Custom, Excise & Service Tax Tribunal
Smita Conductors Ltd vs Daman on 13 September, 2024
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
Excise Appeal No. 13112 of 2018 - DB
(Arising out of OIA-CCESA-AUDIT-SRT-VK-158-159-2017-18 dated 11/09/2018 passed by
Commissioner ( Appeals ) Commissioner of Central Excise, Customs and Service Tax-
SURAT-I)
Smita Conductors Ltd ........Appellant
Survey No. 8, Khutali,
SILVASSA,
DADRA & NAGAR HAVELI
VERSUS
Commissioner of C.E. & S.T.-Daman ......Respondent
3RD FLOOR...ADARSH DHAM BUILDING, VAPI-DAMAN ROAD, VAPI OPP.VAPI TOWN POLICE STATION, VAPI GUJARAT-396191 APPEARANCE:
Shri VipulKhandhar, Chartered Accountant, Appeared for the Appellant Shri Sanjay Kumar, Superintendent (AR), Appeared for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR Final Order No. 12024/2024 DATE OF HEARING: 01.07.2024 DATE OF DECISION: 13.09.2024 RAMESH NAIR The issue involved in the present case is that whether charges for testing conducted by third party on the request of the customer and reimbursement of such testing charges from the customer M/s Power Grid Corporation of India Limited is includible in the assessable value of excisable goods supply to M/s Power Grid Corporation of India Limited on the payment of duty.
2 Shri Vipul Khandhar, Learned Chartered Accountant appearing on behalf of the appellant submits that in the present case the testing was conducted on the request of the customer M/s. Power Grid Corporation of India Limited and the testing charges paid to the testing agency was subsequently taken reimbursement from the M/s Power Grid Corporation of India Limited separately then the assessable value on which Excise duty was paid. He submits that since the testing is on the request of the customer and it is not the obligation of the appellant to carry out such tests to complete 2 E/13112/2018-DB the manufacture of goods. Therefore, the said testing charges is not includible in the assessable value as held in the following judgments:-
LB-BHASKAR ISPAT PVT. LTD.2004 (167) E.L.T. 189 (Tri. LB) Commissioner v. Goyal M.G. Gases Pvt. Ltd. - 2016 (342) E.L.T. A223 (S.C.) 2015 (317) E.L.T. 299 (Tri. - Ahmd.) LUBI SUBMERSIBLES LTD 2017 (351) E.L.T. 307 (Tri. - Mumbai)PAM PHARMACEUTICAL & ALLIED MACHINERY CO. LTD 2018 (359) E.L.T. 590 (Tri. - Chennai) JEEVAN DIESELS & ELECTRICALS LTD As regard the testing conducted on the request of the customer, he referred to the bill copy of the testing charges for reimbursement and also the contract for supply of goods to the Power Grid Corporation. He further submits that in the appellant's own case for different location Meerut-II Commissioner (Appeals) has passed order allowing the appeal on the identical issue vide Order In Appeal No. GZB-EXCUS-000-APP-0351-15-16 dated 09.03.2016. He requests that considering the legal position settled in the appellant's favour, present appeal be allowed.
3. Shri Sanjay Kumar, Learned Superintendent (AR) appearing on behalf of the Revenue, reiterates the findings of the impugned order.
