2013 (7) TMI 564 - AT - Central Excise

Valuation - inclusion of Transportation charges in the assessable value for charging excise duty - Separate invoices were raised for transportation charges Held that - No ground is made out that the transportation charges are far in excess of the actual transportation charges thus shifting the value of goods to transportation charges. Transportation charges not to be included in the assessable value for the purpose of charging excise duty- Decided against the Revenue. Inclusion of Value of Acoustic Enclosures - There is no finding to the effect that these goods were bought out by the respondent and not manufactured by them Held that - If the goods like acoustic enclosure is manufactured in the factory of respondent and cleared, excise duty is payable on it whether it is cleared along with DG sets or separately. Since the respondents are not in a position to demonstrate that the items in question were not manufactured by them the appeal filed by Revenue in this respect is allowed Decided in favor of Revenue. Erection and Commissioning Charges Held that - Excise duty is on manufacture. Erection and Commissioning is in the nature of a service and the apex court had held in the case of Thermax Ltd 1998 (4) TMI 134 - SUPREME COURT OF INDIA that payments made towards erection and commissioning cannot form part of assessable value of excisable goods Decided against the Revenue.

Issues Involved:
1. Inclusion of transportation and unloading charges in the assessable value.
2. Inclusion of the value of acoustic enclosures in the assessable value.
3. Inclusion of erection and commissioning charges in the assessable value.

Detailed Analysis:

1. Inclusion of Transportation and Unloading Charges in the Assessable Value:

The Revenue argued that transportation and unloading charges should be included in the assessable value because the charges were collected separately through different invoices. They contended that the place of removal was the buyer's premises, as the contract included supply and erection of the D.G. sets. Therefore, the transportation charges up to the place of removal should be included in the assessable value as per Section 4(1)(a) and 4(3)(c) of the Central Excise Act, 1944. However, the Tribunal noted that the transportation charges were known separately, and there was no indication that these charges were excessive. The Tribunal referred to the Apex Court decisions in JCB Ltd. v. Commissioner of Central Excise, Delhi-II and Hindustan Wires Ltd. v. Commissioner, which held that freight from the factory to the buyer's premises could not form part of the assessable value. Consequently, the Tribunal upheld the Commissioner (Appeal)'s order, rejecting the Revenue's appeal on this issue.

2. Inclusion of the Value of Acoustic Enclosures in the Assessable Value:

The Revenue's appeal argued that the respondent did not provide evidence to show that the acoustic enclosures were bought out items. The Commissioner (Appeal) had held that the enclosures were optional items. The Tribunal found that the respondent failed to prove that the items were bought out and not manufactured by them. The Tribunal emphasized that if the acoustic enclosures were manufactured by the respondent, excise duty was payable on them, whether cleared with the DG sets or separately. Since the respondent could not demonstrate that the items were not manufactured by them, the Tribunal allowed the Revenue's appeal on this issue.

3. Inclusion of Erection and Commissioning Charges in the Assessable Value:

The Tribunal noted that excise duty is on manufacture, and erection and commissioning are services. The Apex Court in Thermax Ltd. v. CCE had held that payments for erection and commissioning could not form part of the assessable value of excisable goods. The Tribunal acknowledged that the concept of transaction value introduced on 1-7-2000 did not overrule this ruling. The Tribunal also noted that service tax on erection and commissioning was imposed under the Finance Act, 1994, from 1-7-2003, supporting the view that these charges should not be included in the assessable value. The Tribunal rejected the Revenue's argument that the new definition of transaction value changed this position and upheld the Commissioner (Appeal)'s view.

Conclusion:

The Tribunal directed the adjudicating authority to quantify the demand as per the order and communicate it to the respondent. Interest would be payable as per Section 11AA/11AB, and the penalty imposed would be reduced to 25% of the duty amount determined. The Tribunal allowed the Revenue's appeal regarding the inclusion of the value of acoustic enclosures in the assessable value but rejected the appeals on other issues.

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