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2004 (11) TMI 219 - AT - Central ExciseDemand - Valuation (Central Excise) - Facility charges - Whether facility charges are related to the manufacture or sale of gases - assessable value for Central Excise Duty - HELD THAT - The fact that the facility charges have nothing to do with and are not in any way related to the sale of the goods has been accepted by the Central Excise Authority in the appellant s own case at Mumbai Chennai and Bangalore. The Commissioner of Central Excise Mumbai-III in his order-in-original has held that this charge therefore cannot in any way be considered as a condition to sale for goods. It is a discrete component related directly to the maintenance and installation of the facilities and has no nexus with the manufacture of gases. Similar view was taken by the Commissioner of Central Excise (Appeals) Chennai. In his order-in-appeal and by the Additional Commissioner of Central Excise Bangalore-III in his order No. Central Excise. The Department has accepted the order passed by the Commissioner of Central Excise and no appeal was preferred by the Department against the said orders. The Commissioner totally erred holding that the said facility charges relate to any predelivery activity. The stock lying in the VISTs installed and erected at the buyers place is owned by the buyer and not the appellant. In present case also the supply of services i.e. maintenance construction of VIST and the pipeline was not a manufacturing activity and was ancillary to the supply of gases but it was not strictly incidental duty. There are classes of persons who can take either these gases without supply of the VIST by the manufacturer. In such cases the question of charging facility charges would not arise. The present appeal is fully covered by the decision rendered in the case of Inox Air Products Ltd. v. Commissioner of Central Excise 2002 (2) TMI 820 - CEGAT MUMBAI and Grasim Industries v. Commissioner of Central Excise 2003 (12) TMI 101 - CESTAT NEW DELHI . The purported demand of duty of Rs. 4, 10, 240/- Rs. 5, 12, 800/- Rs. 31, 801/- even otherwise is illegal. These demands have been confirmed on the basis that the facility charges from the TELCO/TISCO for the period from April 2001 to December 2001 were receivable by the appellant. The agreement dated 13-12-1997 with TELCO was due to expire on 1-12-2001 but it was terminated in advance on 1-4-2001. Similarly the demands relates to the facility charges allegedly receivable from TISCO Eastern Railway Locomotive Works. Just like in the case of TELCO the agreement with the aforesaid three parties were also terminated in advance and after such termination neither any facility were rendered nor any maintenance was provided and no such facility charges were charged. It can be concluded that the facility charges are not in any way related to or connected with the sale of gases. We find that the facility charges are payable at all times so long as the installations are being used by the customer irrespective of whether there is a supply of gas and irrespective of the quantity supplied. There is no difference in price of the product in respect of the goods supplied from whom facility charges are not being recovered. So we hold that facility charges need not be included in the assessable value. Accordingly we set aside the impugned order and allow the appeal with consequential relief to the appellants.
Issues Involved:
1. Whether facility charges are related to the manufacture or sale of gases. 2. Whether facility charges should be included in the assessable value for Central Excise Duty. Summary: Issue 1: Relation of Facility Charges to Manufacture or Sale of Gases The appellant, a manufacturer of Oxygen, Nitrogen, and Argon gases/liquids, supplies these products through pipelines and Vacuum Insulated Storage Tanks (VISTs). The facility charges are levied on customers for the maintenance and upkeep of VISTs and pipelines, which are separate from the manufacture or sale of gases. The facility charges are billed monthly, irrespective of the purchase of gases. The appellant argued that these charges are not connected to the sale or supply of goods and are optional services provided upon the customer's request. The Tribunal agreed, stating that the facility charges are not related to the manufacture or sale of gases and are independent of the sale transactions. Issue 2: Inclusion of Facility Charges in Assessable Value The Commissioner of Central Excise included facility charges in the assessable value, arguing that these charges are integral to the sale of goods. However, the Tribunal found that the facility charges are not a condition of sale and are only applicable to customers who opt for additional facilities like VISTs or pipelines. The Tribunal referenced multiple precedents, including the Supreme Court's decision in CCE v. Indian Oxygen Ltd., which treated the supply of gases and the supply of storage facilities as separate transactions. The Tribunal concluded that facility charges should not be included in the assessable value u/s 4 of the Central Excise Act, 1944, as they are not connected to the sale of goods. Conclusion: The Tribunal set aside the impugned order, holding that facility charges are not related to the manufacture or sale of gases and should not be included in the assessable value for Central Excise Duty. The appeal was allowed with consequential relief to the appellants.
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