Central Excise - Valuation - Inclusion of Inspection charges in assessable value - Instructions regarding - Central Excise - 3/88-CX.1

Central Excise - Valuation - Inclusion of Inspection charges in assessable value - Instructions regarding Circular No. 3/88-CX.1 Dated 16-2-1988 [From F.No. 6/3/85-CX.1] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise and Customs, New Delhi Subject : Central Excise - Valuation - Inclusion of Inspection charges in assessable value - Instructions regarding. I am directed to say that a case has been brought to the notice of the Board where the Railways were getting the goods like "points" and "crossings" manufactured in outside premises on job work basis from rails supplied by them. The points and crossings after manufacture, were inspected by an outside agency namely M/s. Rail India Technical and Economic Services Limited (RITES) before delivery from the factory. The Railways paid inspection charges direct to M/s. RITES. 2. A doubt has been raised as to whether such "inspection charges" could be included in the price of the points and crossings for determining their assessable value or not. It is understood that conducting of such inspection was vital from the point of view of safety in other words, quality, and hence these charges could not be regarded as in the nature of optional charges. 3. The matter has been examined by the Board. Since inspection of points and crossings is essential before they can be put into use, the Board is of the view that the inspection charges would form a specific ingredient of the cost of manufacture of such points and crossings. In the case of finished products, if a manufacturer sets up a quality control unit to check the quality of the product or maintain a particular standard or comply with a particular standard like the ISS, the inspection or quality control charges form part of the overhead costs and thus become part of the manufacturing cost. The inspection charges should therefore be included while determining the assessable value of goods. 4. Suitable trade notice may be issued for the information of the trade. 5. The receipt of this letter may kindly the acknowledged.