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2024 (10) TMI 884 - AT - Central ExciseValuation - inclusion of cost of type test , charged by the appellant from some of their customers who have difficulty in carrying out such ascertainment at their premises on transformers manufactured by appellant, in the assessable value even though the tests are carried out before clearance - section 4 of Central Excise Act, 1944 - HELD THAT - There is no doubt that the type test is carried out before the goods leave the factory but, at the same time, it is an optional exercise at the instance of such customer, as lack such facilities at their respective premises. Duty, being leviable on manufacture of goods, arises and upon transformers coming into existence but chargeable only upon clearance. The contention of the lower authorities is that the goods do not come into existence until after the type test is concluded. This premise is clearly unacceptable inasmuch as the clearance to other customers are of transformers on which such tests have not been carried out. Consequently, duty liability devolves upon manufacture of transformers even before type test is carried out. It is clearly evident from rule 5 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 that the cost of transportation of goods from place of removal , as well as the other cost attributable to services, are not liable to be included in the value of goods manufactured for levy of duties of central excise. There is no justification for collection of duties of central excise on the consideration realised for an activity which has been subjected to levy under the Finance Act, 1994 - there is no merit in the impugned order which is set aside - Appeal allowed.
Issues: Inclusion of 'type test' charges in the assessable value under Central Excise Act, 1944.
Analysis: The judgment by the Appellate Tribunal CESTAT Mumbai involved three appeals with a common issue of whether the cost of 'type test' charged by the appellant from customers should be included in the assessable value under the Central Excise Act, 1944. The original authority had held that the amount is liable to be included in the assessable value as per the Central Excise Valuation Rules. The Commissioner of Central Excise (Appeals) upheld the decision, leading to a recovery order against the appellant. The Tribunal considered the includability of 'type test' charges in the transaction value under section 4 of the Central Excise Act, 1944. The crux of the issue was whether the 'type test' charges collected from customers, even though carried out before clearance from the factory, should be considered as part of the assessable value. The central excise authorities argued that the goods do not come into existence until after the 'type test' is concluded, hence the charges should be included. However, the Tribunal disagreed, stating that the liability to duty arises upon the manufacture of transformers, even before the 'type test' is conducted. The Tribunal also noted that rule 5 of the Central Excise Valuation Rules excludes the cost of transportation and other attributable services from the value of goods for levy of central excise duties. The appellant cited precedents such as Ericsson India Pvt Ltd and HCL Infosystems Ltd cases, along with a decision by the High Court of Karnataka in Essar Telecom, to support their argument that the service tax liability precludes the inclusion of 'type test' charges in the assessable value for levy of another duty or tax. The Tribunal referred to the Ericsson India case to emphasize that if an activity has already been subjected to levy under the Finance Act, 1994, there is no justification for collecting central excise duties on the same activity. Therefore, the Tribunal found no merit in the impugned order and set it aside, ruling in favor of the appellant. In conclusion, the Tribunal ruled that the 'type test' charges collected by the appellant should not be included in the assessable value for the purpose of levying central excise duties, based on the principles of central excise valuation rules and precedents that support the exclusion of charges already subject to other tax liabilities.
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