Custom, Excise & Service Tax Tribunal
M/S. Indian Card Clothing Co. Ltd vs Commissioner Of Central Excise, Pune I on 17 April, 2017
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No.
E/1272 to 1275/06
E/2445/06
(Arising out Order-in- Appeal No. PI/160/06 dated 27-04-2006 passed by the Commissioner of Central Excise (Appeals), Pune I)
For approval and signature:
Honble Shri Ramesh Nair, Member (Judicial)
Honble Shri Raju, Member (Technical)
1. Whether Press Reporters may be allowed to see No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Seen
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
M/s. Indian Card Clothing Co. Ltd.
Appellant
Vs.
Commissioner of Central Excise, Pune I
Respondent
Appearance:
Shri T.C. Nair, Advocate for the appellant Shri V.K. Shastri, Asstt. Commissioner (AR) for the respondent CORAM:
Honble Shri Ramesh Nair, Member (Judicial) Honble Shri Raju, Member (Technical) Date of hearing : 16.03.2017 Date of decision : 17.04.2017 O R D E R No: ..
Per: Ramesh Nair The brief facts of the case are that appellant are engaged in the manufacture and sale of excisable goods viz. card clothing falling under Chapter sub-heading 8448.90 of the first schedule to the Central Excise Tariff Act, 1985. The said card clothing is used by the textile mills in the carding process for removing foreign particles like cotton and wool for improving quality of the fibre. The appellants also have their sales depot at Madurai and Coimbatore where workshop is available. They are undertaking servicing activities like repair and maintenance etc. relating to card clothing. The contention of the department is that these services prima facie appear to be aiding/ smoothening in installation/ sale of the finished goods that they were issuing separate demands for recovering the cost of these services from their customer, which they failed to include in assessable value of the products. Show-cause notices were issued to the appellants seeking to recover central excise duty on the servicing charges recovered by the appellants on separate commercial invoice/ challans during the period from 18.07.2002 to 31.03.2004. The adjudicating authority confirmed the demand and also imposed equal amount of penalty under Section 11AC. The recovery of interest under Section 11AA/ 11AB has also been ordered. Being aggrieved by the Order-in-Original, the appellant filed appeal before the Commissioner (Appeals) which came to be rejected by upholding the Order-in-Original. Therefore, the appellants are before us.
2. Shri T.C. Nair, ld. counsel for the appellant submits that the services of repairing of card clothing are not related to the newly manufactured goods sold to the customer. The customer after use for substantial period, when the products got defective the same are sent to their depot where this repairing activity of the old/used card clothing is undertaken for which separate bills are raised and the service charges are collected. This activity of repairing is altogether separate from the newly manufactured goods sold by the customer. Since these activities are nothing to do with the newly manufactured goods sold to the customer there is no question of including service charges for repair of old card clothing in the value of the newly manufactured card clothing. He further submits that in most of the cases the card clothing on which the repairing service is carried out, are not even manufactured by them but the same were manufactured and supplied by some other manufacturer and the customer after use thereof the old card clothing are sent to the depot where the repairing activities are carried out. He submits that as regards the goods manufactured and supplied even though through the same depot the goods are fully manufactured in the factory itself therefore, on newly manufactured card clothing no further activities are carried out at the depot. He also submits that as regards the service activity of repair of old card clothing the appellant have registered themselves as service provider and discharged the service charge on the depot. Therefore the repairing activity of old card clothing is an independent activity, which is not related to the manufacture and sale of newly manufactured goods cleared from the factory of the appellant. He also submits that the demand pertaining to the extended period is time barred as there is no suppression of fact on the part of the appellant. For these reason the penalty is also not imposable under Section 11AC. In support of his submission, he placed reliance on the following judgments:-
* Rashtriya Ispat Nigam vs. CCE 2005 (179) ELT 65 * CCE vs. Punjab Alkalies & Chemicals Ltd. 2004 (168) ELT 82 * CCE vs. Kelvinator of India Ltd. 1988 (36) ELT 517 (SC) * Kelvinator of India Ltd. 1988 (33) ELT 695 (T) * CCE vs. Sunray Computers P. Ltd. 1988 (33) ELT 787 (T). * Electronic Corporation of India vs. CCE 1989 (39) ELT 414 (T) * Pratibha Processors vs. UOI 1996 (88) ELT 12
3. Shri V.K. Shastri, ld. Asstt. Commissioner (AR) appearing for the revenue reiterates the findings in the impugned order. He further submits that since the repairing activity is carried out on the card clothing it is directly related to the goods manufactured and sold by the appellant. Therefore, the service charge which is collected separately under the commercial invoice should be added in the assessable value.
4. We have carefully considered the submission made by both sides. We find that the revenue sought to include the repair charges of old card clothing in the value of goods cleared from the factory of the appellant. On observation of the facts of the case, department could not establish that the repairing activity is carried out by the appellant on the newly manufactured goods cleared from the factory to the depot and from there to the customer. It is the submission of the appellant that as regards the newly manufactured card clothing, it is fully manufactured at the factory even though some small quantity is transferred to depot that is only for onward sale as such and on such goods no activity of repair is carried out. The repairing is carried out on the old card clothing where after use by the customer the card clothing got damaged and the same is repaired for which a separate service charge is collected by the appellant. Since the repairing activity is carried out on the old card clothing which also includes the goods initially supplied by some other manufacturer, therefore the said repairing activity has no relation to the manufacture and clearance of new card clothing manufactured by the appellant. In such case the service charge of the repairing is not in relation to the sale of the newly manufactured card clothing cleared by the appellant. Therefore, there is no question of addition of service charge of the repairing activity of old card clothing in the assessable value of newly manufactured card clothing. We also observe that as regards the repairing of old card clothing the appellant is registered as service provider and discharging the service tax on the repairing service of old and used card clothing. As per our discussion based on the facts available on record, we are of the considered view that the repairing service charge of old card clothing is not includable in the assessable value of the appellants newly manufactured card clothing. Therefore, the impugned order is not sustainable. Hence the same is set aside. Appeals are allowed with consequential relief, if any, in accordance with law.
(Pronounced in Court on ..............................) (Raju) Member (Technical) (Ramesh Nair) Member (Judicial) //SR
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E/1272 to 1275/06