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CX - Rent charged to buyers for cylinders beyond free loan period & compensation received for lost cylinders are not includible in Transaction value of Industrial gases manufactured & cleared: CESTAT

By TIOL News Service

MUMBAI, JAN 20, 2016: THESE are Revenue appeals filed in the year 2004/2005.

The brief facts are that the respondent is engaged in the manufacture of Industrial gases such as oxygen and nitrogen. Such gases are delivered to the buyers at the factory gate and in most cases the buyers bring their own cylinders in which gases are delivered. However, some buyers do not bring their own cylinders for taking delivery of gases and in such cases respondent provides cylinders to the buyers on free loan for a certain period of time. If such buyer delays return of the cylinders beyond the free loan period, the respondent charges rent for which the cylinders are retained by the customers beyond the free loan period. Further, if the cylinders are damaged or lost by the buyers, the respondent charges for the loss or damage.

Revenue wants the respondent to pay CE duty on the rent as well as the compensation charges mentioned above by including the same in the transaction value.

The Commissioner (A) did not agree and, therefore, the department is in appeal before the Tribunal.

The main ground of appeal is the following clarification given by Board in Circular 643/34/2002-CX dated 01.07.2002 -

4. Packing: -

(c) Whether  rental charges  or cost of maintenance of reusable metal containers like gas cylinders etc. are to be included in the transaction value ?

(c) Yes, since the amount has been charged by reason of, or in connection with the sale of goods, this amount will be added to the transaction value

The respondent inter alia on the following cases which support their stand that the charges collected has nothing to do with the goods i.e. industrial gases and therefore, would not form part of the assessable or transaction value -

++ Inox Air Products Ltd. - 2007-TIOL-1829-CESTAT-MUM

++ Govind Poy Oxygen Ltd. - 2008-TIOL-1155-CESTAT-MUM

++ Goyal M. Gases P. Ltd. - 2014-TIOL-2818-CESTAT-DEL

The Bench observed that in the respondents' own case the Bangalore Bench of the Tribunal had held as under -

"5. On a very careful consideration of the issue, we find that the issue is covered by the Apex Courts judgment in the Indian Oxygen case cited supra. This Bench has followed the said decision of the Apex Court in the Final Order No. 1292/2007, dated 12-11-2007 in the appellants own case. We also do not accept the Commissioner (Appeals)s view that the issue has not reached finality and, therefore, is not bound to follow the ratio of the tribunal rulings. As long as there is no stay in respect of the tribunal rulings, the Commissioner is bound to follow them. In our view, the Boards clarification relied on by the Commissioner (Appeals) is patently erroneous. The rental charges are leviable when the cylinder is retained for a period longer than the stipulated time. When such is the case, how can one hold that such charges are in relation to the sale of the gases? Hence, we do not find any merit in the impugned order. We set aside the same and allow the appeal with consequential relief."

The appeals filed by the Revenue were dismissed.

(See 2016-TIOL-210-CESTAT-MUM)


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