Assessable value of drilling rig depends on whether items are integral components or separately valued spares and accessories.

Only items shown to be essential and integral parts of the rotary drilling rig may be included in assessable value. Kelly, weight indicator and rotary table were treated as integral components under the contract and specification schedule, so their value was includible. Imported fast-moving spares were separately identified and not shown to be essential parts of the rig, so their value was excluded. Operating equipment and accessories were separately valued, but their inclusion required fresh examination of whether they were integral or merely optional; that question was remitted for reconsideration. The governing principle is that separately valued items need independent justification before being added to assessable value.

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Issues: (i) Whether the value of Kelly, weight indicator and rotary table formed part of the assessable value of the rotary drilling rig; (ii) Whether the value of imported spares was includible in the assessable value; (iii) Whether the value of operating equipment and accessories was liable to be added to the assessable value.

Issue (i): Whether the value of Kelly, weight indicator and rotary table formed part of the assessable value of the rotary drilling rig.

Analysis: The contract and the specification schedule showed that these items were integral to the drilling rig and were not separate optional items. On that basis, they constituted essential parts of the equipment supplied and their value could be brought into the assessable value.

Conclusion: Decided against the assessee; the value of Kelly, weight indicator and rotary table was includible in the assessable value.

Issue (ii): Whether the value of imported spares was includible in the assessable value.

Analysis: The contract separately identified a set of fast-moving spares and the lower authorities gave no reason for treating them as essential parts of the equipment. The spares were not shown to be integral to the functioning of the drilling rig.

Conclusion: Decided in favour of the assessee; the value of spares was not includible in the assessable value.

Issue (iii): Whether the value of operating equipment and accessories was liable to be added to the assessable value.

Analysis: The contract separately valued operating equipment and accessories, but the lower authorities had not examined whether they were essential to the drilling rig or merely optional accessories. The matter required fresh consideration on the appellant's contentions.

Conclusion: Decided in favour of the assessee to the extent of setting aside the addition and remitting the question for fresh decision.

Final Conclusion: The assessment was upheld only in part, while the inclusion of spares and the treatment of operating equipment and accessories were disturbed and sent back for reconsideration.

Ratio Decidendi: Only items that are shown to be essential and integral parts of the equipment form part of the assessable value, whereas separately valued spares or accessories require independent justification before inclusion.

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