2006 (8) TMI 84 - AT - Central Excise

Tribunal excludes supervision charges from assessable value, deems erected system as immovable property

COMMISSIONER OF CUSTOMS, CHENNAI Versus ALSTOM LTD.

The Tribunal upheld the appellate Commissioner's decision to exclude supervision charges from the assessable value of goods used for erection at the ... Valuation(Central Excise) – Department contended that certain supervision charges to be excludible from the assessable value of goods used by the respondent for erection ,at customer’s site of certain “system” – Authority dismissed the appeal and the impugned order is sustained Issues:- Exclusion of supervision charges from assessable value- Applicability of Circular No. 58-1-2002-CX- Inclusion of supervision charges in transaction value- Classification of erected system as immovable propertyExclusion of Supervision Charges from Assessable Value:The appeal challenged the appellate Commissioner's order excluding supervision charges from the assessable value of goods used for erection at the customer's site. The appellant argued that supervision charges for erection and commissioning of the system should be included in the transaction value for duty payment. However, the Tribunal found that the supervision charges were related to the system itself and not its components. The charges were incurred in connection with the installation and commissioning of the system, leading to the conclusion that they should not be included in the transaction value under the amended Section 4 of the Act. The Tribunal highlighted that if the charges were related to the manufacture of components, the situation might have been different.Applicability of Circular No. 58-1-2002-CX:The appellant contested the applicability of Circular No. 58-1-2002-CX, dated 15-1-2002, issued under Section 37 B of the Central Excise Act, relied upon by the appellate Commissioner. The appellant argued that the circular was not applicable to the period of dispute (1-7-2000 to 31-3-2001). The Tribunal considered the arguments presented and found that the circular did not impact the exclusion of supervision charges from the assessable value based on the specific circumstances of the case.Inclusion of Supervision Charges in Transaction Value:The appellant asserted that supervision charges for erection and commissioning of the system should be included in the transaction value for duty payment. The Tribunal examined the nature of the charges and their relation to the system's installation and commissioning. It was determined that the supervision charges were specific to the system and not its components, leading to the decision that they should not be included in the transaction value as defined under the amended Section 4 of the Act.Classification of Erected System as Immovable Property:The respondents argued that the system, once installed, became attached to the civil structure and transformed into immovable property, thus not attracting Central Excise levy. The Tribunal referred to case laws supporting the contention that once the system was installed and became immovable, it ceased to be goods, and consequently, no duty was payable. The Tribunal agreed with this argument and upheld the appellate Commissioner's finding that the erected/commissioned system was immovable and not excisable. This classification influenced the decision regarding the inclusion of supervision charges in the assessable value.In conclusion, the Tribunal sustained the impugned order, dismissing the appeal and affirming the decision regarding the exclusion of supervision charges from the assessable value based on the specific circumstances of the case.