2018 (9) TMI 1570 - AT - Central Excise

Valuation - inclusion of Inspection Charges, Service charges and Freight Charges in assessable value - appellant have collected separately these charges from their buyers through debit notes - whether pre-delivery inspection charges are includible in the assessable value? - Held that - The said issue was settled by the Hon ble Supreme Court in TVS Motors Co. Ltd. 2015 (12) TMI 874 - SUPREME COURT , where it was held that PDI charges and free ASS charges would not be included in the assessable value under Section 4 of the Act for the purposes of paying excise duty - demand set aside. Whether the service charges related to transport arrangement through rail is includible in assessable value? - Held that - Since the said charges are collected after the place of removal which is the factory gate. On the very basis, it can be definitely held that the service charges collected for cargo handling on the instruction of the contractor cannot be included in the assessable value - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Inclusion of inspection charges, service charges, and freight charges in the assessable value for excise duty calculation.
2. Whether pre-delivery inspection charges are includible in the assessable value.
3. Whether service charges related to transport arrangement through rail are includible in the assessable value.

Analysis:
1. The appellants, engaged in manufacturing PVC insulated cables, were alleged to have collected additional charges from buyers through debit notes. The department contended that these charges should be included in the assessable value for excise duty calculation. The original authority confirmed the demand, interest, and penalties, which was partially upheld by the Commissioner (Appeals). The appeal was filed challenging the inclusion of service charges and pre-inspection delivery charges in the assessable value.

2. The appellant argued that the issue of including pre-delivery inspection charges in the assessable value was settled by a Supreme Court decision. Citing the case of Commissioner of Central Excise, Mysore Vs. TVS Motors Co. Ltd., it was contended that such charges should not be included. The Tribunal agreed with this argument and set aside the demand related to pre-delivery inspection charges.

3. Regarding service charges for transport arrangement through rail, the appellant submitted that these charges were not related to the sale but were for arranging railway transport. The Tribunal noted that the service charges were for cargo handling and transportation by railway, collected after the goods were dispatched from the factory gate. It was held that such charges, being related to cargo handling on the contractor's instruction, should not be included in the assessable value. The demand for service charges was also set aside.

4. In conclusion, the Tribunal found that the demand for including service charges and pre-delivery inspection charges in the assessable value was not sustainable. The impugned order was set aside, and the appeal was allowed with consequential relief. The Tribunal's decision provided clarity on the inclusion of specific charges in the assessable value for excise duty calculation, based on legal precedents and the nature of the services provided.