2014 (12) TMI 410 - AT - Central Excise

Tribunal rules in favor of Emerson Network Power in duty dispute, citing warranty obligation precedent

M/s EMERSON NETWORK POWER (INDIA) PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III

The Tribunal allowed the appeal filed by M/s Emerson Network Power (India) Pvt. Ltd., Thane, challenging the duty demand of Rs. 7,75,105/- confirmed by ... Reversal of CENVAT Credit - whether the reversal of the credit taken is sufficient or the appellant should discharge duty liability on the value of such goods cleared in terms of sub-rule 1(c) of Rule 57AB - department was of the view that similar parts were cleared from the appellant's warehouse for sale purposes and, therefore, the value of such goods was available and the appellant should have discharged duty liability on such value and not by merely reversing the credit actually taken - Held that:- As regards the National Engg. India Ltd. (2010 (4) TMI 674 - CESTAT, NEW DELHI) relied by the Revenue, we note that the facts are different from those involved in the present appeal. In that case, the goods though cleared on reversal of credit were actually resold by the sister concern and, therefore, a value was available for payment of duty. It was in that context, it was held the price of the goods sold should be basis for payment of duty and mere reversal of credit would not suffice. In the present case, there is no sale or resale of the goods. The goods are cleared from the factory to meet the warranty obligations free of charge. Therefore, the ratio of the said decision would not apply. It is in this context, one has to see larger Bench's decision which dealt with an identical matter in the case of Eicher Tractors [2005 (9) TMI 340 - CESTAT, NEW DELHI] and held that reversal of credit would suffice and there is no need for re-determination of value in view of the Board's Circular dated 25.4.2005 - Decided in favour of assessee. Issues:1. Duty demand confirmation against the appellant.2. Determination of duty liability on cleared parts.3. Comparison of prices for goods cleared for warranty obligations and spare parts.4. Applicability of reversal of credit for duty liability discharge.5. Interpretation of Rule 57AB for valuation of goods.Analysis:1. The appeal challenged the duty demand confirmed against the appellant by the Commissioner of Central Excise, Mumbai-III. The duty demand amounted to Rs. 7,75,105/- against M/s Emerson Network Power (India) Pvt. Ltd., Thane.2. The main issue revolved around the determination of duty liability on parts cleared by the appellant. The question was whether duty liability should be discharged based on the reversal of credit taken on parts cleared for warranty obligations or if duty should be discharged on the value of the goods cleared as per Rule 57AB.3. The appellant contended that clearances for warranty obligations did not involve sales, unlike spare parts sold from the warehouse. Hence, there should be no comparison of prices between goods supplied free of charge for warranty and those sold as spares.4. The appellant argued that a previous Tribunal's decision in the case of Eicher Tractors had held that reversal of credit taken would suffice for duty liability discharge, without the need for re-determination of value based on the selling price of goods cleared for non-warranty purposes.5. The Revenue, represented by the Addl. Commissioner, disagreed with the appellant's contentions. Referring to the case of National Engg. India Ltd., the Revenue argued that duty liability should be discharged based on the price at which goods were sold from the warehouse, not merely on the reversal of credit taken, as per Rule 57AB (1C) of the Central Excise Rules, 1944.6. The Tribunal analyzed the arguments and distinguished the case of National Engg. India Ltd. from the present appeal. Since there was no sale or resale of goods involved in the present case, and goods were cleared for warranty obligations free of charge, the Tribunal relied on the decision of the Larger Bench in the Eicher Tractors case. Following the precedent, the Tribunal set aside the impugned order and allowed the appeal.