Crompton Greaves Ltd Vs Commissioner of Central Excise (CESTAT Mumbai)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, allowed the appeal challenging inclusion of “type test charges” in the assessable value of transformers for levy of Central Excise duty. The dispute arose after the Department alleged that the appellant had excluded charges recovered from customers for “type tests” conducted under contractual arrangements and instead paid service tax on those charges. A show cause notice demanded duty of Rs. 4,77,968 along with interest and penalty for the period April 2014 to September 2014. While the Commissioner (Appeals) had set aside the penalty, the duty demand was upheld.
The Tribunal observed that transformers became fully manufactured and marketable after completion of mandatory quality control tests, on which excise duty had already been discharged. It found that “type tests” were not mandatory or routine manufacturing activities but were conducted only when customers specifically requested them, either for their satisfaction or due to absence of testing facilities. The tests were performed only on selected units on a random basis, and the costs were separately borne by customers.
CESTAT held that such testing could not be treated as incidental or ancillary to manufacture, nor as a condition precedent for marketability of transformers. The activity was undertaken after completion of manufacture and for separate consideration. Referring to principles of valuation under the Central Excise Act, 1944, the Tribunal stated that only amounts intrinsically linked to manufacture and sale at the time and place of removal can form part of assessable value. Optional post-manufacturing activities carried out at the request of buyers do not form part of the “transaction value”.
