2024 (7) TMI 64 - AT - Service Tax

Excise duty applies to facility charges even without gas production, refund application dismissed

CESTAT Bangalore dismissed the appellant's restoration application regarding excise duty refund on facility charges. The appellant operated an ... Seeking restoration of the appeal dismissed earlier for non-prosecution before this Tribunal - levy of Excise duty - facility charges paid by the appellant during the period August 2008 to September 2008 - duty paid during the said period is refundable to the appellant or not. HELD THAT:- Undisputedly, the appellant through an agreement dated 20.05.2006 with M/s. SAIL, installed an air-separation plant in a piece of land provided by M/s. SAIL for manufacture and supply of liquid gases to M/s. SAIL. As stipulated in the said agreement, M/s. SAIL was required to pay facility charges to the appellant in connection with sale of gases. The grievance of the appellant that even though during the month of August 2008 and September 2008, there was no manufacture and supply of gases, the facility charges collected from the clients cannot be subjected to excise duty. Even though for the period August 2008 to September 2008 there was no production of gases, the appellant was collecting facility charges which is in connection with manufacture and sale of gases for subsequent months utilizing the said facility installed for manufacture and clearance of gases. The Board has clarified about the levy of duty on such facility charges vide Circular dated 10.11.2014 - the said Circular has also been considered by the Tribunal in M/s. Inox Air Products Ltd. [2023 (6) TMI 849 - CESTAT CHENNAI] in confirming the demand for the period May 2008 to March 2009. There are no merit in the contention of the appellant that the said Circular is not applicable to their case since the duty was paid for August 2008 to September 2008 on the facility charges collected from their customers M/s. SAIL. Non-reimbursement of the said duty by M/s. SAIL cannot be a valid ground for claiming refund when the duty is payable on such facility charges and rightly paid by the appellant. The impugned order is upheld and the appeal is rejected. Issues:1. Restoration of appeal dismissed for non-prosecution.2. Admissibility of refund claim for excise duty on facility charges.3. Interpretation of Circular F.No.6/03/2013/CX.1 dated 10.11.2014.4. Applicability of Tribunal judgments in similar cases.5. Nexus of facility charges with excise duty liability.Analysis:1. The judgment deals with a Miscellaneous Application seeking restoration of an appeal dismissed for non-prosecution by the Tribunal. Despite multiple listing dates with no appearance or adjournment requests, the appellant cited an incorrect address for their advocate as the reason for non-appearance. The Tribunal, considering the interest of justice, granted restoration of the appeal to allow the appellant to present their case, as the issue had not been decided on merit previously.2. The primary issue in the appeal was the admissibility of a refund claim for excise duty paid on facility charges collected from a customer for months with no production or sale of gases. The appellant argued that the facility charges were not additional consideration for goods supplied but an assured return, thus not liable to excise duty. However, the Revenue contended that the facility charges had a direct nexus with the sale of gases and were chargeable to excise duty, citing a Tribunal judgment and a Circular clarifying the inclusion of facility charges in assessable value.3. The appellant also disputed the applicability of Circular F.No.6/03/2013/CX.1 dated 10.11.2014 to their case, asserting that the issue related to a period prior to the Circular. The Tribunal, after considering the Circular and related Tribunal judgments, concluded that the duty paid on facility charges was valid, and non-reimbursement by the customer did not justify a refund claim.4. The appellant attempted to distinguish their case from a Tribunal judgment by highlighting the specific issue of excise duty on facility charges when no gas production had commenced. However, the Tribunal found no merit in this argument, as the Circular and previous judgments supported the inclusion of facility charges in assessable value irrespective of gas production.5. Ultimately, the Tribunal upheld the impugned order, rejecting the appeal and affirming the duty liability on facility charges collected by the appellant. The judgment emphasized the nexus between facility charges and the manufacture and sale of gases, leading to the duty liability even in months without gas production.This detailed analysis covers the restoration of the appeal, the admissibility of the refund claim, the interpretation of the Circular, the applicability of Tribunal judgments, and the nexus of facility charges with excise duty liability as addressed in the judgment.