Commissioning charges excluded from assessable value, while installation-linked charges may be included for machinery valuation.

Commissioning charges for electroplating machinery were treated as a post-installation activity undertaken to make the equipment operational, so they were excluded from assessable value. By contrast, installation and customer-specific designing and development charges connected with the manufacture and assembly of the machinery could form part of the value. As the duty demand required recalculation after excluding commissioning charges, confiscation and penalty were considered unsustainable on the facts and were set aside. The matter was remanded for fresh quantification of differential duty after giving the assessee an opportunity of personal hearing.

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Issues: (i) Whether commissioning charges were includible in the assessable value of the electroplating machinery; (ii) whether confiscation and penalty were sustainable on the facts.

Issue (i): Whether commissioning charges were includible in the assessable value of the electroplating machinery.

Analysis: The machinery was manufactured in components, transported to the buyers' premises in unassembled condition and assembled there. On that footing, installation and charges for designing and development connected with customer-specific machinery were treated as part of the assessable value. However, commissioning was regarded as a separate activity undertaken after installation to make the machinery operational for the customer.

Conclusion: Commissioning charges were not includible in the assessable value and had to be deducted.

Issue (ii): Whether confiscation and penalty were sustainable on the facts.

Analysis: In the circumstances of the case, the demand required redetermination after exclusion of commissioning charges, and the confiscation and penalty did not appear justified.

Conclusion: The confiscation order and penalty were set aside.

Final Conclusion: The matter was remanded to the jurisdictional adjudicating authority for fresh quantification of the differential duty after excluding commissioning charges and after giving an opportunity of personal hearing.

Ratio Decidendi: Charges for commissioning, being attributable to making the machinery operational after installation, do not form part of the assessable value, though installation and customer-specific designing and development charges may be includible.

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