Tribunal excludes mould charges from SSI exemption, rules on related party pricing

The Tribunal ruled in favor of the Appellant, holding that the amount collected for mould modification/repair charges should not be added to the aggregate value of clearances for SSI exemption as it does not constitute "manufacture." Additionally, the price at which moulds were sold by the inter-connected undertaking was not considered in determining the aggregate value for SSI exemption, as the related person classification did not extend to their relationship with the other entity. The Tribunal set aside the Commissioner's decision and allowed the appeal with any consequential relief as per the law.

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Issues Involved:
1. Whether the amount collected for mould modification/repair charges should be added to the aggregate value of clearances for SSI exemption.
2. Whether the price at which moulds were sold by the inter-connected undertaking should be considered in determining the aggregate value of clearances for SSI exemption.

Analysis:

Issue 1: Mould Modification/Repair Charges
The Appellant argued that mould modification and repair activities do not constitute "manufacture" under the Central Excise Act, thus the amount received for these services should not be included in the aggregate value of clearances for SSI exemption. The Tribunal cited precedents in the cases of Ampson Engineering Pvt. Ltd and Karthigeya Moulds & Dies Pvt. Ltd, where it was held that modifying or rectifying existing moulds does not result in a new product beyond the mould itself. Consequently, the demand for including the modification/repair charges in the Appellant's clearances was deemed unsustainable.

Issue 2: Price of Moulds Sold by Inter-Connected Undertaking
Regarding the consideration of the price at which moulds were sold by the inter-connected undertaking, the Appellant contended that the related person definition did not apply to their relationship with the other entity. Citing the case of Dujodwala Products Ltd, the Tribunal agreed that the related person classification did not extend to a proprietary concern and a limited company. Therefore, the Commissioner's decision to use the price at which the inter-connected undertaking sold goods in computing the Appellant's SSI exemption for the relevant year was deemed incorrect.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief as per the law. The judgment was pronounced on 06.09.2019 by the Tribunal comprising HON’BLE DR. D.M. MISRA, MEMBER (JUDICIAL) AND HON’BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL).

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