2001 (3) TMI 171 - AT - Central Excise

Summary

Issues involved: Inclusion of charges paid to RITES for inspection in the assessable value and the applicability of the extended period under Section 11A for duty demand.

Inclusion of Inspection Charges: The appellant, manufacturing malleable cast iron inserts, sells them to railway or sleeper manufacturers, with mandatory inspection by RITES. The appellant contends that RITES inspection is buyer-initiated and separate from their own testing. Citing precedents, it argues that charges for third-party inspection, not affecting marketability, should not be included in assessable value. Unlike cases where buyers opt out of such inspection, here every buyer requires RITES testing before purchase, making the goods non-marketable until approved. The appellant recovers inspection charges from buyers, who are reimbursed by Railways, thus forming part of the goods' value.

Applicability of Precedents: Referring to Shree Pipes and Hindustan Development cases, the Tribunal established that charges for buyer-initiated third-party inspection should not be included in assessable value. The absence of buyer optionality and the necessity of RITES testing for every sale distinguish this case from Hindustan Development, where inspection charges were borne by Railways, the sole buyer.

Extended Period for Duty Demand: The notice demanding duty for clearances made between 1991 and 1992 invoked the extended period under Section 11A due to non-disclosure of inspection charges recovery. The appellant did not dispute the lack of communication to the Department regarding these charges, leading to the Commissioner's justified application of the extended period.

Conclusion: The appeal was dismissed, affirming the inclusion of RITES inspection charges in the assessable value and the validity of the extended period for duty demand.