2019 (3) TMI 302 - AT - Central Excise

Valuation - composite contracts - services rendered through separate contracts - composite contracts in which separate amounts have been indicated for supply of goods as well as services - demand of Excise Duty on the composite price of the contract - Held that - An identical dispute with reference to the appellant s factory situated at Vishakhapatnam was decided by the Bangalore Bench of Tribunal in Visuvius India Vs. Commissioner of Central Excise, Visakhapatnam 2007 (6) TMI 92 - CESTAT, BANGALORE in which the Tribunal held that the application charges collected separately in service contracts, not includable in the assessable value - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute regarding payment of Central Excise Duty on composite contracts involving supply of goods and application services
- Interpretation of assessable value for Excise Duty purposes in cases where goods and services are specified separately in composite contracts

Analysis:
1. The appeal challenged an Order-in-Original demanding Central Excise Duty, interest, and penalty for a period from June 2000 to December 2000. The dispute revolved around composite contracts where the appellant supplied goods and provided application services. The Revenue contended that Excise Duty should be paid on the entire contract value, while the appellant argued for duty payment only on the goods component in contracts where separate amounts were indicated for goods and services.

2. The appellant, a manufacturer of refractory ceramic goods, explained that they supplied goods tailored to buyers' requirements and sometimes provided optional Application Services like installation and maintenance. They contended that Application Services were post-manufacturing activities, distinct from the sale of goods, and should not be included in the assessable value for Excise Duty purposes.

3. The Tribunal analyzed a similar case decided by the Bangalore Bench in favor of the assessee, where it was held that charges for Application Services collected separately in service contracts should not be included in the assessable value. The Tribunal emphasized that when goods were already manufactured before reaching the customer's premises, charges for post-manufacturing activities should not be considered for duty calculation.

4. Relying on various case laws and circulars, the appellant argued that service charges for Application Services were not part of the intrinsic value of goods and should not be included in the duty calculation. The Tribunal concurred with this argument, setting aside the impugned order and allowing the appeal based on the principle that application charges separately collected should not be included in the assessable value for Excise Duty payment.

5. The Tribunal's decision aligned with the interpretation that charges for Application Services, even when specified separately in composite contracts, should not form part of the assessable value for Excise Duty calculation, especially when such services are distinct from the sale of goods and are post-manufacturing activities. The judgment provided clarity on the treatment of such charges in composite contracts, ensuring a fair assessment of Excise Duty liability.

(Order pronounced in the open court on 26/02/2019.)