Assessable value for excise includes pre-production engineering, design and installation costs integral to manufacture.

Erection, commissioning and installation charges, together with pre-production engineering and design expenses, were treated as includible in the assessable value of manufactured goods for central excise purposes because they were integral to fabrication and manufacture and not severable as post-manufacturing exclusions. Applying its earlier decision in a substantially identical factual setting, the CESTAT held that drawings, designs and connected activities undertaken before commencement of production formed part of the valuation base. The disputed component was therefore required to be added to assessable value, and the Revenue's appeal succeeded, with the order setting aside duty demand and penalty reversed.

---

---

Issues: Whether erection, commissioning and installation charges and related pre-production engineering and design expenses were includible in the assessable value of the manufactured goods for central excise purposes.

Analysis: The demand arose from non-inclusion of erection, commissioning and installation charges in the value of duct and duct support structures, together with drawings and designs prepared before commencement of production. Following the Tribunal's earlier decision in a substantially identical factual setting, the component attributable to engineering, design and connected activities was treated as forming part of the assessable value, since those activities were integral to fabrication and manufacture and not severable as excluded post-manufacturing expenses.

Conclusion: The disputed component was required to be added to the assessable value, and the Revenue's appeal succeeded.

Final Conclusion: The order setting aside the duty demand and penalty was reversed, and the valuation adopted by the original authority was restored in principle.

Ratio Decidendi: Expenditure on pre-production engineering, design and allied activities that is integral to fabrication and manufacture forms part of the assessable value for excise valuation purposes.

---