Whether processing done at the request of buyers at their premises is includible in assessable value?

PJ/CASE LAW/2015-16/2855

Case:-POKARNA LTD. VERSUSCOMMR. OF C., C.E. & S.T., HYDERABAD-IV

Citation:- 2015 (320) E.L.T. 322 (Tri. - Bang.)

Brief Facts:-Appellant is engaged in manufacture and export of polished granite slabs. A portion of the manufactured granite slabs which were rejected have been cleared in the Domestic Tariff Area (DTA) in terms of Notification No. 8/97-C.E. on payment of duty. The appellant is a 100% EOU. A dispute has arisen in respect of three buyers as regards the assessable value to be adopted. As a result of reassessment, the appellant was required to pay differential duty of Rs. 5,06,570/- with interest and penalty was also imposed.

Appellants Contention:-The learned Counsel submitted that the appellant had undertaken edge cutting, rounding, cutting to different sizes, etc. He submits that this type of work was undertaken in the premises of certain customers only and the appellants have a separate division who were undertaking this work. He submits that rejects were sold at a uniform price to all the customers and only in respect of three customers who had requested for this work to be undertaken, appellant had undertaken to do so. He submits that the same cannot be included in the assessable value. He relies on the decision in the case of Thermax Ltd. v. CCE- 1998 (99)E.L.T.481 (S.C.) wherein it was held that installation, erection and commissioning charges for equipment installed at customers premises is not includable in the assessable value of the equipment.

Respondents Contention:-Learned AR would submit that this is an additional consideration and it has to be added to the assessable value. Further, he also submits that the concept under Central Excise is now that the value should be transaction value and in the case of these three customers, the transaction value has to include with so-called job work charges also.

Reasoning of Judgement:-The tribunal have considered the submissions made by both the sides. According to ‘Explanation’ to Section 4(1) of Central Excise Act, 1944, “For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods……..”The ‘Explanation’ would show that to add additional consideration to the assessable value, it should be flowing from the buyer to the assessee in connection with the sale of such goods. The claim of the appellants that they were selling the rejected items to all the customers at the same price, has not been contradicted. There is also no allegation that the quality of materials supplied to these three buyers is different. There is also no allegation that the job work was undertaken within the factory. Goods have to be assessed in the form in which they are cleared from the factory. In this case, there is no allegation by the Revenue and no evidence brought up to show that price is not ex-factory as far as the rejected slabs are concerned. When the place of removal is factory and no additional consideration is collected in connection with the same, there is no justification for addition of job work charges charged by the appellants to the three customers for undertaking works such as edge cutting, sizing, rounding, etc. In view of the above, tribunal do not find any merit in the impugned order and accordingly the same is set aside and the appeal is allowed with consequential relief, if any, to the appellant.

Decision:- Appeal allowed.

Comment:- The crux of the case is that as the assessee is selling the rejected items to all the customers at the same price, the uniform price should only be considered as the transaction value. Furthermore, according to section 4 of Central Excise Act, 1944,when place of removal is factory and no additional consideration is collected in connection with the sale of goods and some job work is conducted at the buyers premises only at the request of the buyer, the job work charges cannot be included in the assessable value.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2855

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