JUDGMENT
Jeet Ram Kait, Member (T)
1. These two appeals have been filed by the appellants herein against the Order-in-Appeal Nos. 15 & 16/Kol-III/2002 dated 6.6.2002 passed by the Commissioner of Central Excise (Appeals), Kolkata, whereby the Commissioner has rejected the appeal filed by the appellants before him and allowed the appeal filed by the department. Appeal No. E/680/2002 has been filed by the appellants against the rejection of their appeal by the Commissioner (Appeals). The period involved in this Appeal is 7/86 to 3/91. Appeal No. E/681/2002 is filed by the appellants against the same impugned order against allowing the department’s appeal by the Commissioner (Appeals). The period involved in this Appeal is 8/92 to 3/94. Since the issue involved in both these appeals are one and the same, they were heard together and are therefore disposed of by this common order.
2. The brief facts of the case are that the appellants are engaged in the manufacture of elastic rail clips, modified loose jaws, rail anchor, fish plates, suspension shackle, point roding and screw coupling falling under sub-heading 7302.90/8607.00 and they alleged to have cleared from time to time the goods manufactured by them without ascertaining the correct assessable value and cleared the same to the Indian Railways. The railways as the buyer of the goods have the same inspected by M/s Rail India Technical & Economic Services Limited (RITES). The Railways received the goods only after proper inspection of the goods before delivery by RITES. The charges for the inspection by RITES were raised to the Railways by the Inspecting Agencies viz. RITES, The department alleged that the fact about this compulsory inspection was laid down in the Railway’s purchase orders which were agreed by the appellants. The assessees-appellants had not included the inspection charges in the assessable value and hence no Central Excise duty on the inspection charges was paid by the appellants. In the circumstances show cause notices were issued which culminated in the two orders in original i.e. Order-in-Original No. 20/98 dated 26.2.98 passed by the Assistant Commissioner, Central Excise Khardah Division by which he has held that inspection charges should not form part of the assessable value. His conclusion was based on the judgment of the Tribunal in the case of Hyderabad Industries Ltd. v. CCE, 1997 (93) ELT 692 wherein it was held that “fee paid on pre-despatch inspection at the option of the buyer, like the present one is not includible in the assessable value. The other original authority viz. The Joint Commissioner of Central Excise, Kolkata-III vide his Order-in-original No. 10/JC/Cal-III/2001 dated 20.8.01 has held that inspection charges are includible in the assessable value. Appellants filed appeal against the order passed by the Joint Commissioner holding that the inspection charges are includible in the assessable value, while the Department filed appeal before the Commissioner (Appeals), against the Order-in-Original passed by the Assistant Commissioner whereby the Assistant Commissioner has held that inspection charges are not includible in the assessable value. Both these appeals were decided by the Commissioner (Appeals) who allowed the appeal filed by the department and rejected the appeal filed by the Appellants. Appeal No. E/680/02 is filed by the appellants against the rejection of their appeal by the Commissioner (Appeals) while Appeal No. E/681/02 filed by them is against allowing the appeal filed by the Department.
3. Shri J.P. Khaitan, learned Counsel appearing for the appellants submitted that in this case, the inspection has been carried out at the option of the Indian Railways who are the buyers of the goods from the appellants and the Railways had the goods inspected at their own cost and it was not open to the appellants not to subject the goods to inspection by the third party i.e. RITES appointed by the Railways. He submitted that there are other buyers for the appellants’ goods and they do not subject the goods for further inspection by any third party. He submitted that the goods manufactured by them were complete in all respects and were marketable before they were inspected by the third party at the option of the Railways. He further submitted that the price list submitted by the appellants did not include any inspection charges and which price list had been approved by the Department. Therefore, it cannot be said that the department was not aware of the non-inclusion of the inspection charges in the assessable value. Therefore, the invocation of longer period of limitation alleging suppression of fact is not correct and he prayed for allowing the appeal. He has also invited our attention to the order passed by the East Zonal Bench in their own case vide order S. No. 1166-1167 and No. A 1195-1196 dated 22.10.2002 wherein on identical issue their appeal was allowed by the Tribunal. He has prayed for a similar order in these appeals also.
