2016 (2) TMI 779 - AT - Central Excise

Assessable value - whether cost of additional testing conducted on the request of the customer of the appellant and documentation charges collected by appellants needs to be included in the assessable value or otherwise? - Held that - The statement of Deputy General Manager indicates that the tests which are required to be conducted on the Transformers, the statement also records that the appellant conducts all the tests and which are required for their own quality control tests to market the final products. We do not find anything in the statement which states that the appellant has recovered the cost of this mandated testing from the customers. The appellant has been stating before the lower authorities that that additional testing which is carried out by the appellant is at the behest of their customers; the revenue is unable to bring on record that these tests were not carried out on request of the appellant s customers. Revenue has not produced any evidence to negate the claim of the appellant. As regards the inclusion of documentation charges, we do find strong force in the contentions raised by the learned Counsel, as the specimen purchase order indicates that the documentation charges which are collected by the appellants during the material period is in respect of additional copies of drawings of the Transformers given to their customers on specific request of the customer. Learned Counsel categorically states that one set of drawing given along with the transformer to the customer free of cost. In our considered view, cost of additional copies of drawings given to appellants customers on specific request cannot form a part of the assessable value as these cost are post manufacturing and clearance.

Summary

Issues:
Whether the cost of additional testing charges conducted at the request of the customer and the cost of documentation charges collected by the appellants need to be included in the assessable value or not.

Analysis:
The appeal in question is the third round of litigation, with the Tribunal remanding the case to reconsider the inclusion of additional testing charges and documentation charges. The appellant argued that the first appellate authority did not properly consider the larger bench's view and cited precedents to support their case. The departmental representative supported the first appellate authority's findings, emphasizing the necessity of additional testing as per Indian standards.

The main issue revolved around whether the additional testing charges and documentation charges should be part of the assessable value. The first appellate authority had included the testing charges based on the number of tests required for marketing the product as per Indian standards. However, the Tribunal found this conclusion incorrect as the appellant conducted the tests for quality control, not for cost recovery from customers. The Tribunal referenced a previous case to support its decision, highlighting that the cost of additional testing charges borne by customers should not be included in the assessable value.

Regarding documentation charges, the Tribunal agreed with the appellant that the cost of additional copies of drawings provided to customers upon specific requests should not be part of the assessable value as these charges are post-manufacturing and clearance. Ultimately, the Tribunal set aside the impugned order, ruling in favor of the appellant based on the precedents and the specific circumstances of the case.

In conclusion, the Tribunal found the impugned order unsustainable and allowed the appeal, emphasizing the settled legal principles and the specific details of the case. The judgment was delivered on December 4, 2015, upholding the appellant's position on the inclusion of additional testing and documentation charges in the assessable value.