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2014 (6) TMI 760 - AT - Central ExciseValuation of goods - Third party inspection - whether Pre-Delivery Inspection (PDI) charges recovered by the respondent for conducting test at the instance of the buyer is liable to be included in the assessable value or not - Held that - circular No. 3/88-CX dated 16-2-88 issued under erstwhile Section 4 of the Act in respect of Pre-delivery Inspection charges has not stood the test of legal scrutiny as Tribunal s judgment has been otherwise and consequently CBEC withdrew its subsequent circular No. 355/77/97-CX, dated 19-11-97 and 435/I/99-CX dated 12-1-99 vide Circular No. 681/72/2002-CX, dated 12-12-02 in the context of old Section 4 of CEA, 1944. The CBEC has issued a Circular dated 12-5-00 in which in Para 2.2 it has been clarified that the concept of new transaction value under Section 4 has same scope as that of old Section 4 of the Act and Valuation Rules. - third party s inspection charges initially paid by the appellants and subsequently reimbursed by the buyers is not includible in the assessable value of the goods. I, therefore, hold that duty demand of Rs. 25,125/- on inspection charges along with interest is not sustainable - Following decision of M/s. Choksi Tube Co. Ltd. v. CCE Ahmedabad 2002 (11) TMI 521 - CEGAT, NEW DELHI , M/s. Sunrise Structurals & Engg. P. Ltd. v. CCE, Nagpur 2002 (6) TMI 136 - CEGAT, MUMBAI , M/s. Southern Structurals Ltd. v. CCE, Chennai II 2002 (7) TMI 147 - CEGAT, CHENNAI and CCE, Jaipur II v. M/s. A. Infrastructure Ltd. 2003 (5) TMI 161 - CESTAT, NEW DELHI - Decided against Revenue.
Issues involved:
1. Inclusion of Pre-Delivery Inspection (PDI) charges in the assessable value under Section 4 of the Central Excise Act, 1944. Analysis: Issue 1: Inclusion of PDI charges in assessable value The appeal was filed by the revenue against the dismissal of their appeal by the first appellate authority regarding the demand raised against the respondent for dropping the demand under Order-in-original No.MP/66/DEMAND/06. The main issue was whether PDI charges recovered by the respondent for conducting tests at the buyer's instance should be included in the assessable value. The revenue contended that PDI charges should be added to the assessable value under the new Section 4 of the Act. The respondent argued that such charges should not be included as the goods were fully tested and ready for use as per norms, and any additional testing was at the buyer's option. The first appellate authority relied on the judgment of CESTAT Larger Bench in Bhaskar Ispat Pvt. Ltd., holding that inspection done at the buyer's option is not part of the assessable value. Analysis of Arguments: The revenue argued that PDI charges should be added based on the Delhi Larger Bench judgment in Maruti Suzuki India Ltd. Vs. CCE, Delhi-III. However, the respondent emphasized their cross objection, citing the decision in CCE, Ahmedabad-II Vs. Johnson Pumps (I) Ltd., where it was held that PDI charges incurred at the buyer's instance need not be included in the assessable value. The bench noted that the issue had been settled in previous cases and reiterated that inspection charges borne by customers or done by a third party at the buyer's option are not part of the assessable value. Final Decision: The bench rejected the revenue's appeal, upholding the decision that PDI charges incurred at the buyer's instance are not includable in the assessable value. The bench distinguished the Maruti Suzuki India Ltd. case, clarifying that it pertained to compulsory PDI done by the manufacturer, not inspections at the buyer's request. Therefore, the cross objection by the respondent was allowed, and the appeal by the revenue was rejected, based on established legal precedents and interpretations under Section 4 of the Central Excise Act, 1944.
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