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Indo Berolina Industries Pvt. Ltd. And IBI Chematur (Engg. & Consultancy) Ltd. Versus Commissioner of Central Excise, Mumbai-IV

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 most of the activities are relating to pre-fabrication, engineering and design .....

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llant 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 design charges for the same reasons. It is immaterial that those engineering and .....

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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. Jain Brief facts of the case are that appellant No.1 viz. Indo Berolina Indust .....

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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 value of the equipment supplied by appellant No.1. This is based upon the fa .....

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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 the modifications, re-modified the plant and sold to Vamorganic Chemicals Ltd. .....

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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 India Ltd., the burden and onus of preparing shop level and operating level dra .....

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ineering 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 required to make their own shop level/operating level drawings for manufacture of .....

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th 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 Commissioner has erred in confirming the duty corresponding to the total amoun .....

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t 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. reported in 2000 (122) ELT 169 (T); (v) CCE vs. Luna Agro Industries Pvt. Ltd .....

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D 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 adjudication order without any justification. It was also submitted that in view o .....

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an 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 designing, mechanical equipment, civil engineering, electrical piping, measuring .....

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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 was further submitted that as per the agreement between appellant No.2 and EID .....

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red 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 were exactly for the same purpose. It is immaterial that the said amount was lat .....

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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.). 6. We have gone through the rival submissions. The basic point to be seen in .....

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- 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 and insulation of process pipes, vessels and heat exchangers, main items of i .....

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pment 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 schedule is to be included in the assessable value. 2 MECHANICAL EQUIPMENT As per .....

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able 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. installation, interlocking block diagrams, with description of the interlocking conditio .....

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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 plant drawing and piping isometrics, pipe support list, piping material take-o .....

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e 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 ₹ 21 Lakhs attributed to these items of wok is includible in the assessable va .....

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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 supplied by the assessee during the erection and also to supervise all the work .....

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her 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 M/s. IBIC were not only to supply technical documentation of machines and eq .....

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ical, 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 basis of this designing that the appellant is fabricating various equipment, .....

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dicated 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 plant was fabricated and assembled by appellant No.1 as per the engineering d .....

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