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2015 (10) TMI 1103 - CESTAT MUMBAI

2015 (10) TMI 1103 - CESTAT MUMBAI - 2015 (330) E.L.T. 739 (Tri. - Mumbai) - Valuation - Determination of assessable value - Invocation of extended period of limitation - whether the charges paid to appellant No.2 by EID Parry India Ltd. or Triveni Engineering Works Ltd. were relating to the engineering, designing and various equipment before manufacturing or these charges are relating to post manufacturing activity - Held that:- Entirely in agreement with the findings of the Commissioner that m .....

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y have supplied.

Whole plant was fabricated and assembled by appellant No.1 as per the engineering design by appellant No.2. Keeping in view all these facts, we are of the considered view that the amounts paid to appellant No.2 would form part of the assessable value. We also note that these critical facts were not submitted along with the price declarations and, therefore, the extended period of limitation has been correctly invoked.

Revenue has added the engineering des .....

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he extended period of limitation is correctly invoked and the penalty imposed under Section 11AC is correct. - However, penalty under Rule 173Q is reduced. - Decided partly in favour of assessee. - APPEAL Nos. E/1105 & 1106/05-Mum - Final Order Nos. A/3089-3090/2015-WZB/EB - Dated:- 7-9-2015 - Mr. P.K. Jain, Member (Technical) And Mr. S.S. Garg, Member (Judicial) Shri V.S. Sejpal, Advocate : For The Petitioner Shri V.K. Agrawal, Additional Commissioner (AR) : For The Respondent ORDER Per: P.K. J .....

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ct consultancy including designing of various pipings equipments etc. for the said plant and thereafter the said equipments, pipings etc. were manufactured by appellant No.1 and supplied to EID Parry India Ltd. EID Parry India Ltd. paid certain amounts to appellant No.1 for the equipment supplied by them and also paid certain amounts to appellant No.2 for the engineering, consultancy and designing. The case of the Revenue is that the amount paid to appellant No.2 will form part of the assessable .....

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y of similar equipment and took certain advances. However, before the project could be implemented, the order was cancelled. Appellant Nos.1 and 2 retained the advances as the demurrage/liquidation charges. Thereafter appellant No.1 found a new customer, Vamorganic Chemicals Ltd. who after discussion, asked appellant No.1 to modify the plant. Thereafter appellant No.1 asked appellant No.2 for redesigning and modification of consultancy and paid certain amounts to appellant No.2 and based upon th .....

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is Tribunals order No. A/686, 687/WZB/2004/C-II dated 22.7.2004 with certain directions. Aggrieved by the said order, the appellants are before this Tribunal. 3. Learned counsel for the appellant submitted that the adjudicating authority has failed to consider the directions of the CESTAT. It was submitted that the period involved is before 1.7.2000 i.e. under the old Section 4 and old Central Excise Valuation Rules, 1975. It was submitted that as regards the supplies made by IBI to EID Parry In .....

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incipal basis for which they were provided with only mechanical equipment engineering drawing. It was submitted that as per agreement between EID Parry India Ltd. and IBIC, IBIC would provide only general drawing for fabricated equipment for fabricator to make shop drawings. Learned counsel submitted that the said drawings are only providing broad specification of the machines and equipments by the project consultant i.e. appellant No.2 and IBI i.e. appellant No.1 as manufacturer is further requ .....

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ut. It was submitted the detailed break up of the scope of work group wise with billing break up and project consultancy break up of various amounts received by IBIC to substantiate the proportionate amount of the drawing and engineering consultancy amount which is in relation to mechanical machines so manufactured by IBI could only be part of it. It was further submitted that the Commissioner should include only ₹ 22 lakhs received by appellant NO.2 relating to mechanical equipment. The C .....

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eited by appellant No.2 from Triveni Engineering Works Ltd. as claimed against damages i.e. liquidation charges and there is no excise duty involvement on the same. Learned counsel also referred to the following case laws:- (i) Naran Lala Metal Works Ltd. vs. CCE reported in 2003 (156) ELT 281 (Tri.-Mum.); (ii) CCE vs. Statfield Systems (Coating) Pvt. Ltd. reported in 1996 (87) ELT 510 (Tri.); (iii) Alfa Laval India Ltd. vs. CCE reported in 1998 (100) ELT 502 (T); (iv) CCE vs. Bharat Forge Ltd. .....

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adjudicating authority has imposed penalty under Rule 173Q for supplies to EID Parry India Ltd. and penalty under Section 11AC for supplies to Vamorganic Chemicals Ltd. There are no grounds to justify heavy penalty on appellant No.1 and, therefore, these penalties should be set aside. 4.2 As far as appellant No.2 is concerned, it was the submission that at the time of first adjudication, the penalty imposed was only ₹ 1 lakh which has been increased to ₹ 10 lakhs in the present adjud .....

