2005 (6) TMI 467 - AT - Central Excise

Summary

Issues Involved:
1. Incorrect totaling of value leading to wrong duty and penalty confirmation.
2. Inclusion of charges for observing and overseeing the work of installation in the assessable value under Central Excise Act, 1944.
3. Assessability of removals and assessments from 1-7-2000 onwards under the concept of Transaction Value.
4. Excise duty on plant and machinery assembled at the customer's site.

Detailed Analysis:

1. Incorrect totaling of value leading to wrong duty and penalty confirmation:
The judgment addresses an error in the totaling of the value, which led to an incorrect duty demand of Rs. 62,82,895/- instead of Rs. 56,36,135/-. This resulted in an erroneous confirmation of Rs. 6,46,770/- as duty and an equal amount as a penalty, totaling Rs. 12,93,540/-. The Tribunal emphasized that this mistake is apparent on the face of the record and must be corrected as it constitutes a wrongful collection of duty and penalty without the authority of law, referencing the precedent set by the Regional Bench in Besterna Chemicals.

2. Inclusion of charges for observing and overseeing the work of installation in the assessable value:
The core issue was whether charges for observing and overseeing the installation work at the customer's site should be included in the assessable value under the Central Excise Act, 1944. The Tribunal referenced several precedents:
- Quality Steel Tubes (P) Ltd v. Collector of Central Excise: Erection and installation of a plant are not excisable goods.
- Thermex Limited: Installation and commissioning charges should not be included in the assessable value.
- Radiant Electronics and Molins of India: Installation and commissioning charges are post-manufacturing expenses and not includible in the assessable value.
- Gordhandas Desai Ltd.: Erection and commissioning charges do not create new excisable goods at the site.
The Tribunal concluded that the charges for observing and overseeing installation activities, which are arranged by the customer's contractors, should not be included in the assessable value.

3. Assessability of removals and assessments from 1-7-2000 onwards under the concept of Transaction Value:
The Tribunal examined the interpretation of "by reason of sale" or "in connection with the sale" under the concept of Transaction Value. Citing Commissioner of Central Excise v. Acer India, the Tribunal noted that excise duty is chargeable only on excisable goods, and the definition of "transaction value" cannot override the charging provisions of Section 3 of the Central Excise Act, 1944. The Tribunal agreed that recoveries for activities such as supervising erection, which do not result in the manufacture of new excisable goods, cannot be subject to excise duty.

4. Excise duty on plant and machinery assembled at the customer's site:
The Tribunal addressed the Commissioner's finding that the VFBD tea dryer machinery, cleared and assembled at the customer's premises, comes into existence there, making installation, erection, and commissioning charges includible in the assessable value. The Tribunal found this conclusion erroneous, noting:
- The VFBD tea dryer, classified under Heading 84.19 of the Tariff, retains its identity whether assembled or disassembled.
- According to HSN Explanatory Notes and Rule 2(a) of Interpretation of CETA, 1985, unassembled goods should be classified as the machine in question.
- The Respondent's own findings indicated that the dryer could be dismantled and reassembled without losing its identity.
The Tribunal concluded that no new identity, character, or use arises from assembling the dryer at the customer's site, so no manufacture or dutiability occurs. The inclusion of erection, installation, and commissioning charges in the assessable value was deemed unsustainable.

Conclusion:
The Tribunal found no merit in upholding the impugned order and set it aside. The appeal was allowed, and the proposed addition to the assessable value was not upheld.