Custom, Excise & Service Tax Tribunal
Belapur vs Surindra Engineering Co. Pvt. Ltd on 2 November, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/749/2006
[Arising out of Order-in-Original No: 30-32/Commr(AH)/05 dated 28/02/2005 passed by the Commissioner of Central Excise (Adjudication), Mumbai.]
For approval and signature:
Honble Shri Ramesh Nair, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Commissioner of Central Excise
Belapur
Appellant
versus
Surindra Engineering Co. Pvt. Ltd.
Respondent
Appearance:
Shri Ajay Kumar, Jt. Commissioner (AR) for the appellant Shri Prakash Shah, Advocate for the respondent CORAM:
Honble Shri Ramesh Nair, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 02/11/2016 Date of decision: 19/12/2016 ORDER NO: ____________________________ Per: Ramesh Nair:
The fact of the case is that the respondent is engaged in the manufacture of MS pipes falling under Chapter 73 of the Central Excise Tariff Act,1985 and supplying the same to their customers on payment of duty on the value arrived at in terms of Section 4 of the Central Excise Act, 1944.
2. The customers (Central/State and semi-government bodies) are arranging third party inspection of the goods at respondents factory for which in most of the cases, payment for such inspection charges is made by the customer directly to the inspection agency. In few cases the appellant is making payment to the inspection agency on behalf of the customer and subsequently getting the reimbursement of the same from their customers. The department contends that among other charges, one of the charges i.e. said inspection charges should be included in the assessable value. The adjudicating authority dropped the demand on such inspection charges. Aggrieved by the adjudication order, to the extent the demand was dropped on the inspection charges, Revenue is before us.
3. Shri Ajay Kumar, Jt. Commissioner (AR), appearing on behalf of Revenue reiterates the grounds of appeal. He submits that the goods manufactured by the respondents cannot be sold without the inspection as required by the customers. Therefore, the goods become marketable only after inspection. He submits that as per Section 4 of the Central Excise Act, 1944, all the elements which are required to be carried out before clearance of the goods should form part and parcel of the transaction value. He refers to the judgment relied upon in the grounds of appeal in the case of Hindustan Gas & Industries Ltd v. Commissioner of Central Excise & Customs, Baroda 2001 (123) ELT 481 (Tri.-Mumbai).
4. On the other hand, Shri Prakash Shah, Learned Counsel appearing on behalf of the respondent supports the findings of the learned Commissioner for dropping the demand in respect of inspection charges. He placed reliance on the following judgments:
i. Commissioner of Central Excise, Raipur v. Bhaskar Ispat Pvt. Ltd. 2004 (167) ELT 189 (Tri.LB) ii. Bhaskar Industrial Development. Ltd. v. Commissioner of Central Excise, Kolkata III 2003 (161) ELT 822 (Tri.-Kolkata) iii. Commissioner of Central Excise, Belapur v. Sulzer Pumps India Ltd 2015 (326) ELT 619 (Tri.-Mumbai); iv. Tirupati Structurals Pvt Ltd v. Commissioner of Central Excise, Ghaziabad 2014 (300) ELT 582 (Tri-Del.) v. Commissioner of Central Excise, Ahmedabad v. Johnson Pumps (India) Ltd. 2013 (294) ELT 263 (Tri.-Ahmd) vi. Commissioner of Central Excise, Jaipur II v. A. Infrastructure Ltd 2003 (160) ELT 549 (Tri.Del.) vii. Idcol Kalinga Iron Works Ltd v. Commissioner of Central Excise, Bhubaneshwar II 2007 (214) ELT 511 (Tri.-Kolkata)
5. We have carefully considered the submissions made by both the sides. We find that the fact is not in dispute. The inspection agency is deputed by the customer/government body. Payment for such inspection are paid by the customer directly to the inspecting agency. However, in few cases the payment of inspection charges was made by the respondent to the inspecting agency on behalf of the customer and subsequently such payment was collected as reimbursement. This arrangement has been clearly spelt out in the contract. As per Section 4, any amount which is paid or payable on behalf of the goods will form the transaction value. In the present case, as per the contract, the respondent is not under obligation to undertake the inspection and bear the expenses thereof. As regards the inspection it is a contract between the inspection agency and the customer and the payment transactions invariably made between both of them. Therefore, in few cases, whatever payment was borne by the respondent, for the inspection, the same was collected from the customer as reimbursements which cannot form part of transaction value as the subject amount is not paid or payable on account of sale of goods. In this regard, learned Commissioner has given categorical finding in the impugned order which is reproduced below 40 As regards the inclusion of inspection charges in the assessable value of the notice, on perusal of copies of the contract furnished by them, I observe that such inspection by third independent agencies was organized at the instance of their customers. The contract also stipulated that such charges would be borne by the customers themselves. I observe that on stray occasions, the notice would pay the inspection agencies their fees and such fess would be reimbursed to the notice by their customers at a later date. I also observe that the Tribunals and Courts have consistently held that such inspection charges would not form part of the assessable value. All the case law relied upon by the Noticee in para 24 above and the case law in 2003 (153) ELT 178 (Tri-Del.) in Choksi Tube Co. Ltd. v. CCE, Ahmedabad would be applicable to them. Hence, on the ratio of the orders/decisions of this Tribunal/Courts relied upon by the notice, I hold that inspection charges as in the instant case cannot form part of the assessable value.
6. In view of the above clear finding, we do not find any infirmity therein. This issue is settled by the Larger Bench of this Tribunal in the case of Commissioner of Central Excise, Raipur v. Bhaskar Ispat Pvt. Ltd. 2004 (167) ELT 189 (Tri.-LB) wherein it was held that cost of additional testing conducted at customers request and borne by the customer is not includable in the assessable value of the goods. In the case of Bhaskar Industrial Development. Ltd (supra) this Tribunal has held that inspection charges in respect of inspection conducted by third party at the instance of buyer and borne by the buyer not includable to determine the assessable value.
7. Similarly, by relying upon the Larger Bench decision, the Tribunal in the case of Sulzer Pumps India Ltd (supra) it was held that cost of additional testing at customers request not includable in the assessable value. Similar view was taken by the Tribunal in the case of Tirupati Structurals Pvt Ltd. (supra), Johnson Pumps (India) Ltd. (supra) and A. Infrastructure Ltd. (supra).
8. As per the facts and being the legal issues settled in the various judgments we are of the view that the inspection charges is not includable in the assessable value. Therefore, the order to the extent that it drops the demand of duty on inspection charges stand sustained.
9. Revenues appeal is dismissed.
(Pronounced in Court on 19/12/2016) (C J Mathew) Member (Technical) (Ramesh Nair) Member (Judicial) */as 7 2