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Central Cables Ltd. Versus Commissioner of Central Excise, Mumbai

2015 (12) TMI 256 - CESTAT MUMBAI

Valuation of goods - whether the additional amount received by appellant towards the third party inspection charges undertaken at the instance of the buyer is includable in the transaction value or otherwise and whether the duty liability arises or not - Held that:- We notice from the purchase orders placed that the said orders are given by the Government authorities to the appellant and one of the order of the Thermal Power Station specifically talks about the material should be despatched afte .....

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received as reimbursement by the appellant on third party inspection charges at the instance of the buyer is not includable in the assessable value of the products cleared by them. - impugned order is not sustainable and liable to be set aside - Decided in favour of assessee. - Appeal No. E/1145/05 - Dated:- 3-11-2015 - Mr. M.V. Ravindran, Member (Judicial) And Mr. C.J. Mathew, Member (Technical) For the Petitioner : Shri Bharat Raichandani, Advocate For the Respondent : Shri N.N. Prabhudesai, .....

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eration for the sale of the goods and transaction value has to be increased on the amount received by the appellant for third party inspection charges. Coming to such conclusion the duty liability was confirmed with interest and equivalent penalty has been imposed. 3. Learned Counsel would draw our attention to the show-cause notice and the orders passed by the lower authorities. He would submit that it is not in dispute that the appellant had on instructions and instance of the buyer undertook .....

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Pvt. Ltd. - 2004 (167) ELT 189 (T-LB). He would also submit that the Hon ble High Court of Madhya Pradesh in the case of Union of India v. Siddharth Tubes Ltd. - 2006 (194) ELT 144(MP) followed the law settled by the Honble Apex Court on this point reported at page A-51 in 1992 (62.) ELT. He would submit that post July 2007 when the provisions of Section 4 were amended the discharge of duty liability on the transaction value, this Tribunal in the case of Grasim Industries Ltd. - 2014 (304) ELT .....

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ed unless the inspection is carried out by third party inspectors. It is his submission that unless the inspection conducted by third party is confirming the specifications, the product does not become marketable hence this charge is includable for discharging Central Excise duty. He would submit that this view has been expressed by the Honble Supreme Court in the case of Southern Structurals Ltd. - 2008 (229) ELT 487 (S.C.) and by this Tribunal in the case of Rai Agro Industries Ltd. - 2011 (2 .....

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nly regarding the includability or otherwise of an amount received by the appellant during the period August 1997 to March 2002 as additional inspection conducted on the products at the instance of buyer. Undisputed facts are the appellant is conducting his own inspection on the finished goods as a manufacturer would do so before clearance and the products are further tested on the specific instruction of various buyers. All buyers do not insist on third party inspection. The charges which are t .....

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strued the entire issue while upholding the demand, interest thereof and penalty for more than one reason. 6.1 Firstly, we notice from the purchase orders placed that the said orders are given by the Government authorities to the appellant and one of the order of the Thermal Power Station specifically talks about the material should be despatched after inspection by the representative of Thermal Power Station while the South Eastern Coalfields Ltd. purchase order talks about the inspection of th .....

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milar issue. Respectfully we reproduce the ratio:- 4. So far as the issue in relation to inspection charges is concerned, the Tribunal recorded the following finding : Inspection Charges - As regards the inspection charges, we consider that the matter is covered in favour of the appellants by the Tribunals decision in the case of Shree Pipes Ltd. v. CCE - 1992 (59) E.L.T. 462 (T), which has been confirmed by the Supreme Court as reported in the Court Room Highlighted at Page A-51 in 1992 (62) E .....

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A-51 in 1992 (62) E.L.T. Thus, we hold that the cost of galvanisation and that of the sockets and the service charges were includible in the value of the pipes and tubes, while the cost of rubber/plastic rings and the inspection charges were not includible in the assessable value of the pipes and tubes. 6.4 We also note that in an identical issue this Tribunal in the case of Grasim Industries Ltd. (supra) held as under:- 6. In this case, the fact that liquid Chlorine manufactured by the Respond .....

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cludible in the assessable value of liquid chlorine. In fact, in this case, the testing of the tonners belonging to the customers on their request is an activity different from the sale of Chlorine which is marketable as such and, hence the charges for such testing cannot be said to be for the reason of or in connection with sale of Chlorine, as the customers could have got the testing of their tonners done from other persons also. 7. The judgment of the Tribunal in case of Kota Oxygen (P) Ltd. .....

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the Revenue had alleged that part of the value of the Oxygen Gas was being collected as cylinder rental and maintenance charges and this allegation of the Revenue had been upheld by the Tribunal. In this case, there is no such allegation. 8. In view of the above discussion, we hold that the cylinder testing charges are not includible in the assessable value of the liquid chlorine and there is no infirmity in the impugned order. The Revenue s appeal is therefore dismissed. 6.4 This Tribunal in t .....

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rger Bench judgment in the case of Bhaskar Ispat Pvt. Ltd. (supra) PDI charges at the option exercised by the buyer are not required to be included in the assessable value. It is also observed that this issue is no more res integra as this very bench in the case of CCE, Ahmedabad-II v. Johnson Pumps (I) Ltd. (supra) has held as follows in paragraph 4 and 5 : 4. Apart from the various decisions discussed by the Commissioner (Appeals), we also note that he has taken note of the Boards Circular wh .....

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includable in assessable value especially when they have a full-fledged quality assurance department. (ii) The Hon ble Supreme Court of India in case of Collector v. Hindustan Development Corpn. Ltd. - 1996 (86) E.L.T. A162 (S.C.), has upheld Tribunal Order Nos. 209 & 210/95-A, dated 8-3-95 which held that expenses incurred on account of additional tests conducted on customers requisitions are not includible in the assessable value. (iii) The Hon ble Supreme Court in case of Commissioner v. .....

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L.T. 178 (Tri.-Del.) (ii) M/s. Sunrise Structurals & Engg. P. Ltd. v. CCE, Nagpur - 2003 (152) E.L.T. 387 (Tri.-Mumbai) (iii) M/s. Southern Structurals Ltd. v. CCE, Chennai-II - 2002 (146) E.L.T. 678 (Tri.-Chennai) (iv) CCE, Jaipur-II v. M/s. A. Infrastructure Ltd. - 2003 (16) E.L.T. 549 (Tri.-Del.) As regards reliance on C.B.E. & C. Circular No. 3/88-CX, dated 16-2-88 by the adjudicating authority, I find that the circular dated 16-2-88 issued under erstwhile Section 4 of the Act in res .....

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ction value under Section 4 has same scope as that of old Section 4 of the Act and Valuation Rules. Hence, respectfully following the ratio of the above decisions, I hold that the third party s inspection charges initially paid by the appellants and subsequently reimbursed by the buyers is not includible in the assessable value of the goods. I, therefore, hold that duty demand of ₹ 25,125/- on inspection charges along with interest is not sustainable. 5. As against the above, learned JDR r .....

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in the said order of the Commissioner (Appeals). We also note that this Judgement has clearly distinguished the judgement of the Larger Bench of the Tribunal in the case of Maruti Suzuki India Ltd. (supra) in para 5 which also is reproduced. 5. Before we proceed to analyse their contention in relation to the issue referred for consideration, it would be appropriate to record the undisputed facts of the case wherein the issue has arisen for the consideration 6.5 From the foregoing, it is very cl .....

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