1992 (11) TMI 181 - Commissioner - Central Excise

Summary

Issues:
1. Whether charges for erection, supervision, design, and engineering claimed by the appellants are includible in the assessable value of goods for Central Excise duty calculation.
2. Whether the penalty imposed on the appellants under Rule 173Q of the Central Excise Rules is justified.

Analysis:
1. The case involved the appellants, manufacturers of machinery, who claimed deductions in price-lists for charges related to erection, supervision, design, and engineering. The Assistant Collector held these charges as integral to the goods' price, citing the Supreme Court's decision in M/s. Bombay Tyre International case, where charges for services after delivery were not deductible. The Assistant Collector denied the deductions and confirmed a demand of Rs. 5,19,750, imposing a penalty of Rs. 5,000 under Rule 173Q of the Central Excise Rules.

2. In the appeal, the appellants argued that charges for erection and supervision at the customer's site should not be treated as post-clearance charges. They also contended that the Assistant Collector misinterpreted the Supreme Court's decision in the Bombay Tyre International case. The appellants referenced judgments by CEGAT and other courts to support their claim for deductions. They further argued that the charges for design and engineering were not connected to manufacturing or marketability.

3. Upon reviewing the submissions and legal precedents, the Collector noted that charges includible in the assessable value must relate to manufacturing or marketability of the goods. Post-removal charges not connected to these aspects should not be included. The Collector analyzed each deduction separately:
- Charges for erection at the site post-removal were not includible.
- Supervision charges for post-removal activities were also excluded.
- Design and engineering charges were found to be unrelated to manufacturing or marketability, as per the contract description and appellants' submissions.

4. The Collector concluded that the deductions claimed by the appellants were admissible as they were not related to manufacturing or marketability. The price-lists were approved with the deductions. The penalty imposed under Rule 173Q was deemed unjustified as no justification for penal action was provided in the Assistant Collector's order.

5. Consequently, the Order-in-Original was set aside, and the appeal was allowed in favor of the appellants. The Collector found no basis for penal action against the appellants. The judgment clarified the criteria for includible charges in the assessable value for Central Excise duty calculation, emphasizing the connection to manufacturing or marketability of goods.