2008 (4) TMI 169 - AT - Central Excise

Appellant charging for design & engineering charges in respect of lay out of the machines manufactured by them at site contention is that these charges are not in respect of the goods manufactured by them, therefore, not includible Revenue plea that the appellants manufactured the goods as per the design and, civil work or installation at site is not part of the supply order/contract, is correct - Commissioner rightly hold that the design and engineering charges are includible

Summary

Issues:
Interpretation of assessable value - Inclusion of design and engineering charges in assessable value.

Analysis:
The appellant filed an appeal against the order-in-appeal passed by the Commissioner (Appeals) regarding the inclusion of design and engineering charges in the assessable value of goods manufactured and cleared by the appellant. The appellant argued that the design and engineering charges they levy on customers for the lay out of machines at the site are not related to the goods manufactured by them. They contended that the charges should not be included in the assessable value. The appellant provided copies of agreements and invoices to support their claim.

The Revenue, on the other hand, argued that the design and engineering charges are related to the components of the complete system of handling equipment supplied by the appellant. They pointed out that the civil work or installation at the site was not part of the contract, and the equipment and components were to be supplied as per the specifications of the drawing and design. The Revenue relied on exclusion clauses in the contracts to support their contention that the charges should be included in the assessable value.

Upon reviewing the supply orders produced by the appellant, the Tribunal found that civil engineering work and equipment erection were not part of the supply orders or contracts. The Tribunal concluded that the design and engineering charges were indeed related to the design and drawing of the equipment supplied as per the contract. Therefore, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the appeal, stating that there was no infirmity in the impugned order.

This judgment clarifies the interpretation of assessable value concerning the inclusion of design and engineering charges in cases where such charges are levied for services related to the goods supplied. The Tribunal's analysis focused on the contractual terms and the scope of supply orders to determine the relationship between the charges and the goods manufactured.