1997 (6) TMI 164 - AT - Central Excise

Summary

Issues:
Includibility of technical services in the assessable value of goods supplied.

Analysis:
The appeal concerns the inclusion of technical services provided by the appellants in the assessable value of computers/parts supplied by them. The lower appellate authority relied on a previous Tribunal decision but was unaware that the decision was overturned by the Supreme Court. The appellants had contracts to supply goods and provide technical personnel for upgrading computers at customer premises. The Department argued that since services were related to the supplied goods, charges should be included. The Tribunal analyzed the situation, focusing on when goods could be considered manufactured and whether the services enriched the goods' value. The services were performed at customer premises, involving upgrading already installed equipment by changing parts to enhance functionality. The Tribunal questioned if these services truly enriched the goods' value or were separate activities for system improvement. It was noted that such technical services, while related to goods, primarily aimed at making the equipment functional at customer sites, not directly enhancing goods' value. The Tribunal found no evidence that the charges for technical services exceeded the services rendered. Consequently, the lower authority erred in including these charges for assessment, leading to the appeal being allowed, and the order set aside.

This judgment delves into the critical distinction between technical services provided in connection with goods and activities that directly enhance the value of the goods. It emphasizes that while technical services may be related to goods, they do not necessarily enrich the goods' value but contribute to the functionality and goodwill of the supplier. The Tribunal scrutinized the nature of services rendered at customer premises, highlighting that such services aimed at making the equipment operational at desired levels rather than fundamentally altering the goods' value. The decision underscores the importance of assessing whether additional charges for services rendered are proportionate to the actual services provided, indicating that disproportionate charges should not be included in the assessable value of goods. Ultimately, the judgment clarifies that technical services, albeit related to goods, should not automatically be considered as value-enhancing activities for the goods unless they directly impact the goods' intrinsic worth through manufacturing or substantial alterations.