By TIOL News Service

MUMBAI, APRIL 10, 2018: THE Appellant is manufacturer of Hydrogen gas and supplying the same to M/s NOCIL through its pipeline. They were also recovering from M/s NOCIL maintenance and operating charges on such pipeline owned and maintained by them.

CE duty demands were raised on the ground that the said charges were includible in assessable value u/s 4 of the CEA, 1944.

As the demand was confirmed and upheld by the lower authorities, the appellant is before the CESTAT.

The Tribunal had ordered a pre-deposit while granting stay. See 2009-TIOL-1842-CESTAT-MUM.

The appeal was heard recently.

It is submitted that pipeline was maintained only for transfer of gas and not for manufacture of Hydrogen Gas. Reliance is placed on the decision in Escorts JCB Ltd. - 2002-TIOL-05-SC-CX to emphasize that freight is not includible in assessable value; that the demand is time barred as their records were audited from time to time and they have not suppressed any facts.

The AR supported the order of the lower authorities and also submitted that the charges were recovered by debit notes and not through invoices and thus charges of suppression are attracted. The decision in Madras Refineries Ltd. - 2006-TIOL-1726-CESTAT-MAD is relied in support.

The Bench observed -

++ Inasmuch as the merits of the case we are of the view that the operation and maintenance of pipe line is not related with transportation charges and hence are includible in assessable value. Further we find that the purchase order issued by the NOCIL mentioned that the gas will be transported through pipeline and maintenance charges will be paid separately and the rates are ex-factory. Thus the demand on merit is sustainable.

++ However, no evidence has been brought on record that the Appellant intended to suppress the facts of charging of such charges with intention to evade payment of duty. The records of the Appellant were audited and purchase orders of the NOCIL were mentioning about separate recovery of maintenance and operation charges. Further in absence of any fact showing malafide intention of Appellant to evade payment of duty, the demand raised by invoking extended period is not sustainable.

In fine, the demand was upheld for the normal period of limitation. Penalty imposed under Section 11ACof the CEA, 1944 was also set aside for the above reason.

The Appeal was partly allowed.

(See 2018-TIOL-1129-CESTAT-MUM)