Excise valuation of site equipment: immovable-structure design charges excluded, but factory-made goods used at site remain dutiable.

Design and engineering charges connected with erection of equipment treated as immovable property were not includible in assessable value for excise duty because they related to creation of a non-excisable immovable structure rather than manufacture of movable goods. Manufactured goods cleared from the factory for use in setting up that equipment remained dutiable, and their assessable value had to be determined under the applicable valuation principles, with standard goods already duty-paid not attracting further levy. For specially fabricated items, cost of manufacture plus normal profit was the relevant basis, and the related design and engineering charges could be included to the extent they formed part of the equipment valuation.

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Issues: (i) whether design and engineering charges relating to the erection of equipment at site, treated as immovable property, were includible in the assessable value for excise duty; (ii) whether the duty payable on goods manufactured by the appellant and used for setting up the equipment at site was to be determined separately under the valuation rules.

Issue (i): whether design and engineering charges relating to the erection of equipment at site, treated as immovable property, were includible in the assessable value for excise duty;

Analysis: The equipment installed at the customer's site was treated as immovable property. On that footing, expenses incurred for bringing such equipment into existence, including design and engineering expenses connected with site preparation and erection, were not expenses incurred in the manufacture of movable excisable goods. Such charges, therefore, could not themselves be subjected to excise duty.

Conclusion: In favour of the assessee. Design and engineering charges relating to the immovable equipment were not liable to excise duty as such.

Issue (ii): whether the duty payable on goods manufactured by the appellant and used for setting up the equipment at site was to be determined separately under the valuation rules.

Analysis: Goods manufactured by the appellant and cleared from its factory for use in setting up the equipment remained dutiable. Standard items already sold on price lists, if duty had already been discharged, would not attract further duty. For specially fabricated items, duty was to be worked out on the cost of manufacture plus normal profit, and the design and engineering charges relatable to such equipment were includible in the assessable value. The exact value required verification from contract and data.

Conclusion: In favour of the Revenue in part. Duty was payable on the manufactured goods used at site, and the valuation had to be determined by the departmental authority.

Final Conclusion: The appeal succeeded to the extent that design and engineering charges for the immovable equipment were not dutiable, but the matter of valuation of the manufactured goods used at site was remitted for determination of the duty payable.

Ratio Decidendi: Charges relating to the creation of an immovable structure are not exigible to excise duty, but manufactured goods cleared from the factory for use in such a project remain dutiable and must be valued under the applicable valuation principles.

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