2006 (8) TMI 393 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of erection and installation charges in the transaction value for excise duty assessment.
2. Determination of the excisability of "Curtain Walls" as immovable property.
3. Validity of previous departmental clarifications and their applicability post-amendment of Section 4 of the Central Excise Act, 1944.
4. Interpretation of "transaction value" under Section 4(3)(d) of the Central Excise Act, 1944.

Detailed Analysis:

1. Inclusion of Erection and Installation Charges in Transaction Value:

The appellant was issued a notice to show cause why duty should not be determined on the erection and installation charges recovered from customers for the erection and commissioning of 'Curtain Walls'. The Department alleged that these charges should be included in the transaction value under Section 4(3)(d) of the Central Excise Act, 1944. The appellant argued that the erection and installation were optional services and that these charges were separately quoted and agreed upon with customers. The Commissioner, however, held that these charges were closely related to the sale of the goods and thus should be included in the transaction value.

2. Determination of Excisability of "Curtain Walls":

The appellant contended that the 'Curtain Walls' become part of immovable property once installed and thus are not excisable. The Commissioner dismissed this argument, stating that the valuation of goods manufactured and removed by the assessee was the issue, not their classification. The Commissioner concluded that the 'Curtain Walls' could be dismantled and removed, thus not immovable. However, the Tribunal found that 'Curtain Walls' are site-specific, tailor-made, and cannot be removed without substantial damage, thus confirming them as immovable property and not excisable.

3. Validity of Previous Departmental Clarifications:

The appellant referred to previous clarifications from the Department, which stated that installation and erection charges were not includible in the assessable value. The Commissioner dismissed these clarifications, arguing that they were issued before the amendment of Section 4 and thus not applicable. However, the Tribunal noted that the factual matrix had not changed post-amendment and upheld the previous clarifications, finding no reason to include these charges in the transaction value.

4. Interpretation of "Transaction Value" under Section 4(3)(d):

The Tribunal referred to the Constitutional Bench decision in Commissioner of Central Excise, Pondicherry v. Acer India Ltd., which held that the expressions "by reason of sale" or "in connection with the sale" refer to excisable goods. Since 'Curtain Walls' were determined to be immovable and thus not excisable, the erection and installation charges could not be included in the transaction value. The Tribunal concluded that the cost of erection and installation at the building site should not be added to the value of components cleared from the factory.

Conclusion:

The Tribunal set aside the Commissioner's order, stating that the erection and installation charges for 'Curtain Walls' should not be included in the transaction value for excise duty purposes. The 'Curtain Walls' were determined to be immovable property and thus not excisable. The previous departmental clarifications were upheld, and the interpretation of "transaction value" did not support including these charges. The appeal was allowed, and the duty demand, penalty, and interest were set aside.