2004 (1) TMI 246 - AT - Central Excise

Valuation (Central Excise) - Rental charges - Interpretation of Cylinder Holding Charges in assessable value post amendment in Section 4 u/s 4(3)(d) - HELD THAT - Undisputedly the appellants are manufacturers of Gases. Any buyer is free to receive Gases in their own Cylinder in which case the question of addition of any Rental Charge does not arise at all. We also take note of the fact that the appellants are given a free period of seven days to the customers by returning the empty Cylinder. It is only in those cases where the customers do not honour the above contractual obligation to return the Cylinders within the free period there is provision for rent of the Cylinders for the period for which the customers keep the Cylinders in their premises. This can be safely termed as a sort of penal provision for the customers in not honouring the contractual obligation. These Rental Charges are not being collected by the appellants from their customers as routine irrespective of the return of the Cylinders. As such it can be safely concluded that the said charges are not in any way related to or connected with the sale of the Gases. As such the same cannot be said to be included in the definition of the transaction value as is appearing in the provisions of Section 4(3)(d). As such we are of the view that even after the introduction of the new Section 4 with effect from 1-7-2000 the same would not form part of the assessable value of the final product i.e. Gases. Accordingly we set aside the impugned order and allow the appeal with consequential relief to the appellants.

Summary

Issues involved: Interpretation of Cylinder Holding Charges in assessable value post amendment in Section 4 u/s 4(3)(d) from 1-7-2000.

Summary:
1. The main issue in the appeal was whether Cylinder Holding Charges collected by gas manufacturers post 1-7-2000 should be added to the assessable value of gases. The lower authorities held that these charges are includible in the transaction value. However, the appellants argued that the charges are ancillary and not related to the sale of gases, citing a previous Supreme Court decision. They contended that the charges are only applicable if customers retain cylinders beyond the free period and are not routine charges.

2. The Tribunal noted that the Supreme Court had previously held that the levy of Central Excise is on the manufacture of gases, and supplying gases in cylinders is a separate supply. Despite the introduction of new provisions in Section 4 from 1-7-2000, the Cylinder Holding Charges were not considered part of the transaction value as they were not directly related to the sale of gases. The charges were seen as penal provisions for customers who did not return cylinders within the free period, rather than routine charges connected to the sale of gases.

3. The definition of 'transaction value' under Section 4(3)(d) includes amounts payable in connection with the sale of goods, but does not specifically mention rental charges for containers. As the charges in question were not collected routinely and were only applicable in cases of customer default, the Tribunal concluded that they were not linked to the sale of gases and should not be included in the assessable value. Therefore, the impugned order was set aside, and the appeal was allowed in favor of the appellants.