2007 (6) TMI 92 - AT - Central Excise

Valuation (Central Excise) Revenue contended that application charges collected by the appellant shall be includible in the assessable value of the goods Held that application was at the choice of customer so not includible in assessable value

Summary

Issues:
- Whether charges for Application Services are includable in the assessable value of goods for excise duty purposes?
- Whether the demand raised by the Revenue is justified, including penalties and interest?
- Whether the invocation of the extended period for Show Cause Notices is valid?

Analysis:
- The appeal was filed against an Order-in-Original passed by the Commissioner of Central Excise & Customs. The appellants manufactured Castable Refractory monolithic compositions and Refractory Shapes. The Revenue issued three Show Cause Notices alleging non-payment of duty on application installation charges for specific periods. The Commissioner confirmed the demands and imposed penalties and interest. The appellants challenged the order, arguing that Application Services were separate from the sale of goods and not includable in assessable value.
- The appellants contended that Application Services were optional for customers, with no nexus to the sale of goods. They highlighted that in composite contracts, where goods and services were combined, duty was paid on the entire contract value. They also emphasized paying service tax separately for Application Services. The Commissioner allegedly ignored submissions and relevant legal precedents, leading to erroneous inclusion of Application Services in assessable value.
- The Tribunal reviewed the case records and found that in cases where only goods were supplied, no application charges existed. For composite contracts, where goods and services were combined, duty was paid on the total contract value. In cases of separate service contracts, the appellants paid service tax, and there was no evidence of intentional duty evasion. The Tribunal held that Application Services charges, when separately collected for service contracts, were not includible in assessable value for excise duty purposes.
- The Tribunal rejected the Revenue's claim of intentional duty evasion through separate invoicing, citing relevant Board circulars and legal principles. It concluded that the impugned order lacked merit, set it aside, and allowed the appeal with consequential relief. The decision was pronounced on 20-6-2007.