2012 (11) TMI 71 - AT - Central Excise

Appellate Tribunal rules travelling expenses not included in excise duty calculation value

The Appellate Tribunal allowed the appeal, ruling that the Department's demand to include travelling expenses in the assessable value for excise duty ... Turnkey project - manufacturing plant and supply of plant and machinery in addition to erecting the plant at the work site as per the design layout, etc. provided by the buyer - They discharged Excise duty on the entire contract amount - they raised a debit note on the buyer towards reimbursement of travelling expenses to the customer’s site for undertaking erection and commissioning work – Held that:- Demand of the Department for inclusion of travelling expenses from the factory to the customer’s site for erection and installation work cannot form the part of the transaction value under Section 4 of Central Excise Act, 1944 and, therefore, excise duty demand on such value is not sustainable in law. Issues:- Inclusion of travelling expenses in the assessable value of goods for excise duty calculation.Analysis:The case involved an appeal against an order passed by the Commissioner of Central Excise (Appeals) regarding the inclusion of travelling expenses in the assessable value of goods supplied by the appellant for the purpose of calculating Central Excise duty. The appellant undertook a turnkey project that included manufacturing, supply of machinery, and erection at the customer's site. The dispute arose when the Department demanded excise duty on the reimbursement of travelling expenses to the customer's site, which the appellant had raised through a debit note. The Assistant Commissioner confirmed the demand, imposing a penalty as well. The Commissioner (Appeals) modified the duty demand but upheld the penalty. The appellant challenged this decision before the Appellate Tribunal.The appellant argued that charges for supervision during erection and commissioning at the customer's site should not be included in the assessable value of goods, citing precedents where similar charges were excluded. The Revenue, represented by the ld. AR, supported the lower authorities' findings. The Tribunal, after considering the submissions, noted that the appeal could be decided based on the issue at hand. It observed that the travelling expenses for erection and installation at the customer's site were post-manufacturing activities and not related to the transaction value of the goods supplied. Referring to previous cases, the Tribunal agreed that such charges should not be part of the transaction value under the Central Excise Act, 1944.Based on the legal principles established in prior cases and the specific circumstances of the present case, the Tribunal concluded that the Department's demand for including travelling expenses in the assessable value for excise duty calculation was not legally sustainable. Therefore, the appeal was allowed, and any consequential relief was granted to the appellant. The judgment highlighted the distinction between manufacturing costs and post-manufacturing activities in determining the assessable value for excise duty purposes, emphasizing the need for a clear nexus between the charges and the goods' transaction value to warrant inclusion in the duty calculation.