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CX - Charges for servicing of already sold machines is not includible in transaction value: CESTAT

By TIOL News Service

MUMBAI, APRIL 04, 2017: THE issue is whether in respect of already sold machines, charges of servicing of the said machine, training of the operator, charges for providing assistance in plant layout and service charges for changing power voltage in the electric motor collected by the appellant are chargeable to excise duty for the valuation of their final product.

Before the CESTAT, the appellant submitted that all these charges are not related to sale of the machine for the reason that servicing of machine by deputing servicing engineer is in respect of machine which were sold almost four years ago. As regards the charges for assistance in plant layout, it is submitted that the same is an independent activity, distinct than manufacture and supply of their goods, for which they are paying service tax. Reliance is placed on the following judgments:

a. TVS Motors Co. Ltd. - 2015-TIOL-299-SC-CX

b. Essar Steel Ltd. - 2015-TIOL-63-SC-CUS

c. Classic Polytubes Pvt. Ltd. - 2016-TIOL-653-CESTAT-ALL

d. Real Times Systems Ltd. - 2009-TIOL-1482-CESTAT-DEL

It is further submitted that in the appellant's own case, on the same issue, the Commissioner (Appeals) had for the earlier period as well as subsequent period dropped the duty demand vide O-in-A dated 18.01.2010.

The Bench observed -

+ There is no dispute in the fact that whatever charges on account of servicing of the machine, training of the operator, charges for providing assistance in plant layout are not related to sale of the particular machine but these are the independent activity.

+ Servicing of the machine is in respect of those machines which were sold almost more than four years ago, therefore, the same cannot be treated as part of the transaction value of any machine sold by the appellant.

+ It is also noticed that appellant on all these activities is discharging service tax. These activities are completely independent from the manufacture and sale of the machine.

Noting that the order passed by the Commissioner (Appeals) on identical issue for the past as well as subsequent period allowing the appeals of the assessee was not challenged by the Revenue, the CESTAT held that the charges collected by the appellant from customer, whom the machines were sold long back, is not includible in the assessable value of the machine.

The demand was held to be unsustainable; the impugned order was set aside and the appeal was allowed.

(See 2017-TIOL-1110-CESTAT-MUM)


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