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2023 (3) TMI 432 - AT - Central ExciseValuation - collection of charges from customers in the name of consumable charges through debit notes - case of the department is that the said charges are includible in the assessable value of DG sets - HELD THAT - The appellant have 2 separate activities one is manufacture and sale of DG sets on which excise duty is paid on transaction value. The other activity is Installation Commissioning and Repair Maintenance which is provided through their sub contractor. There is separate contract for such services. In this fact, the activity of manufacture is completed when the DG set is sold by the appellant from their factory on transaction value. The other activities such as supply of spares for Installation Commissioning and Repair Maintenance of DG sets is all together different activity which cannot be clubbed with the assessable value of manufactured DG set sold by the appellant. It is also observed that in the show cause notice the department failed to even corelate the consumable charges raised through debit note with a particular DG set manufactured and sold by them. Therefore, the case of the department cannot be sustained. This issue is no longer res- integra as the same was decided in the appellant own case reported at M/S. VEENA INDUSTRIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE S.T., VAPI 2016 (1) TMI 161 - CESTAT AHMEDABAD wherein this Tribunal has held that It is an independent activity of service therefore the cost of diesel which was recovered by the appellant from the customer as reimbursement for the testing of the DG set is not includable in the transaction value towards the sale of DG set. The activity of filling of Diesel in the DG Set at the site Company is at most can be considered as pre-delivery inspection charges. The impugned order is set aside - Appeal is allowed.
Issues:
1. Inclusion of consumable charges in the assessable value of DG sets. 2. Nexus between consumable spares and manufacture/sale of DG sets. 3. Separation of activities: manufacture/sale vs. Installation & Commissioning/Repair & Maintenance. 4. Interpretation of transaction value and assessable value. 5. Application of relevant case laws to determine the issue. Issue 1: Inclusion of consumable charges The case involved a dispute regarding the inclusion of consumable charges in the assessable value of DG sets sold by the appellant. The department contended that charges collected from customers for consumable spares used in Installation & Commissioning and Repair & Maintenance should be included. A show cause notice was issued, leading to an order confirming the demand of excise duty and penalties. The appellant argued that these charges were not related to the manufacture and sale of new DG sets but for post-sale services. Issue 2: Nexus between consumable spares and DG sets The appellant emphasized that the consumable spare parts were used for post-sale activities and had no direct connection to the manufacture or sale of new DG sets. They argued that the consumable charges were for services provided separately from the sale of DG sets. The department failed to establish a specific link between the consumable charges and the DG sets sold by the appellant, leading to a lack of basis for the demand. Issue 3: Separation of activities The Tribunal noted that the appellant engaged in two distinct activities: manufacturing/selling DG sets and providing Installation & Commissioning/Repair & Maintenance services through subcontractors. These activities were treated separately, with excise duty paid on the transaction value of the manufactured DG sets. The Tribunal found that the charges for post-sale services could not be clubbed with the assessable value of the manufactured DG sets. Issue 4: Interpretation of transaction value The Tribunal analyzed the concept of transaction value and assessable value in light of relevant legal provisions and case laws. It was established that charges for post-sale activities, such as Installation & Commissioning and Repair & Maintenance, should not be included in the assessable value for excise duty calculation. This interpretation was supported by precedents and clarifications from the Supreme Court and other judicial authorities. Issue 5: Application of case laws The Tribunal referred to various judgments, including Veena Industries Ltd, TVS Motors Co. Ltd, and Indian Card Clothing Co. Ltd, to support its decision. These cases highlighted that charges for post-sale activities or consumable spares not directly related to the manufacture or sale of goods should not be included in the assessable value. The Tribunal's decision was aligned with the legal principles established in these cases, leading to the setting aside of the demand for duty on consumable charges. In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant based on the separation of activities, lack of nexus between consumable charges and DG sets, and the interpretation of transaction value supported by relevant case laws.
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