2017 (9) TMI 1364 - AT - Central Excise

Charges for testing & installation activities not included in Excise duty assessable value. Commissioner's decision set aside.

The Tribunal held that charges collected for testing, service, and installation activities were not includable in the assessable value for determining ... Valuation - includibility - amounts collected as testing charges, service charges, installation charges - Held that: - In the case of testing charges, it is seen that the same is done at the customers' site. The testing is done by Indian Registrar of Shipping as per the statutory obligation and as hired by HPCL. In such cases, testing activity does not form part of manufacturing activity and therefore is not includable in the assessable value - The Tribunal in the case of Goyal M.G. Gases (P) Ltd. Vs. Commissioner [2014 (8) TMI 81 - CESTAT AHMEDABAD] held that cylinder testing charges are not includible in the assessable value. The service charges collected for servicing a pump cleared to the customer - includibility - Held that: - The purchase order was only for supply of DG sets and not for installation. No material required for erection/installation was cleared from their factory as part of the DG sets. There was separate order for installation and erection. Therefore, the above discussed charges cannot be included in assessable value in terms of definition of transaction value under section 4 of Central Excise Act. In Bharat Bijlee Ltd. vs. Commissioner of Central Excise, Mumbai [2016 (2) TMI 779 - CESTAT MUMBAI], where it was held that testing charges borne by customer is not includable in assessable value. Further, charges for erection and installation of DG sets are includable only if such charges are shown in the purchase order. Appeal allowed - decided in favor of appellant. Issues:- Appellant aggrieved by demand of differential duty, interest, and penalty for not including additional charges in assessable value.- Whether charges collected for testing, service, installation, and other activities are includable in the assessable value for central excise duty.Analysis:- The appellant, a manufacturer of Diesel Generating sets, was required to include additional charges collected as testing charges, service charges, and installation charges in the assessable value for determining Central Excise duty.- The Department issued a show cause notice alleging non-inclusion of additional amounts collected in the assessable value, leading to the confirmation of duty, interest, and penalty by the Commissioner (Appeals).- The Managing Director of the appellant argued that the charges were not part of the sale of goods subject to excise duty. Various contentions were raised, supported by Chartered Accountant certificates and documentary evidence.- The appellant explained that charges for testing, servicing, and installation activities were not part of the manufacturing process but post-manufacturing activities, hence not includable in the assessable value.- The Tribunal referred to precedents where charges for testing and servicing were held not includable in the assessable value, emphasizing that such charges do not form part of transaction value under the Central Excise Act.- The Tribunal also cited cases where charges for testing borne by the customer and charges for erection and installation were held to be includable only if specified in the purchase order.- Ultimately, the Tribunal found that the confirmation of duty, interest, and penalty was not sustainable. The impugned order was set aside, and the appeal was allowed with consequential relief, if any.