Assessable value and suppression: manufacturing-linked design charges were includible, while post-removal consultancy and erection charges were excluded.

Drawing, designing and technical specification charges recovered separately under consultancy invoices were treated as part of the machinery's manufacturing cost and, where not disclosed, the non-disclosure amounted to suppression supporting the extended limitation period. Other consultancy items such as project reports, plant layout, civil works, technical know-how for improving existing machinery, and staff training were treated as distinct services and excluded from assessable value. Erection and service charges incurred at the customer's premises were also excluded because they arose after removal from the factory gate and related to installation rather than manufacture. Quantification of the includible charges was left to the adjudicating authority on supporting records.

---

---

Issues: (i) Whether drawing, designing and technical specification charges recovered separately under consultancy invoices formed part of the assessable value and whether the demand was saved from limitation by suppression. (ii) Whether other consultancy-related service elements and erection and service charges were includible in the assessable value of the machinery.

Issue (i): Whether drawing, designing and technical specification charges recovered separately under consultancy invoices formed part of the assessable value and whether the demand was saved from limitation by suppression.

Analysis: Drawing, designing and technical specification work was held to be the first stage of manufacture and, therefore, an element of the machinery cost rather than a mere service. Since these charges were recovered separately but not disclosed to the department, the non-disclosure constituted suppression. The demand relating to these charges was therefore held to be within the extended period of limitation. As the exact break-up was not available, quantification was left to the Assistant Collector, with liberty to call for an affidavit and chartered accountant certificate. No duty was payable where the machinery itself attracted no duty because it had been exported.

Conclusion: The demand was upheld only in respect of drawing, designing and technical specification charges, and the plea of time bar was rejected.

Issue (ii): Whether other consultancy-related service elements and erection and service charges were includible in the assessable value of the machinery.

Analysis: The remaining consultancy items, namely project report, plant lay-out, civil works, technical know-how for improving existing machinery, and training of staff, were treated as services distinct from the cost of manufacture. Erection and service charges at the customer's premises were also held to be outside assessable value because they were incurred after removal from the factory gate and, after installation, the machinery became immovable property and ceased to be goods. Since these charges were not part of manufacture, there was no obligation to disclose them as manufacturing cost and no suppression on that account.

Conclusion: The other consultancy-related service elements and the erection and service charges were held not includible in assessable value.

Final Conclusion: The departmental appeals succeeded only to the limited extent of drawing, designing and technical specification charges, while the rest of the demands were rejected.

Ratio Decidendi: Charges integrally connected with the manufacturing process and recovered but not disclosed are includible in assessable value and attract the extended period for suppression, whereas post-removal or purely service-related charges are not part of assessable value.

---