Assessable value excludes post-manufacture freight and erection charges, but includes manufactured optional accessories supplied with goods.

Freight from the factory to the buyer's premises, together with unloading charges, octroi and similar transportation-related expenses, was held not to form part of assessable value, even where separately invoiced. The value of acoustic enclosures supplied with diesel generating sets was includible where the assessee did not establish that they were bought-out goods; items manufactured and cleared by the assessee remained dutiable even if supplied as optional accessories. Erection and commissioning charges were also excluded from assessable value because they were treated as post-clearance services distinct from manufacture under the transaction value regime.

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Issues: (i) Whether transportation charges, unloading charges, octroi and similar incidental expenses incurred up to the buyer's premises formed part of the assessable value; (ii) Whether the value of acoustic enclosures supplied with diesel generating sets was includible in the assessable value; (iii) Whether erection and commissioning charges were includible in the assessable value under the transaction value regime.

Issue (i): Whether transportation charges, unloading charges, octroi and similar incidental expenses incurred up to the buyer's premises formed part of the assessable value

Analysis: Freight from the factory to the buyer's premises was held to be outside assessable value where the goods were delivered at the buyer's premises. That principle was applied equally to unloading charges, octroi and incidental expenses incurred during transportation. The separate invoicing of such charges did not alter their character for valuation purposes.

Conclusion: The charges for transportation, unloading, octroi and similar incidental expenses were not includible in the assessable value, and the Revenue's challenge on this issue failed.

Issue (ii): Whether the value of acoustic enclosures supplied with diesel generating sets was includible in the assessable value

Analysis: The finding excluding acoustic enclosures was found unsustainable because the assessee did not establish that the items were bought-out goods. If the acoustic enclosures were manufactured and cleared by the assessee, duty was payable on their value whether supplied with the diesel generating sets or separately. The exclusion based merely on the item being optional was not accepted.

Conclusion: The value of acoustic enclosures was includible in the assessable value, and the Revenue succeeded on this issue.

Issue (iii): Whether erection and commissioning charges were includible in the assessable value under the transaction value regime

Analysis: Erection and commissioning were treated as services distinct from manufacture. The definition of transaction value did not displace the settled position that duty is attracted at the stage of removal of excisable goods and not on post-clearance erection at site. The later service tax treatment of erection and commissioning also supported this view.

Conclusion: Erection and commissioning charges were not includible in the assessable value, and the Revenue's challenge on this issue failed.

Final Conclusion: The appeals succeeded only to the limited extent of inclusion of the value of acoustic enclosures, while the exclusions of freight-related charges and erection and commissioning charges were sustained.

Ratio Decidendi: Charges for post-manufacture transportation-related expenses and erection and commissioning services are not part of excisable assessable value, but the value of items manufactured and cleared by the assessee is includible even if supplied as optional accessories.

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