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er in successfully implementing the project and in view of this, no penalty can be imposed on them. The learned counsel also referred to the following two case laws:- (i) Kamdeep Marketing Pvt. Ltd. vs. CCE reported in 2004 (165) ELT 206 (Tri.-Del.); (ii) Amit Industries vs. CCE reported in 2004 (165) ELT 177 (Tri.). 5. Learned AR, on the other hand, submitted that appellant No.2 as per the agreement entered into with EID Parry India Ltd., has separately charged for the activities of process des .....

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le value. He further submitted that it would be seen from the impugned order that there are some activities within the above mentioned broad categories which may not be integrally connected with the manufacture of the equipment but since the separate value for such activities are not available, the Commissioner had no option but to include the entire amount for each of the above mentioned activities. The learned AR took us through the findings of the Commissioner to support the contention. It wa .....

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No.1. Under these circumstances, the amounts paid to appellant No.2 are required to be added to the assessable value. It was further submitted that these facts were suppressed from the department and were not mentioned in the relevant price declaration etc. and, therefore, extended period of limitation is invokable. 5.1 As far the contract between appellant No.1 and Vamorganic Chemicals Ltd. is concerned, learned AR submitted that the amount paid by Triveni Engg. Works Ltd. to appellant No.2 wer .....

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sioning of equipment at site which is a post manufacturing activity while in the present case, the engineering, drawings were the basic drawings based on which appellant No.1 fabricated or manufactured various parts and equipments of the plant. Learned AR further submitted the following case laws in support of his contention:- (i) CCE, Jamshedpur vs. Tata Motors reported in 2009 (237) ELT 147 (Tri.-Kolkata); (ii) CCE, Bangalore-III vs. Wintac Limited reported in 2011 (263) ELT 273 (Tri.-Bang.). .....

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eak up of each item given in the billing schedule my findings are as follows:- 1. PROCESS DESIGNING It is seen from the Annexure IBIC V of agreement between M/s. IBIC and M/s. EID that the process includes plant design, basis specifying plant capacity, raw material and utility, quality and quantity and included diagram equipment identified by item number including title and shown in their approximate elevations, equipment for utilities, package-units as block diagrams, identification of heating .....

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These activities are directly attributable to manufacture of machine and equipment manufactured by M/s. IB1. Without these specification they would not be in a position to manufacture machine and equipment. Although the process includes certain other activities with reference to start up operation and normal operation of the plant, however, the assessee has not given any break up of the same. In absence of the same the entire amount of ₹ 22 Lakhs attributable to process as per billing sche .....

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ts that the amount attributed towards these items is includibie in the assessable value ₹ 22 Lakhs, attributed to these items of "work is includibie in the assessable value. 3. CIVIL ENGINEERING. I have already discussed the same above. 4. ELECTRICAL. As per para G Annexure IBIC-V electrical equipments includes motor list, single line diagram, motor control center specifications, safety classification of building and rooms, earthing plan and lightning protection, lighting. installatio .....

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ted to these items of work is includibie in the assessable value. 5. PIPING. As per para E to the annexure IBIC-V piping equipments includes line number operating data, design conditions, designations, material of construction, flange rating and facing, maximum working limits, gasket specifications, insulation requirements, valve type IO be used. These activities are directly attributable to manufacture machine and equipment by the assessee. Piping also includes other activities such as piping p .....

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onditions, materials of construction, connection rating, dimensions, allowable pressure drop, fluid flow rate and conditions, relief valve parameters, specification, alarm settings, control ranges, interlocking diagram and description, identification of failure position, draft of instrument arrangement in panel, instrument loop diagram, instrument, material take-off list. These activities arc directly attributable to manufacture machine and equipment by the assessee. The entire amount of ₹ .....

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rement was part of mechanical engineering. The entire cost of ₹ 3 Lakhs attributed these items of work is therefore, includible in the assessable value. It is further seen from the agreement between M/s. IBIC and M/s. EID that M/s IBIC was also to ensure successful performance guarantee runs for 6 months. In other words M/s. IBIC were to ensure successful performance regarding the goods manufactured by the assessee. M/s. IBEC was also to undertake inspection of the machine and equipment su .....

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M/s IBIC was to ensure that the production capacity of products, yield and other production figures under regular operating conditions should not be less than the figures shown in IBIC-II and 1BIC-I11 and that the quality of the products shall be confirm to IBIC-IV. It is clearly shows that machines and equipments manufactured by M/s IBI were to confirm the capacity, quality of products, yield and other production figures under regular operating condition. It is also seen that the consultant i.e .....

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ent made by the assessee to show that the charges relating to process, electrical, piping, instrumentation, insulation were not related to manufacture of machinery and equipment manufactured by them cannot be accepted. 7. We have also gone through Annexure 5 of the agreement between appellant No.2 and EID Parry India Ltd. and we find entirely in agreement with the findings of the Commissioner that most of the activities are relating to pre-fabrication, engineering and design stage. It is on the .....

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ary at the manufacturing stage. However, since no separate amount has been indicated for such post manufacturing activities, the entire amount is required to be added. During the course of the hearing, the Bench has queried from the counsel for the appellant the list of the equipments or other items which have been purchased by EID Parry India Ltd. directly from other vendors. However, the learned counsel could not supply any such information. From the agreement, to us it appears that the whole .....

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