Assessable value principles: independent job-work fabrication charges excluded, but procurement and coordination service charges included.

Cabin fabrication charges paid to an independent job worker were not includible in the bulkers' assessable value because the cabins were separately manufactured and cleared by the job worker, so any duty issue arose against that manufacturer, not the assessee. By contrast, 5% service charges recovered for procurement and co-ordination of materials were held to be sufficiently connected with manufacture and sale of the bulkers and were includible in assessable value. On that basis, the challenge to exclusion of the cabin charges failed, and the challenge to inclusion of the service charges also failed.

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Issues: (i) Whether the cabin making charges of Rs.45,000 per cabin were includible in the assessable value of the bulkers manufactured by the assessee. (ii) Whether 5% of the assessable value recovered as service charges for procurement and co-ordination was includible in the assessable value of the bulkers.

Issue (i): Whether the cabin making charges of Rs.45,000 per cabin were includible in the assessable value of the bulkers manufactured by the assessee.

Analysis: The cabins were fabricated by an independent job worker who cleared them under Notification No. 5/98-CE dated 02.06.1998 without payment of duty. Since the job worker was the manufacturer of the cabins, any duty issue arising from the exemption could arise against the job worker and not against the assessee manufacturing the bulkers. The amount paid for cabin fabrication could not, on these facts, be added to the assessable value of the bulkers.

Conclusion: The addition of Rs.45,000 per cabin was not sustainable against the assessee.

Issue (ii): Whether 5% of the assessable value recovered as service charges for procurement and co-ordination was includible in the assessable value of the bulkers.

Analysis: The 5% amount was charged by the assessee as service charges in relation to procurement and co-ordination of materials for the bulkers manufactured by it. The amount was therefore connected with the manufacture and sale of the bulkers and formed part of the assessable value.

Conclusion: The 5% service charges were includible in the assessable value.

Final Conclusion: The challenge to inclusion of the cabin making charges failed, and the challenge to inclusion of service charges also failed, leaving the dismissal of both appeals in place.

Ratio Decidendi: Amounts paid to an independent job worker for fabrication of a component are not includible in the manufacturer's assessable value when the component is separately manufactured and cleared by the job worker, but charges recovered by the manufacturer for services integrally connected with procurement and coordination for the manufactured goods may form part of the assessable value.

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