2008 (5) TMI 205 - AT - Central Excise

Appellants were engaged in the manufacture of various gases Includibility of rental charges/detention charges on cylinders supplied by them as well as service charges under different headings such as hydraulic testing charges inspection and repair charges internal inspection and repair charges in A.V. of gases since above charges on cylinders are collected only when appellant supplied gases in their own cylinders not in cylinders provided by customers these chares are not includible

Summary

Issues:
1. Inclusion of rental/detention and service charges in the assessable value for payment of duty under Section 4 of the Central Excise Act, 1944.
2. Validity of the penalty imposed under Section 11AC of the Central Excise Act, 1944.

Analysis:

Issue 1: Inclusion of rental/detention and service charges in the assessable value
The appellants were engaged in manufacturing various gases and had recovered rental, detention, and service charges from customers. The department contended that these charges should be included in the assessable value for duty payment. However, the Tribunal referred to previous judgments to support its decision. The Tribunal cited the case of Saurabh Gases v. Commissioner of Central Excise, Meerut, and Bhoruka Gases Ltd. v. C.C.E., Bangalore-I, where it was held that such charges are not includible in the assessable value of industrial gases. The Tribunal distinguished the case of Kota Oxygen (P) Ltd. v. CCE, Jaipur, stating that unlike the present case, where charges were collected only when the appellants supplied gases in their cylinders, in the Kota Oxygen case, charges were collected even when customers provided their cylinders. Therefore, the Tribunal concluded that the charges collected represented the value of gases and not rental or maintenance charges. Consequently, the demands made by the department were not sustainable, and the impugned order was set aside, allowing the appeal.

Issue 2: Validity of penalty under Section 11AC
The Joint Commissioner had imposed a penalty under Section 11AC of the Central Excise Act, 1944. However, since the Tribunal found that the demands for duty payment were not sustainable, the basis for imposing the penalty was no longer valid. As a result, the penalty imposed by the Joint Commissioner was also set aside along with the demand for duty payment. The Tribunal's decision in this regard was in line with the dismissal of the demands related to the inclusion of rental, detention, and service charges in the assessable value.

In conclusion, the Tribunal allowed the appeal, setting aside both the demand for duty payment and the penalty imposed under Section 11AC of the Central Excise Act, 1944, based on the findings that the charges collected by the appellants from customers were not to be included in the assessable value for duty payment.