2019 (6) TMI 504 - AT - Central Excise

Liability for Excise Duty on Mobile Towers Clarified by Tribunal

The Tribunal determined that the liability for excise duty on fabrication and supply of mobile towers crystallizes at the factory gate, with the place of ... Valuation - excise duty on immovable property - inclusion of freight amount in the assessable value - CENVAT Credit - place of removal - It is not in dispute that after completing the process of erection, the tower comes into existence as immovable property. Even though there can be no levy of Central Excise Duty on immovable property, we note that tower is cleared in dismantled form from the factory. As such, we are of the view that the liability for payment of excise duty gets crystalised at the factory gate and such liability is for the goods in the form in which they are cleared from the factory i.e. the tower components. Place of removal - HELD THAT:- The contract dated 18/2/2005 placed by Airtel specifically mentions that the rate will be on “FOR site basis”. This clearly points to the fact that the sale of goods is deemed to have happened at the site. This further points to the fact that the Place of Removal is to be considered as the site and not the factory gate - In terms of Section 4 as above, read with Rule 5 of the Rules, it emerges that since the place of removal in the present case, in respect of the Airtel contract, is the premises of the site installation, the cost of transportation of the tower materials from the factory gate to the site will need to be included in the value and to be added to the supply cost. Whether the installation, erection and painting charges are required to be added to the supply cost of towers for payment of duty? - HELD THAT:- The Adjudicating authority has held that once place of removal is decided, all expenses incurred upto that place is required to be added. As such, he has loaded the installation cost. We find it difficult to accept this proposition. We have taken the view that the tower is to be assessed in the form in which it is cleared from the appellant’s factory i.e. in dismantled form. Once we take the view that the excise duty liability is on the goods in the form it is cleared from the factory, it follows that the installation, erection and painting cost which has been incurred at the site where the goods are taken to form immovable property, cannot be added. The goods are required to be assessed in the form in which they are cleared from the factory at the factory gate. There is no justification for adding erection, commissioning and painting charges - demand set aside. When the Place of Removal is the site of the customer; Appellant will be entitled to the CENVAT Credit of Service Tax paid on transportation cost. Appeal allowed - decided in favor of appellant. Issues:1. Determination of place of removal for excise duty liability.2. Inclusion of erection, installation, and painting charges in the assessable value for payment of central excise duty.Analysis:1. The case involved an appeal against an Order-in-Original regarding the liability of central excise duty on the fabrication and supply of mobile towers. The Department contended that the sale of goods occurred at the site of installation, not the factory gate, leading to the inclusion of various charges like transportation, erection, and painting in the assessable value. The appellant argued that the liability for excise duty arises at the factory gate, as the towers are cleared in dismantled form. The Tribunal analyzed sample contracts and relevant legal provisions to determine the place of removal. It concluded that the liability for excise duty crystallizes at the factory gate, and the place of removal is the site of installation, requiring the inclusion of transportation costs in the assessable value.2. The Tribunal further deliberated on whether erection, installation, and painting charges should be added to the supply cost for the payment of duty. The Department had included these charges, considering the place of removal as the site of the towers. However, the Tribunal disagreed, stating that the goods should be assessed in the form cleared from the factory, i.e., in dismantled form. Therefore, it ruled that the installation, erection, and painting costs incurred at the site, where the towers become immovable property, should not be added to the assessable value. The Tribunal emphasized that the excise duty liability is on the goods as cleared from the factory gate, and rejected the inclusion of these additional charges in the duty calculation.3. In conclusion, the Tribunal set aside the demand made by including erection, installation, and painting costs in the assessable value. It directed the original authority to consider the terms of specific contracts to determine the includibility of transportation costs based on whether the contract was FOR site or factory gate clearance. Additionally, the Tribunal clarified that when the place of removal is the customer's site, the appellant is entitled to CENVAT Credit of Service Tax paid on transportation costs.