2017 (11) TMI 1166 - AT - Central Excise

Valuation - includibility - Board s Circular No.58/1/2002-CX. Dated 15.1.2002 - Revenue felt that the material supplied charges for the job work done by M/s.JVR at site should be included in the value of the air brake equipment supplied by the appellant - Held that - since the process admittedly was in the nature of job work and the benefit of N/N. 214/86-CE was not availed by the job worker, the duty leviable, if any, had to be paid by the job worker and not by the appellant - Further, since the pipe fittings were not an input for the final product viz. Air Brake Equipment, the appellant appropriately did not avail the Movat Credit on the same - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of excise duty on manufacturing activities conducted by a third party, Inclusion of job work charges in the value of supplied equipment, Application of Circular No.58/1/2002-CX, Determination of assessable value for excise duty calculation, Compliance with notification NO.214/86-CE for job work charges.

Interpretation of Excise Duty on Manufacturing Activities:
The case involved the manufacturing and supply of Railways Brake equipment by the appellant to the Indian Coach Factory, Chennai. The Revenue contended that activities performed by a third party, M/s.JVR Enterprises, constituted manufacturing under Rule 2(f) of Central Excise Rules, 2002. The dispute centered on whether the processes of bending, welding, and laying of pipes by M/s.JVR constituted manufacturing, impacting the excise duty liability.

Inclusion of Job Work Charges in Equipment Value:
The Revenue issued a show cause notice demanding duty payment, arguing that material supply charges for job work by M/s.JVR should be included in the value of the air brake equipment. The Commissioner (Appeals) upheld this view, leading to the appellant's appeal. The appellant argued that the installation charges should not be part of the assessable value, citing separate pricing for main equipment and pipe fittings in the purchase order.

Application of Circular No.58/1/2002-CX:
The appellant relied on Circular No.58/1/2002-CX, dated 15.1.2002, to support their contention that installation charges for equipment at the customer's premises should not be included in the assessable value. Reference was made to legal precedents like Thermax Limited vs. CCE-1998 and Ultrasea (India) Pvt. Ltd. vs. CCE, Pune-2016 to bolster their argument regarding the non-inclusion of installation charges.

Determination of Assessable Value for Excise Duty:
The Tribunal analyzed the purchase order and work order to ascertain the nature of the supplied equipment and the activities performed by M/s.JVR. The order highlighted the separate pricing for main equipment, pipe fittings, and installation charges, emphasizing the distinction in costs. The Tribunal also considered the Commissioner (Appeals)'s misinterpretation of the components supplied versus the air brake equipment delivered.

Compliance with Notification NO.214/86-CE for Job Work Charges:
The Tribunal examined the applicability of notification NO.214/86-CE concerning duty liability for job work charges. It was established that since the process was akin to job work and the notification was not availed by the job worker, any duty leviable would be the responsibility of the job worker, not the appellant. The non-availment of Modvat Credit on pipe fittings for the final product was also noted.

Conclusion:
The Tribunal set aside the Commissioner (Appeals)'s decision, ruling that the installation charges for equipment at the customer's premises should not be included in the assessable value for excise duty calculation. The judgment emphasized the distinction between manufacturing activities and post-manufacturing processes like installation, erection, and commissioning, aligning with legal precedents and circulars. The appeal was allowed in favor of the appellant, clarifying the excise duty liability in the context of job work charges and equipment value determination.