2016 (6) TMI 1057 - AT - Central Excise

Valuation - inclusion of design and engineering charges - receipt of additional consideration in the guise of transportation charges - manufacturers of equipment and machinery item - Held that - The appellants did the designing and engineering for the civil structure at the premises of M/s. SAIL, BSP where the erection and installation of walking beam cooling bed etc. was done on turnkey project basis. - these design and engineering charges do not pertain to the plant and equipment manufactured by the appellants in their factory and sold as part of the turnkey project. When that is the case, there is no question of inclusion of such designing and engineering charges in working out the assessable value of the goods manufactured by the appellants. - Demand is not maintainable As regards the consideration received for storage, handling, erection, commissioning and P G test of plant and equipment charges, Commissioner (Appeals) has set aside the demand by observing that the same are the activities relatable to erection of plant and machinery at the site of M/s. SAIL. The erection and installation is done out of goods supplied by the assessee as well as by others and which ultimately results into coming into existence of immovable rail mill. Demand cannot sustain - Decided against the revenue.

Summary

Issues:
- Inclusion of design and engineering charges in assessable value
- Inclusion of storage, handling, erection, commissioning charges in assessable value

Inclusion of Design and Engineering Charges in Assessable Value:
The case involved the issue of whether design and engineering charges should be included in the assessable value of goods manufactured by the appellants. The Revenue contended that such charges were pre-manufacturing activities and essential for the manufacture of engineering goods, thus should be included in the transaction value for excise duty. However, the Commissioner (Appeals) observed that the design and engineering charges pertained to civil and structural works at the site, not to the plant and equipment manufactured by the appellants. The jurisdictional Central Excise authority confirmed this distinction. The Tribunal cited precedents to support the decision that such charges related to site designing should not be included in the assessable value of the manufactured goods.

Inclusion of Storage, Handling, Erection, Commissioning Charges in Assessable Value:
Another issue in the case was the inclusion of charges for storage, handling, erection, and commissioning of plant and equipment in the assessable value. The Commissioner (Appeals) set aside the demand for these charges, noting that they were activities related to the erection of machinery at the site, as per a Board circular. The Tribunal referred to previous decisions to establish that charges for installation and commissioning at the customer's premises should not be part of the assessable value of the equipment. Consequently, the Tribunal found no merit in the Revenue's argument on this matter and rejected the appeal.

In conclusion, the Tribunal dismissed the appeal by the Revenue, ruling against the inclusion of design and engineering charges as well as storage, handling, erection, and commissioning charges in the assessable value of the goods manufactured by the appellants. The decision was based on the specific nature of the charges and their relation to site work rather than the manufacturing process itself, as established by relevant precedents and authoritative interpretations of the law.