2014 (8) TMI 657 - AT - Central Excise

Tribunal excludes cylinder charges from assessable value, clarifies medical grade oxygen classification.

The Tribunal held that cylinder rental, maintenance charges, and testing charges are not to be included in the assessable value. Excess transportation ... Valuation of goods - manufacture and supply of Industrial gases viz. Oxygen, Nitrogen, Hydrogen, Helium, Argon and also mixture of these gases - inclusion of cylinder rental and maintenance charges - inclusion of excess amount of transportation charges - classification of the medical grade oxygen - Cenvat Credit in respect of cryogenic tank - Held that:- 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 in as much 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 Vs. Grasim Industries Ltd. reported in [2014 (4) TMI 650 - CESTAT NEW DELHI] would be applicable to this case and these charges would not be includible in the assessable value. - Decided in favour of assessee. Inclusion of differential freight charges - Held that:- even if the appellant make profit from their activity of arranging transport by charging higher amount than the expenses actually incurred on transportation, the differential freight would not be includible in the assessable value and in this regard, the Apex Court judgement in the case of Baroda Electric Meter [1997 (7) TMI 126 - SUPREME COURT OF INDIA] would be applicable. - Decided in favour of assessee. Classification of medical grade oxygen - Held that:- When the tariff does not provide that the classification would be determined by the condition of the end use, the condition of end use cannot be brought in for deciding the classification and just because the medical grade oxygen manufactured by a manufacturer and sold by him to his customers was further sold to other dealers for non-medical, use the classification of the oxygen manufactured and cleared by the manufacture cannot be changed to non-medical oxygen. - notwithstanding the statement of some of the dealers that the medical grade oxygen purchased by them from the appellant company was sold by them to some other persons for non-medical use the oxygen gas, in question, would be correctly classifiable as medical grade, oxygen under sub-heading 2804.11, as the fact that it is more than 99.5% pure is not disputed. - Decided in favour of assessee. As regards the Cenvat Credit demand on the used cryogenic tanks, which have been removed, it is not disputed by the department that the appellant at the time of clearance of the used cryogenic tanks had reversed the Cenvat Credit equal to the amount of duty paid on the transaction value. In view of this, no amount over and above amount already reversed would be recoverable from the appellant in view of the judgments of the Hon'ble Madras High Court in the case of CCE, Salem Vs. Rogini Mills Ltd. (2010 (10) TMI 424 - MADRAS HIGH COURT) and the judgement of the Hon'ble Punjab & Haryana High Court in the case of Raghav Alloys Pvt. Ltd. (2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT). - Decided in favour of assessee. Issues Involved:1. Inclusion of cylinder rental and maintenance charges in the assessable value.2. Inclusion of excess transportation charges in the assessable value.3. Classification of medical grade oxygen.4. Reversal of Cenvat Credit on used cryogenic tanks.Detailed Analysis:1. Inclusion of Cylinder Rental and Maintenance Charges:The first issue is whether cylinder rental and maintenance charges for gases supplied in the appellant's own cylinders, and charges for testing of cylinders brought by customers, should be included in the assessable value of the gases sold. The Department's view is that these charges should be included. However, the appellant argued that since gases are marketable without being packed in cylinders, these charges should not be included. The Tribunal relied on its decision in the case of CCE, Indore Vs. Grasim Industries Ltd. and the Supreme Court judgment in the case of Indian Oxygen Ltd., concluding that these charges are not includible in the assessable value.2. Inclusion of Excess Transportation Charges:The second issue concerns the inclusion of transportation charges in the assessable value. The Department objected that the actual transportation expenses incurred were less than the amount charged to customers, and thus the excess amount should be included in the assessable value. The Tribunal, however, noted that sales were at the factory gate and relied on the Supreme Court judgments in Baroda Electric Meters Ltd. and CCE, Noida Vs. Accurate Meters Ltd., holding that freight charges for transportation from the factory to customers' premises are not includible in the assessable value, irrespective of any profit made from transportation.3. Classification of Medical Grade Oxygen:The third issue pertains to the classification of medical grade oxygen. The appellant claimed that the oxygen, being of 99.5% purity, should be classified as medical grade oxygen under sub-heading 2804.11, which attracts no duty. The Department argued for classification under sub-heading 2804.19, claiming it was supplied in cryogenic tankers and used for non-medical purposes. The Tribunal concluded that since the oxygen met the purity standards of the Indian Pharmacopeia, it should be classified as medical grade oxygen under sub-heading 2804.11, regardless of its end use by customers.4. Reversal of Cenvat Credit on Used Cryogenic Tanks:The fourth issue involves the reversal of Cenvat Credit on used cryogenic tanks. The Department contended that the appellant should reverse the entire Cenvat Credit originally taken upon clearance of the tanks. The appellant argued that they had already reversed the credit equal to the duty on the depreciated value. The Tribunal, referencing judgments from the Madras High Court and the Punjab & Haryana High Court, held that the appellant was not required to reverse any additional amount beyond what had already been reversed.Conclusion:The Tribunal found that:- Cylinder rental and maintenance charges, as well as cylinder testing charges, are not includible in the assessable value.- Excess transportation charges are not includible in the assessable value.- The medical grade oxygen should be classified under sub-heading 2804.11.- No additional Cenvat Credit reversal is required beyond what was already reversed.The impugned orders were set aside, and the appeals were allowed.