4. Shri A.K. Mondal, learned SDR appearing for the Revenue defended the impugned order and submitted inspection charges are required to be included in the assessable value in view of the majority view held in the case of Southern Structurals Ltd. v. CCE, Chennai-II, 2002 (52) RLT 334. He therefore, prayed for dismissal of the appeals.
5. We have considered the submissions made by both the sides. The only issue that arises for consideration in these appeal is whether the inspection charge incurred by the Railways who is the buyer of the goods, is to be included in the assessable value or not. We note that this issue is no longer res integra as the issue has already been decided against the Revenue by a catena of judgments, such as (i) Paxma Axle & Springs (P) Ltd., 2000 (125) ELT 836 wherein it was held that inspection charges borne by the buyer with regard to inspection carried out by third party (RITES) on account of the buyer is not includible in the assessable value in terms of Section 4 of the Act. (ii) In the case of Sunrise Structurals & Engg. P. Ltd. v. CCE, 2003 (152) ELT 387 wherein it was held that where the inspection has been carried out on behalf of customers by third party, the charges paid on account of inspection cannot be included in the assessable value. (iii) In the case of Cimmco Ltd. v. CCE, Jaipur, 1994 (74) ELT 687 wherein it has been held that inspection charges incurred by the customers are not includible in the assessable value of the goods. This decision of the Tribunal was challenged by the Department before the Hon’ble Apex Court and the Apex Court has dismissed the Civil appeal filed by the department, as reported in ELT 1996 page A-167. The Hon’ble Supreme Court had also dismissed the appeal filed by the Collector of Central Excise against Order No. 209 & 210/95-A dated 8.3.95 reported in, 1995 (58) ECR 8 in the case of Hindustan Development Corporation Ltd. v. Collector. The Tribunal had held that expenses incurred on account of additional tests conducted at Customers requisitions are not includible in the assessable value. (iv) In the case of General Engineering Works v. CCE, Jaipur, 1996 (81) ELT 659 it was held by the Tribunal that inspection charges paid to RITES by the Railways are not includible in the assessable value. In that case the inspection was done in addition to the regular inspection done by the assessees therein. (v) The Hon’ble Apex Court has dismissed the civil appeal filed by the Collector of Central Excise, against CEGAT Order No. 796/91-A dated 2.12.1991 reported in 1992 (59) ELT 462 in the case of Shree Pipes Ltd. v. CCE. The Tribunal in the said order had held that when inspection and testing are conducted by DGS & D at the request of specific customers, the inspection charges are not includible in the assessable value. We further find that this Tribunal in the appellants’own case in appeal No. E/391 to 392/2002 dated 24.10.02 on identical facts and circumstances have allowed the appeal filed by the appellants by holding that the inspection charges paid to RITES by the Railways are not includible in the assessable value. We also take note of the fact that the South Zonal Bench in the case of Southern Structural Ltd. v. CCE, Chennai-II, 2002 (52) ELT 334 has held that inspection charges for inspection by the third party at the request of the buyer is includible in the assessable value. The said judgment of the Tribunal is distinguishable from the various judgments cited by the assessee inasmuch as in the case of Southern Structural, the inspection charges @ Rs. 2400 per wagon were collected by the assessee therein from the Railways who were the buyers of the goods and it was in that circumstances that it was held that the inspection charges are to be included in the assessable value whereas in the present case, the inspection charges were paid by the Railways to the RITES who had carried out the inspection at the instance of the railways.
6. In view of the above, respectfully following the ratio of the various judgments cited supra, we hold that the impugned order is not legal and proper and we set side the same and allow the appeals.