4. We have carefully considered the submission made by the both the sides and perused the record. We find that in the present case the Revenue sought to include the testing charges of testing conducted by third party on the request of the customer in the assessable value of excisable goods on which test was conducted. We find that in the facts of the present case the testing was conducted not as a part of the obligation of the appellant but in a special case when the request was made by the customer to conduct such test. In this regard, we scan the copy of the bill for reimbursement of such testing charges as below:-
3 E/13112/2018-DB From the above bill raised for reimbursement of the testing charges it is clear that the test was done as per the letter No. CC/ENGG-
TL/WR:Moosebear:Smita dated 14.09.2012of the customer M/s Power Grid Corporation of India Limited whereby they have made specific request for conducting such test. Therefore, the test was conducted by third party on the request of the customer M/s Power Grid Corporation, in such case the testing charges cannot be part and partial of the manufacture of excisable 4 E/13112/2018-DB goods in the hand of the appellant consequently the same is not includible in the assessable value of the excisable goods. On the identical facts and circumstances various judgments have been delivered wherein, it was held that the testing charges conducted on behalf of the appellant by third party and taking reimbursement of such testing charges by the manufacturer supplier is not includible in the assessable value. Some of the judgments are reproduced below:-
4.1 This issue has been considered by larger bench of this Tribunal in the case of BHASKAR ISPAT PVT. LTD (supra) wherein, the larger bench answered the reference made to it as under:-
"3. We have perused the decision of the Tribunal in the case of Hindustan Gas & Industries Ltd. v. Commissioner of Central Excise & Customs, Baroda (supra). In that case the Tribunal had taken into consideration the facts that the inspection charges were not in respect of the optional or secondary testing, hence are includible in the assessable value of the goods. While deciding so, it was also held that it is settled law that charges paid for inspection or testing by third party at the option of the buyer cannot form part of the assessable value. As in the case of Hindustan Gas & Industries Ltd. v. Commissioner of Central Excise & Customs, Baroda (supra) that inspection charges were not for the additional or optional testing, therefore, taking into consideration facts and circumstances of case, it was held that these are includible in the assessable value.
4. The issue before us is to decide whether the additional testing charges at the request of customer and borne by the customer, are includible in the assessable value of the goods for the purpose of Central Excise duty. We find that the Tribunal in the case of Shree Pipes Ltd. v. Collector of Central Excise, reported in 1992 (59) E.L.T. 462 (Tribunal) held that such additional testing charges born by the customer and which are optional, are not includible in the assessable value of the goods. Revenue filed appeal against this decision and the Hon'ble Supreme Court dismissed the appeal, reported in 1992 (61) E.L.T. A63 (S.C.) - C.C.E. v. Shree Pipes Ltd. This decision was followed by the Tribunal in the case of CIMMCO Ltd. v. Collector of Central Excise, Jaipur, reported in 1994 (74) E.L.T. 687 (Tribunal). The appeal filed by the Revenue against this decision was dismissed by the Hon'ble Supreme Court, reported in 1996 (84) E.L.T. A167 (S.C.) - C.C.E. v. CIMMCO Ltd. The Tribunal further followed the decision in the case of Shree Pipes Ltd. (supra) and in the case of Hindustan Development Corporation Ltd. v. C.C.E., Calcutta, reported in 1996 (85) E.L.T. 58 (Tribunal) and the appeal filed by the Revenue was dismissed by Hon'ble Supreme Court reported in 1996 (86) E.L.T. A162 (S.C.) - C.C.E. v.
Hindustan Development Corporation Ltd.
5. In view of the above settled position, we hold that cost of additional testing conducted at the request of the customer and the cost of such testing being borne by the customer, are not includible in the assessable value of the goods. The issue referred to the Larger Bench is answered in the above terms.
6. No other issue is involved in the present appeal. Therefore, we take up the appeal for disposal. The Revenue filed this appeal on the ground that the cost of additional and secondary inspection carried out at the request of the buyer and for which buyer has to pay, is includible in the assessable value of the goods. As discussed above, as we held that such charges are not includible in the assessable value of the goods. Therefore, we find no merit in this appeal and the same is dismissed."
4.2 The identical issue has been considered by the principal bench of this Tribunal in the case of Goyal M.G. Gases Pvt. Ltd. wherein, the following observation was made:-
"8. As regards the inclusion in the assessable value of the cylinder rental and maintenance charges in the case where the gases were supplied in the appellant's own
5 E/13112/2018-DB cylinders and the charges for cylinder testing done at the request of the customers, in the cases where the gases were supplied in the cylinders brought by the customers, it is not disputed that the gases, in question, were marketable as such inasmuch as a substantial quantity of the gases was being supplied in tankers as well as through pipe line and also in the cylinders brought by the customers and as such, the packing of the gases into cylinders is not necessary for making the gas marketable. In view of this factual matrix, the ratio of the Tribunal's decision in the case of CCE v. Grasim Industries Ltd., reported in 2014-TIOL-573-CESTAT-Del would be applicable to this case and these charges would not be includible in the assessable value."
