1993 (12) TMI 127 - AT - Central Excise

Tribunal upholds charges in assessable value, affirms jurisdiction, justifies extended limitation period, and remands for re-calculation.

COLLECTOR OF CENTRAL EXCISE, PUNE Versus THERMAX (P) LTD.

The Tribunal upheld the inclusion of designing and engineering charges in the assessable value while remanding the issue of erection and commissioning ... Central Excise Officers - Jurisdiction Issues Involved:1. Inclusion of designing and engineering charges in the assessable value.2. Inclusion of erection and commissioning charges in the assessable value.3. Jurisdiction of the adjudicating authority.4. Applicability of limitation period under Section 11A of the Central Excises and Salt Act, 1944.5. Applicability of Notification No. 120/75-C.E.6. Determination of duty liability and penalty.Detailed Analysis:1. Inclusion of Designing and Engineering Charges in the Assessable Value:The show cause notices alleged that the assessee did not include designing and engineering charges in the assessable value, which were recovered from customers on separate invoices. The Assistant Collector and the Collector of Central Excise (Appeals) both concluded that these charges were part of the value of the goods manufactured. The Tribunal upheld this view, stating that designing and engineering charges are necessary preliminaries for manufacturing high-tech products and are directly connected with the manufacture of the goods, thus forming part of the assessable value.2. Inclusion of Erection and Commissioning Charges in the Assessable Value:The Assistant Collector initially included erection and commissioning charges in the assessable value, but the Collector of Central Excise (Appeals) held that these were post-manufacturing expenses and should not be included. The Tribunal found the issue complex, noting varying versions from the assessee regarding their role in erection and commissioning. The Tribunal decided that the correct procedure should be to deduct expenses incurred by the manufacturer for providing labor and other services from the total receipts towards erection and commissioning charges. The matter was remanded back to the adjudicating authority for re-calculation of duty and redetermination of penalty, if any.3. Jurisdiction of the Adjudicating Authority:The assessee argued that the adjudicating authority had no jurisdiction over services rendered at the customer's site, which were outside his jurisdiction. The Tribunal rejected this plea, stating that the incidental and ancillary work at the site is integrally connected with the manufacture of excisable goods, thus falling within the jurisdiction of the Central Excise officers where the goods were manufactured.4. Applicability of Limitation Period under Section 11A:The assessee contended that the demand was time-barred as earlier show cause notices had been issued on the same point, and their records were regularly scrutinized by Central Excise officers. The Tribunal found that each contract was separate, and the assessee did not follow the prescribed procedure, thus justifying the invocation of the extended period of limitation under Section 11A due to suppression of facts. The demand exceeding the amount in the show cause notice was not sustained, and the Tribunal directed re-calculation of duty.5. Applicability of Notification No. 120/75-C.E.:The Tribunal noted that the goods were not sold outright at the point of removal from the factory, making Notification No. 120/75-C.E. inapplicable. The value had to be determined under Section 4 of the Act, considering the contract prices for goods supplied over time.6. Determination of Duty Liability and Penalty:The Tribunal upheld the Order-in-Original regarding designing and engineering charges. However, it remanded the matter for re-calculation of duty and redetermination of penalty concerning erection and commissioning charges. The assessee was directed to furnish necessary information to the Collector, Central Excise, Pune, who would then pass a speaking order after providing an opportunity for a hearing.Conclusion:The Tribunal upheld the inclusion of designing and engineering charges in the assessable value while remanding the issue of erection and commissioning charges for re-calculation. The jurisdiction of the adjudicating authority was affirmed, and the extended period of limitation under Section 11A was justified due to suppression of facts. Notification No. 120/75-C.E. was deemed inapplicable, and the matter was remanded for re-calculation of duty and penalty.