CESTAT Holds Type Test Charges Not Liable to Excise Duty Under Section 4: Quashes Demand and Penalty Against Crompton Greaves [Read Order]
The CESTAT held that type test charges, being a separate service activity and not part of the sale value, are not includible in the assessable value under Section 4 of the Central Excise Act and set aside the duty demand and penalty.
The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside the demand and penalty imposed on Crompton Greaves Ltd. for including “type test” charges in the assessable value of transformers cleared from its factory.
The appeal arose from the order passed by the Commissioner (Appeals), confirming a duty demand of ₹2,20,875 for the period April 2015 to October 2015, along with interest under Section 11AA of the Central Excise Act, 1944, and a penalty of ₹22,088 under Rule 25 of the Central Excise Rules, 2004.
The original authority had held that such “type test” charges, conducted before clearance from the factory, formed part of the sale value and were therefore includible under Section 4 of the Central Excise Act.
The learned counsel for the appellant submitted that certain customers required type tests to be carried out with the cost chargeable separately in accordance with specific contracts and argued that these tests were not mandatory for the product but were undertaken as a facilitation on behalf of customers. Therefore, it amounted to a service not liable to central excise duty.
The appellant relied on the Tribunal’s earlier decision in its own case, which held that merely conducting such tests before clearance does not justify inclusion of such charges in the assessable value.
The Bench comprising C.J.Mathew (Technical Member) and Ajay Sharma (Judicial Member) observed that the Tribunal had already, in a previous order concerning Crompton Greaves, relied on Ericsson India Pvt. Ltd. v. Commissioner of Central Excise, Pondicherry (2007) and Essar Telecom v. Union of India (2012) to hold that consideration realized for an activity subjected to service tax cannot be included for excise duty purposes.
The Tribunal found no justification for levying central excise duty on type test charges and held that such consideration, being for a separate service activity, could not form part of the assessable value under Section 4 of the Central Excise Act, 1944.
Accordingly, the CESTAT set aside the demand, interest, and penalty, allowing the appeal in favour of the appellant.
The appellant was represented by Viraj Reshamwala, while AK Shrivastava appeared for the revenue.
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