The above decision of the Tribunal was upheld by the Hon'ble Supreme Court by dismissing the Revenue Appeal reported at Commissioner v. Goyal M.G. Gases Pvt. Ltd- 2016 (342) E.L.T. A223 (S.C.) 4.3 In another case on the identical issue this Tribunal in the case of LUBI SUBMERSIBLES LTD taken the same view is under:
"4. Heard both sides and perused the case records. The issue involved in the present appeal filed by the revenue is whether PDI charges incurred only at the instance of the buyer are required to be added to the assessable value under Section 4 of the Central Excise Act, 1944 or not. The first appellate authority has rejected revenue's appeal on the ground that as per Larger Bench judgment in the case of BhaskarIspat 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 Board's Circular which is in favour of the assessee. For better appreciation, we reproduce the relevant paragraph of his order as under :
"I further find that under erstwhile Section 4, which existing prior to 1-7-2000.
(i) The Hon'ble Supreme Court of India in case of Collector of C.E., Jaipur v. M/s.
CIMMCO Ltd. - 1996 (84) E.L.T. 167 (S.C.) has upheld the Tribunal Order Nos. 296-301/94-A, dated 19-10-94 reported in 1994 (74) E.L.T. 687 (Tribunal), holding that inspection charges incurred by the customers are not 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. Hindustan Motors Ltd.
- 2002 (140) E.L.T. A81 (S.C.), has held that pre-delivery inspection charges and after sales service charges incurred by dealer are not includible in assessable value of vehicles.
Further, the Hon'ble Tribunal under erstwhile Section 4 of the Act in following cases has held that cost of additional inspection charges borne by the customers carried out by a third party, is not includible in the assessable value.
(i) M/s. Choksi Tube Co. Ltd. v. CCE, Ahmedabad,2003 (153) E.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) 6 E/13112/2018-DB
(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 respect of Pre-delivery Inspection charges has not stood the test of legal scrutiny as Tribunal's judgment has been otherwise and consequently C.B.E. & C. withdrew its subsequent Circular No. 355/77/97- CX, dated 19-11-97 and 435/I/99-CX, dated 12-1-99 vide Circular No. 681/72/2002-CX, dated 12-12-02 in the context of old Section 4 of CEA, 1944. The C.B.E. & C. has issued a Circular dated 12-5-00 [2000 (118) E.L.T. 45] in which in Para 2.2 it has been clarified that the concept of new transaction 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 Rs. 25,125/- on inspection charges along with interest is not sustainable."
5. As against the above, learned JDR relied upon another circular of Board being No. 643/34/2002-CX., dated 1-7-2002. However, we find that reference in the said circular is to the pre-delivery inspection charges incurred by the dealer during the warranty period. The same does not relate to the pre-inspection conducted by the manufacturer at the behest of their buyer. The issue stands discussed in detail by Commissioner (Appeals), who has followed the precedent decisions of the Tribunal as also Board's circular. We find no infirmity in the said order of the Commissioner (Appeals)."
5. Ld. AR has relied upon Larger Bench judgment in the case of Maruti Suzuki India Ltd. v. CCE, Delhi-III (supra) wherein it has been held that PDI charges are required to be included in the assessable value. However, it is observed from this case law that the issue before the Larger Bench, in the case of Maruti Suzuki India Ltd. (supra) was only on inspection done on compulsory PDI done in all cases by the appellant in that case. It was not the case before the Larger Bench that PDI inspections were done at the instance of the buyer. In view of the interpretation made by this bench in the case of CCE, Ahmedabad-II v. Johnson Pumps (I) Ltd. (supra) PDI charges recovered at the instance of the buyer are not includible in the assessable value and accordingly appeal filed by the revenue is required to be rejected and cross objection filed by the respondent is required to be allowed.
6. In view of the above observations, appeal filed by the revenue is rejected and the cross objection filed by the respondent is allowed."
In view of the above judgments, it is settled law that any testing charges for the testing done by third party on the request of the customer and reimbursement of the same to the manufacturer supplier, the said testing charges is not includible in the assessable value of the excisable goods supplied on payment of duty. The issue in hand is no longer res-integra in the light of the above judgments. Therefore, we are of the considered view that in the present case the testing charges is not includible in the assessable value of excisable goods manufactured and cleared by the appellant on payment of duty.
5. Accordingly, the impugned order is set aside to the extent it upheld the demand, interest and penalty. The appeal is allowed with consequential relief.
7 E/13112/2018-DB (Pronounced in the open court on 13.09.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (C L MAHAR) MEMBER (TECHNICAL) Bharvi