Central excise valuation excludes site installation charges and bought-out accessories unless they form part of factory-cleared goods.

For central excise valuation, erection, installation and commissioning charges for a SCADA system were excluded from assessable value where the goods had already been cleared on duty payment and were later installed at the customer's premises into immovable property. The department had not shown that the charges represented consideration for manufacture at the factory stage. The value of bought-out accessories supplied with the system was also excluded because no evidence proved that they were integral or essential components of the goods cleared from the factory. On these facts, the demand, interest and penalties could not be sustained.

---

---

Issues: (i) Whether erection, installation and commissioning charges for the SCADA system were includible in the assessable value; (ii) whether the value of bought-out accessories supplied with the system was includible in the assessable value.

Issue (i): Whether erection, installation and commissioning charges for the SCADA system were includible in the assessable value.

Analysis: The charges sought to be added related to installation and commissioning at the customer's site. The Board's Circular No. 643/34/2002-CX stated that where a machine cleared on payment of duty is later taken to the buyer's premises for installation, erection and commissioning into an immovable property, no further duty is payable. The department did not establish that the case was one of charging for completion of a product cleared in knocked down form or that the charges represented consideration for manufacture of excisable goods at the factory stage.

Conclusion: The erection, installation and commissioning charges were not includible in the assessable value and the finding was in favour of the assessee.

Issue (ii): Whether the value of bought-out accessories supplied with the system was includible in the assessable value.

Analysis: The department failed to produce evidence that the accessories were integral or essential components of the goods cleared from the factory. In the absence of such proof, the accessories could not be treated as part of the assessable value of the main goods merely because they were supplied along with the system at the customer's site.

Conclusion: The value of the bought-out accessories was not includible in the assessable value and the finding was in favour of the assessee.

Final Conclusion: The demand, interest and penalties could not be sustained as neither the site erection and commissioning charges nor the value of accessories formed part of the assessable value on the facts proved.

Ratio Decidendi: For valuation under central excise, site erection and commissioning charges are excluded where the goods are already cleared on duty payment and installed later into immovable property, and the value of bought-out accessories is includible only if the department proves that they are integral or essential parts of the goods cleared from the factory.

---