1997 (2) TMI 202 - AT - Central Excise

Summary

Issues:
Appeal against refund claim rejection - Inclusion of second testing cost in assessable value for duty calculation.

Analysis:
The case involved an appeal by the department against the Collector (Appeals) order that allowed the refund claim of the respondent, who was engaged in manufacturing industrial valves. The respondent had opted for the invoice price procedure under Notification 120/75 and filed a refund claim for the cost of second testing conducted at the buyers' option in the manufacturer's premises. The Assistant Collector rejected the claim, but the Collector (Appeals) allowed it.

The main issue revolved around whether the cost of second testing, conducted at the buyers' instance and cost, should be included in the assessable value for the purpose of duty calculation. The department contended that such costs should be added to the assessable value, relying on previous Tribunal decisions like Madhavnagar Cotton Mills Ltd. and Richardson & Cruddas Ltd. These cases held that costs incurred for additional testing, even if done at the buyer's instance, should be part of the total cost of production and included in the assessable value.

However, the respondent relied on other Tribunal decisions, such as Shree Pipes Ltd., General Engineering Works, Hindustan Development Corporation Ltd., and Ashok Transformers Pvt. Ltd., which held that charges for additional testing conducted at the buyer's instance should not be included in the assessable value. These decisions distinguished the earlier cases and established that costs of additional testing, beyond the manufacturer's normal testing, should not impact the assessable value for duty calculation.

The Tribunal analyzed the conflicting decisions and concluded that the proposition in the earlier cases did not apply when additional testing was conducted at the buyer's instance. Therefore, the Tribunal upheld the Collector (Appeals) decision, stating that the cost of second testing, not part of the manufacturer's normal testing, should not be included in the assessable value. Consequently, the appeal was dismissed, affirming the correctness of the Collector (Appeals) decision.