2019 (9) TMI 276 - AT - Central Excise

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 ... Valuation - inclusion of amount collected by the Appellant from their customers as mould modification/repair charges during the period 1997 to 2002, in the assessable value - related party transaction - determination of price at which moulds were sold by their inter-connected undertaking M/s MTIPL - admissibility of SSI exemption notification. Repairing/modification of moulds - HELD THAT:- Tribunal in the case of Ampson Engineering Pvt. Ltd [2016 (2) TMI 780 - CESTAT MUMBAI] and Karthigeya Moulds & Dies Pvt. Ltd [2007 (10) TMI 49 - CESTAT, CHENNAI], held that the activity of modification/rectification of the existing mould does not pass the test of manufacture, as defined under Section 2(f) of Central Excise Act, 1944, since no new product other than mould emerges in the activity of modification of the mould - on repairing/modification of moulds, the demand confirmed against the Appellant is unsustainable. Applicability of the provisions of related person under the category of inter-connected undertaking - HELD THAT:- This Tribunal in the case of Dujodwala Products Ltd [2007 (3) TMI 27 - CESTAT,MUMBAI], it is held that the Proprietaryship Concern and a Limited Company could not fall under the category of Explanation 2 (G) of MRTP Act, as the same applies to two body corporates and not one body corporate and a proprietary-ship concern. Thus there are no merits in the findings of the adjudicating Commissioner, holding that the price at which M/s MTIPL sold the goods to customers be considered the value, in computing the aggregate value of clearance while determining the SSI exemption benefit of the Appellant for the financial year 2001-2002. Appeal allowed - decided in favor of appellant. 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 ChargesThe 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 UndertakingRegarding 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).