Post-removal erection supervision charges are excluded from excisable value when they are distinct from manufacture and marketability.

Charges for post-removal supervision of erection and commissioning at the customer's site were held not to form part of the assessable value of excisable goods, because the goods were already complete on clearance from the factory and the supervision was a distinct post-manufacturing activity with no nexus to manufacture or marketability. The related duty demand was therefore not sustainable, and the consequential penalty also could not survive.

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Issues: Whether charges received for supervising erection and commissioning of pumps and compressors at the customer's site were includible in the assessable value of the goods for central excise duty, and whether penalty could be sustained when no duty was leviable.

Analysis: The goods were complete when cleared from the factory, and the customer, in some cases, engaged the assessee only for supervision of erection and commissioning at site. Such supervision was a post-manufacturing and post-removal activity, distinct from manufacture, and had no nexus with the cost of manufacture or the marketability of the goods. Charges for that supervision could not therefore be added to the assessable value for levy of duty. Once the demand itself was not sustainable, the consequential penalty also could not survive.

Conclusion: The supervision charges were not includible in the assessable value, and the duty demand and penalty were rightly set aside in favour of the assessee.

Ratio Decidendi: Charges for post-removal supervision of erection and commissioning, being unrelated to manufacture and marketability, are not includible in the assessable value of excisable goods.

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