Whether rental, repair/testing charges for cylinder includible in the assessable value of gases being sold?

PJ/CASE LAW/2015-16/2736

Case:-COMMISSIONER OF C. EXCISE, ALLAHABAD VERSUSINDIAN AIR GASES LTD.

Citation:-2015 (318) E.L.T. 434 (Tri. - Del.)

Brief facts:- The respondent manufacture industrial gases like Medical grade oxygen gas and liquid nitrogen. The gases are sold by the respondent in their own cylinders and also in the cylinders brought by the customers. In the case where the gases are sold by the respondent in their own cylinders, the respondent charged an amount towards cylinder rental in addition to the value of the goods. In the cases where the gases are sold in the cylinders belonging to the customers, wherever the customers request for testing and repair of the cylinder, it is done by the respondent and for which they charge some amounts which are in addition to the price for the gas supplied. The Department is of the view that the cylinder rental charges in the cases where the gases are supplied in the appellant’s own cylinders and the cylinder repair and servicing/testing charges in the cases where the gases are supplied in the cylinders brought by the customers would be includible in the assessable value of the goods. It is on this basis that for the period from July 2000 to October 2003, the Jurisdictional Joint Commissioner vide order-in-original dated 30th September 2004 confirmed the duty demand of Rs. 6,04,269/- against the respondent along with interest and imposed penalty of equal amount on them under Section 11AC. On appeal being filed to Commissioner (Appeals) against this order, the Commissioner (Appeals) vide impugned order-in-appeal dated 2nd March 2005 set aside the Joint Commissioner’s order and allowed the appeal. Against this order of the Commissioner (Appeals), this appeal has been filed by the Revenue.

Appellant’s contention:- Shri Pramod Kumar, learned Jt. CDR, assailed the impugned order by reiterating the grounds of appeal and cited the judgment of the Tribunal in the case of CCE, Ghaziabad v. Modi Gas & Chemicals Ltd. reported in 2010 (261)E.L.T.1154 (Tri. - Del.),wherein following the judgment of the Tribunal in the case of Kota Oxygen (P) Ltd. v. CCE, Jaipur reported in 2000 (121)E.L.T.369 (Tribunal)it was held that the cylinder rentals in the cases where the gases are supplied in the cylinders owned by the manufacturer would be includible in the assessable value of the goods, that against the Tribunal’s judgment in the case of Kota Oxygen (P) Ltd. v. CCE, Jaipur (supra), the assessee had filed an appeal before the Apex Court which had been dismissed and in view of the Apex Court’s judgment in the case of Kunhayammed v. State of Kerala reported in 2001 (129)E.L.T.11 (S.C.), the Supreme Court’s order dismissing the civil appeal in the case of Kota Oxygen (P) Ltd. v. CCE, Jaipur (supra) would become a binding precedent. He, therefore, pleaded that the impugned order is not correct.

Respondent’s contention:- Shri B.L. Narasimhan, Advocate, the learned Counsel for the respondent, pleaded that the fact that the gases manufactured by the respondent are being sold by them either in their own cylinders or in the cylinders brought by the customers shows that the gases manufactured are as marketable as such without being packed in any containers, that taking this fact into account, the Tribunal in the case of CCE, Indore v. Grasim Industries Ltd.reported in 2014 (304)E.L.T.310 (Tri.-Del.)relying upon the Apex Court’s judgments in the cases of Hindustan Polymers v. CCE reported in 1989 (43) E.L.T.165 (S.C.)and also the judgment in case of Union of India v.Bombay Tyre International Ltd. reported in 1983 (14) E.L.T.1896 (S.C.), had held that the cylinder rentals or cylinder repair/testing charges would not be includible in the assessable value of the gases, that in these judgments of the Tribunal, the Tribunal also considered its earlier judgment in the case of Kota Oxygen (P) Ltd. v. CCE, Jaipur (supra) relied upon by the Tribunal in its judgment in the case of CCE, Ghaziabad v. Modi Gas & Chemicals Ltd. (supra), that the Tribunal’s judgment in the case of Kota Oxygen (P) Ltd. v. CCE, Jaipur (supra) is based on the fact that, the assessee were charging amounts towards cylinder rental and cylinder maintenance charges even from the customers who purchased oxygen gas manufactured by them in their own cylinders and the amounts charged as cylinder rental and cylinder maintenance charges were several times higher than the actual cost incurred and on this basis, the Revenue had alleged that part of the price of oxygen gas was being recovered as cylinder rental and maintenance charge and this allegation had been upheld by the Tribunal, and that in the present case there is no such allegation and, therefore, the judgment of the Tribunal in the case of Kota Oxygen (P) Ltd. v. CCE, Jaipur (supra) is not applicable. He, therefore, pleaded that there is no infirmity in the impugned order.

Reasoning of judgement:- The undisputed facts are that the respondent manufacture Medical grade oxygen gas and liquid nitrogen and sell the gases either in their own cylinders in which case they charge, in addition to the value of the goods, cylinder rental charges or in the cylinders brought by the customers, in which case, on the request of the customers, wherever the cylinders are tested or repaired, the cylinder testing/repair charges are charged in addition to the value of the goods. The point of dispute is as to whether in these circumstances, the cylinder rental charges and cylinder repair/testing charges would be includible in the assessable value of the gases being sold. Since from the facts of the case it is clear that the goods are marketable as such without being packed in any special container as the same can be sold even in the cylinders brought by the customers, following the judgment of this Tribunal in the case of CCE, Indore v. Grasim Industries Ltd. (supra), cylinder rental charges and cylinder testing and repair charges would not be includible in the assessable value of the goods. As regards the Revenue’s reliance on the judgment of the Tribunal in the case of Kota Oxygen (P) Ltd. v. CCE, Jaipur (supra) which has been upheld by the Apex Court, in that case the assessee was charging fixed amount towards rental and cylinder maintenance charges even from the customers who purchased oxygen gas manufactured by the assessee in their own cylinders and there was also allegation that the amounts charged as cylinder rental and cylinder maintenance were several times higher than the actual cost incurred in this regard and on that basis the Revenue had alleged that part of the value of the oxygen gas was being recovered as cylinder rental/maintenance charges and this allegation of the Revenue have been upheld by the Tribunal. In the present case, there is no such allegation. In view of this, the Tribunal’s judgment in the case of Kota Oxygen (P) Ltd. v. CCE, Jaipur (supra) is not applicable.

In view of the above discussion, they do not find any merit in the Revenue’s appeal. The same is dismissed.

Decision:-Appeal dismissed.

Comment:- The analogy of the case is that relying in case of Grasim Industries Ltd. cylinder rental charges and cylinder testing and repair charges would not be includible in the assessable value of the goods. This is for the reason that Medical grade oxygen gas and liquid nitrogen gas were marketable as such without being packed in any special container. Hence, Repair/rental charges were not includible in assessable value.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2736

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