2017 (2) TMI 887 - AT - Central Excise

Valuation - inclusion of erection, commissioning and installation charges in the assessable value of duct and duct support structures - Held that - reliance was placed in the case of Indo Berolina Industries Pvt. Ltd. And IBI Chematur (Engg. & Consultancy) Ltd. Versus Commissioner of Central Excise, Mumbai-IV 2015 (10) TMI 1103 - CESTAT MUMBAI , where it was held that most of the activities are relating to pre-fabrication, engineering and design stage. It is on the basis of this designing that the appellant is fabricating various equipment, instruments, pipings, insulations etc. The expenditure on such activities would, therefore, form part of the assessable value of the machinery and equipment - this component should have been added to the assessable value - appeal allowed - decided in favor of Revenue.

Summary

Issues:
- Appeal against order setting aside confirmation of duty under section 11A of Central Excise Act, 1944
- Inclusion of 'erection, commissioning and installation charges' in assessable value
- Interpretation of post-manufacturing activities in determining assessable value
- Reliance on circular and tribunal decision for clarification
- Precedent set by Tribunal in similar circumstances
- Reduction of penalties imposed under various rules

Analysis:
The judgment pertains to an appeal against an order setting aside the confirmation of duty under section 11A of the Central Excise Act, 1944, along with interest and penalty, by the Commissioner of Central Excise (Appeals), Nagpur. The dispute revolves around the non-inclusion of 'erection, commissioning and installation charges' in the assessable value of 'duct and duct support structures' supplied by a company between May 2003 and December 2003. The appellant was accused of not incorporating the costs of drawings and designs in the assessable value, which were prepared before production commenced.

The appellate authority disagreed with the original authority's justification, stating that the post-manufacturing activities were not relevant to determining the assessable value. The Learned Authorized Representative cited a circular and a Tribunal decision in support of their argument. Referring to a similar case, the Tribunal highlighted the importance of engineering drawings in the fabrication process, emphasizing that such activities should be considered in the assessable value. Consequently, the Tribunal ruled in favor of adding the component to the assessable value, overturning the previous order and allowing the appeal.

In conclusion, the judgment underscores the significance of including certain charges in the assessable value, particularly those related to pre-fabrication and engineering activities. It establishes a precedent based on the interpretation of post-manufacturing activities and emphasizes the relevance of engineering designs in determining the assessable value. Moreover, the judgment addresses the reduction of penalties imposed under various rules, indicating a nuanced approach to penalty assessment based on the specific circumstances of each case.