RITES charges reimbursed by buyers includable in assessable value but excise duty on metal scrap sale set aside under Section 2(f)

CESTAT Hyderabad held that charges paid to RITES by appellant and subsequently reimbursed by buyers are includable in assessable value for excise duty purposes, distinguishing cases where payments were made directly by third parties. The tribunal ruled that mandatory inspection fees must be included in assessable value, unlike optional inspections. However, excise duty on metal scrap sale was set aside, as scrap is a necessary byproduct of manufacturing and marketability alone is insufficient for excise levy without proper manufacture under Section 2(f) of Central Excise Act, 1944. Appeal partially allowed.

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Issues involved: Excise duty on charges paid to RITES for inspection and reimbursement, excise duty on sale of metal scrap generated during manufacturing.

Excise Duty on Charges Paid to RITES for Inspection and Reimbursement:
The Appellants, manufacturers of "Isolators," faced a Show Cause Notice for including charges paid to RITES in the Assessable Value for Excise Duty payment. The Appellants argued citing precedents like Hindustan Development Corporation Ltd. and TVS Motors Co. Ltd. to support their case. However, the Department contended that the charges for mandatory inspection by RITES should be included in the valuation. The Tribunal noted the distinction in payment methods between the cited cases and the present situation. It emphasized that charges necessary for the sale to occur must be included in the Assessable Value, as per legal principles. The Tribunal referred to a case involving Surya Pvt Ltd., where a similar issue was decided against the Appellant, leading to the rejection of the appeal regarding charges paid to RITES.

Excise Duty on Sale of Metal Scrap:
Regarding the sale of metal scrap generated during manufacturing, the Appellants argued against the Excise Duty demand, citing the necessity of proper manufacture as per Section 2(f) of the Central Excise Act, 1944. The Tribunal acknowledged that scrap is a byproduct of manufacturing and held that Excise duty cannot be levied on the sale of such scrap. Consequently, the Appeal was allowed in favor of the Appellants concerning the confirmed demand related to the sale of metal scrap.

In conclusion, the Tribunal partially allowed the Appeal, rejecting the demand related to charges paid to RITES but allowing the Appeal concerning the sale of metal scrap.

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