Per. P.G. Chacko
1. In this appeal filed by the assessee, the short question arising for consideration is whether the erection and commissioning charges collected by the assessee from their buyers in respect of the goods (electro chlorinator) supplied to the latter from 1.7.2000 to 31.12.2001 are liable to be included in the assessable value of the goods. According to the appellant, these charges were collected neither by reason of sale, nor in connection with sale of the said goods and hence would not be part of the transaction value as defined under Section 4 (3) (d) of the Central Excise Act. In support of this contention, the learned Counsel has relied on the following decisions:
(i) Thermax Ltd vs Collector 1998 (99) ELT 481 (SC);
(ii) Gordhandas Desai Ltd vs Commissioner 2005 (179) ELT 557 (Tri-Mum);
(iii) Orient CerlaneLtd vs Commissioner 2009 (241) ELT 156 (Tri-Ahmd).
It is further submitted that, from 1.7.03, the appellant is paying service tax on the aforesaid charges. According to the learned Counsel, the decision of the lower authorities is liable to be set aide.
2. The learned SDR, on the other hand, submits that the electro chlorinator, which was cleared by the appellant in CKD/SKD condition, took the form of finished goods only upon installation/erection/commissioning and, therefore, the installation/erection/commissioning charges should also be included in the assessable value of the goods.
3. After giving careful consideration to the submissions, we find that, admittedly, the electro chlorinator was assessed to duty in the form it was cleared from the factory. The Central Excise Tariff read with interpretative rules thereunder permitted the equipment to be classified as electro chlorinator even when cleared in SKD/CKD condition. Such duty was paid by the assessee. Subsequently, upon erection/installation/commissioning of the equipment at the buyer’s site, the assessee received the charges for these activities from the buyer under commercial invoice. The demand of differential duty is based on this document. Neither any formal instrument of contract of sale, nor any purchase order is available on record to support the view taken by the SDR, who has submitted that the installation/commissioning/erection charges were collected by the assessee by reason of, or in connection with, the sale. On a perusal of the definition of transaction value given under Section 4 (3) (d) of the Act, we find that any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with, the sale, whether payable at the time of the sale, or at any other time would be included in the transaction value of the goods. No evidence has been shown by the Revenue to indicate that the erection/installation/commissioning charges were collected by the assessee from the buyer by reason of, or in connection with, the sale of the electro chlorinator. In this view of the matter, we find that the Tribunal’s decision in the cases of Gordhandas Desai Ltd (supra) and Orient Cerlane Ltd would go to support the appellant’s case. In both these cases, the question was whether, for periods after 1.7.2000, erection and commissioning charges, collected by the manufacturers from the buyers would be includible in the transaction value for the purpose of levy of duty. The question was answered in the negative. In the case of Thermax (supra), the Hon’ble Supreme Court was dealing with a similar question but for a period prior to 1.7.2000. It was held that erection and commissioning charges were not to be included in the assessable value of the goods under Section 4 (prior to its amendment of 1.7.2000) of the Act. It would appear that, insofar as erection and commissioning charges are concerned, there is no essential change of the law of valuation with reference to 1.7.2000 unless it is established on the basis of documents like contract of sale that such charges have been collected by the manufacturer from the buyer by reason of, or in connection with, the sale of the goods.
4. In the instant case, obviously, the erection/commissioning charges were collected by the appellant independently of the sale of the goods inasmuch as the Revenue has not placed anything on record to show that such charges were collected by reason of, or in connection with, the sale. Therefore, the decision of the lower authorities to include the said charges in the assessable value of the goods cannot be sustained. The impugned order is set aside and this appeal is allowed.