By TIOL News Service

MUMBAI, APRIL 13, 2017: THE appellants manufactured LPG Bullets for execution of a composite project of manufacture and supply and erection, installation of the same at the site of M/s Bharat Petroleum Corporation Ltd.

They valued each LPG Bullet for Rs.42,00,000/- as against the total project cost of Rs.1,71,37,000/-.

Revenue was of the view that the amount of Rs.70,14,400/- escaped payment of excise duty as the appellants did not add the value of bought out items and cost of other ‘manufacturing activity' carried out at the site. It was also contended in the show-cause notice that the finished goods as per purchase order has come into existence at the site at Goa and the goods are in movable condition, as they are not fixed/attached to the earth by nuts and bolts or by anchor chains and they are only covered by soil and stone pitching for safety reasons. Inasmuch as since the goods are in movable condition at the site, the said finished goods at Goa are to be charged to Central Excise duty on the transaction value.

The original authority confirmed the demand and the Commissioner(A) upheld the same resulting in the assessee filing an appeal before the CESTAT.

The appellant submitted that it is evident from the invoices raised that the LPG Bullets were correctly valued at Rs.42 lakhs and the same has been certified by the Chartered Accountant. Furthermore, the bought out items were sent directly from the suppliers' end to the site; that all other activities such as fitting of the bought out items and erection & installation is taking place at the site of the customer; that all these activities are carried out to make the LPG Bullets as immovable goods, therefore, all such activities are not part and parcel of the manufacturing activity in respect of LPG Bullets and hence inclusion of any amount over and above the price of the LPG Bullets is incorrect and without authority of law. Case laws were cited in this regard - 2002-TIOL-14-SC-CX, 2005-TIOL-1298-CESTAT-MAD, 2004-TIOL-366-CESTAT-DEL, 2007-TIOL-1558-CESTAT-BANG etc.

The AR reiterated the impugned order.

The Bench observed –

+ Revenue has not disputed the value of Rs.42 lakhs for each LPG bullet. However, the demand was raised only on inclusion of the value in respect of bought out items and certain activities taken place at the site for erection and installation of the said LPG bullets.

+ All these elements such as bought out items are undisputedly supplied from the supplier to the site. It is not taking part in the manufacture of LPG Bullets. These bought out parts are used only for erection and installation of LPG Bullets at site and other activity at site are also related to erection and installation. The said activity of erection and installation, in our considered view, is not amount to manufacture.

+ Moreover, after erection and installation of the LPG Bullets, it became immovable goods. For this reason also, if at all any activity by any imagination is amount to manufacture, by virtue of immovability of LPG Bullets, the activities at site cannot be charged to excise duty.

Holding that no further addition can be made to the value of the LPG bullets, the impugned order was set aside and the appeal was allowed.

(See 2017-TIOL-1230-CESTAT-MUM)