CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL BANGALORE REGIONAL BENCH - COURT NO. 2 Central Excise Appeal No. 20603 of 2023 [Arising out of Orders-in-Appeal No. 185-187/2021 dated 17.06.2021 passed by the Commissioner of Central Tax (Appeals-I), Bangalore]

M/s. Disa India Limited Plot No. 50, KIADB Industrial Area, Hoskote, Bangalore – 562 114. ............ Appellant(s)

VERSUS Commissioner of Central Tax Bengaluru East TTMC, BMTC Building, Old Airport Road, Domlur Bangalore – 560 071 .............. Respondent(s)

APPEARANCE:

Mr. Dayananda K., Chartered Accountant for the Appellant Mr. Rajashekar B.N.N., Superintendent (AR) for the Respondent CORAM:

HON'BLE MR. P.A. AUGUSTIAN, MEMBER (JUDICIAL)

HON’BLE MR. PULLELA NAGESWARA RAO, MEMBER (TECHNICAL)

FINAL ORDER NO. 20505 / 2026 Date of Hearing: 08.10.2025 Date of Decision: 07.04.2026 PER: P.A. AUGUSTIAN The issue in the present appeal is regarding duty on warranty replacement of parts removed as such and demand of excise duty on amounts recovered by way of a debit notes towards repair charges on inputs damaged during transportation.

2. The brief facts are during audit for the period from February 2014 to February 2015, it is observed that the Appellant had availed irregular input service tax credit in respect of repair services and raised debit note towards goods received in damaged condition, but availed full CENVAT credit, in other words, not reversed the CENVAT credit proportionate to the goods damaged and in certain cases, invoices has mentioned the description as parts supplied free of cost, however on the contrary charged value of excise duty in some invoices. Accordingly, a show cause notice was issued on 14.08.2015 and thereafter one more show cause notice issued for the period from March, 2015 to December, 2015 on 22.03.2016. Thereafter, as per the Order-in-Original dated 18.11.2016, the demand was confirmed along with interest and penalty was imposed. Aggrieved by said order, an appeal was filed before the Commissioner (Appeals) and Commissioner (Appeals) as per the Orders-in-Appeal Nos. 35 to 36/2018 dated 17.01.2018 remanded the matter with certain observation. During the relevant period, Statement of Demand (SOD) dated 29.01.2018 was also issued for the period from January 2016 to June 2017. Thereafter on remand by the Commissioner (Appeals), all the 3(three) notices were taken up for hearing and as per the order dated 31.03.2019, demands were confirmed along with interest and penalties were imposed. Aggrieved by said order, appeals were filed before the Commissioner (Appeals) and as per the impugned order dated 17.06.2021, Commissioner (Appeals) rejected the appeals.

Aggrieved by said order, present appeal is filed.

3. When the appeal came up for hearing, regarding demand of duty on warranty replacement parts as removal of inputs as such, the Learned Chartered Accountant for the Appellant submits that the issue is covered by the Notification No. 3/2011-CE (NT) dated 01.03.2011 wherein it is categorically held that inputs means any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products. Learned Chartered Accountant for the Appellant further submits that Appellant is a manufacturer of 'shot blasting machine' for which they purchase various components from local suppliers as well as from outside India. Learned Chartered Accountant also submits that the appellant has cleared the bought-out items as warranty replacement without payment of duty. However, wherever manufactured goods were cleared as warranty replacement, duty was paid. As the appellant has to prepare the invoice for each and every removal of goods and also has to mention the value of the goods for the purpose of transportation, the Audit officer has made an observation based on the single reason that appellant had followed divergent practice. In this regard, Learned Chartered