By TIOL News Service

MUMBAI, OCT 17, 2015: THIS is a Revenue appeal.

The respondent assessee is a manufacturer of PD pumps/water pumps etc. Normally such pumps after manufacture are inspected and tested by themselves and sold. However, in some of the cases, their customers insist that such pumps should be inspected by a third party before despatch. In such cases, they get the pumps inspected by the third party. The amounts paid to such third parties are recovered from the customers through debit notes.

Sheer habit made the Revenue take a view that the amount pertaining to such debit notes will form part of the assessable value and CE duty is to be paid thereon.

The adjudicating authority toed the line taken in the SCN and confirmed the demand.

The Commissioner(A) agreed with the contention of the assessee that such an inspection is not part of their manufacturing or sale proceeds but is carried out on the instruction of the customer; that they are paying for such testing to third party on behalf of such customer and later on raising debit note for the same amount.

The CCE, Belapur was not ready to let go so easily and so an appeal came to be filed.

The AR emphasised that as per Section 4(3)(d) of the CEA, 1944, the value is required to be the transaction value and in these cases, the amount pertaining to the testing will form part of the transaction value and hence the duty is required to be paid on the said amount.

The CESTAT was not impressed.

It held -

"3. ... We find that the issue is already decided by the Larger Bench of this Tribunal in the case of CCE, Raipur vs. Bhaskar Ispat Pvt. Ltd. - 2004-TIOL-277-CESTAT-DEL-LB. We also note that the amount corresponding to the debit notes is nothing but the amount the respondent-assessee has paid to the third party as per the direction of the customer. Thus the said amount has nothing to do with the transaction value."

The Revenue appeal was dismissed.

In passing: Another appeal bites the dust…troubling statistics!

(See 2015-TIOL-2230-CESTAT-MUM)