1997 (12) TMI 444 - AT - Central Excise

Summary

Issues:
1. Inclusion of commissioning and erection charges in the assessable value of machinery under Chapter 84 of Central Excise Tariff Act, 1985.

Detailed Analysis:

The judgment by the Appellate Tribunal CEGAT, Mumbai involved a dispute regarding the inclusion of commissioning and erection charges in the assessable value of machinery manufactured by the appellants falling under Chapter 84 of the Central Excise Tariff Act, 1985. The department alleged that the appellants were charging these additional charges for installation at the customer's premises but did not include them in the assessable value declared in the price list. Consequently, a duty demand of Rs. 22,500 was issued for the period between January and February 1985. The Addl. Commissioner of Central Excise & Customs, Vadodara held that such charges enhance the value and marketability of the products, citing the Supreme Court judgment in the case of Union of India v. Bombay Tyre International. Therefore, he confirmed the duty demand.

The appellants, represented by Shri S.C. Bhide, argued that the erection and commissioning charges were incurred post-removal of the machines from the factory and were optional, not compulsory. They referred to the decision of the Central Advisory Council and previous Tribunal decisions to support their contention that such charges should not be included in the assessable value. They highlighted that these charges were post-removal expenses and did not contribute to the manufacturing or marketability of the product, as held in previous Tribunal cases.

On the other hand, Shri S.V. Singh, representing the department, contended that there was no evidence to suggest that the machinery at the erection site became immovable property, implying that the charges should be included in the assessable value.

After careful consideration of the submissions, the Tribunal found merit in the appellants' argument. They noted that the machinery was removed to the customer's site for installation after full manufacturing, and the installation and commissioning charges were optional at the customer's preference. Since this claim was not rebutted, the Tribunal relied on previous decisions, including the one involving Jenson and Nicholson (India) Ltd., which held that optional charges like these should not be included in the assessable value. The Tribunal concluded that such charges were post-removal expenses with no direct connection to the manufacturing or marketability of the product. Consequently, the impugned order was set aside, and the appeal was allowed.