Collector of Central Excise Vs. Steel Industrials Kerala Ltd. - Court Judgment

Excerpt:
1. respondent, engaged in the manufacture of excisable product, had filed price list dated 5-9-1988 in part ii in respect of certain goods fabricated by them for supply to their customers. the same was approved by the assistant collector and respondent had cleared the goods paying duty in accordance with such approved price list. subsequently, the department found that in addition to the price declared in the price list amounting to rs. 1,28,000/-, an additional sum of rs. 10,500/- was collected by them as third party inspection charges. an application was filed by the assistant collector before the collector (appeals) for setting aside the approval of the price list and issuing direction for including the aforesaid testing charges in the assessable value. the collector (appeals), however, did not agree with the stand taken in the application and rejected it. aggrieved with the said decision of the collector (appeals), the present appeal has been filed by the department.2. respondents have sent a letter stating that the matter may be disposed of on merits without insisting on their appearance. we have accordingly heard shri sanjay srivastava, learned dr and proceed to dispose of the appeal.3. the main thrust in the appeal which was referred to by the learned dr in his argument is that the collector (appeals) erred in holding that the testing charges on account of third party's inspection at customers' cost is not includible in the assessable value. it is further stated that if a manufacturer sets up a quality control unit to check the quality of the product or maintain particular standard to comply with the one prescribed by institutions like isi, such testing charges become part of the manufacturing cost and should be included in determining the assessable value. the fact that the inspection charges are borne by the buyer will not affect the includibility of such charges in the assessable value and they cannot be regarded as being in the nature of optional charges. in this connection, it is pointed out in the appeal that the record showed that the inspection charges were actually paid by the respondent and only at a later point of time the same was reimbursed by the customers. the claim that the manufacture of the product, namely, storage tank was complete as soon as it was fabricated had been wrongly accepted by the collector (appeals) since the inspection of the tank was vital from the point of view of safety and quality and hence the charges incurred on account of inspection should have been included in the assessable value of the goods.4. we have taken note of the contentions raised in the appeal. the purchase order relating to the goods in question has been placed on the respondent by the vikram sarabhai space centre. the purchase order contains the remark that approved third party inspection charges at rs. 10,500/- will be extra and that such inspection shall be carried out and certificate for the same should be furnished along with the original documents. it is clear from this that the said third party inspection is carried out as per the requirement of the customer. any assessee manufacturing any goods would have his own quality control and testing arrangements and any third party inspection carried out at the instance of institutional or government department order would be extra inspection carried out by specialised inspection agencies. in a similar matter relating to the question of includibility of optional testing charges carried out at the instance of the buyers, the tribunal had held that the same was not includible. that was in shree pipes ltd. v.c.c.e. reported in 1992 (59) e.l.t. 462. the finding of the tribunal has been upheld by the supreme court on appeal by the collector. we hold that the ratio of the aforesaid decision will squarely apply to the present case. accordingly, we see no reason to interfere with the finding of the collector (appeals). we uphold the same and dismiss the appeal.

Judgment:
1. Respondent, engaged in the manufacture of excisable product, had filed price list dated 5-9-1988 in Part II in respect of certain goods fabricated by them for supply to their customers. The same was approved by the Assistant Collector and respondent had cleared the goods paying duty in accordance with such approved price list. Subsequently, the department found that in addition to the price declared in the price list amounting to Rs. 1,28,000/-, an additional sum of Rs. 10,500/- was collected by them as third party inspection charges. An application was filed by the Assistant Collector before the Collector (Appeals) for setting aside the approval of the price list and issuing direction for including the aforesaid testing charges in the assessable value. The Collector (Appeals), however, did not agree with the stand taken in the application and rejected it. Aggrieved with the said decision of the Collector (Appeals), the present appeal has been filed by the department.

2. Respondents have sent a letter stating that the matter may be disposed of on merits without insisting on their appearance. We have accordingly heard Shri Sanjay Srivastava, learned DR and proceed to dispose of the appeal.

3. The main thrust in the appeal which was referred to by the learned DR in his argument is that the Collector (Appeals) erred in holding that the testing charges on account of third party's inspection at customers' cost is not includible in the assessable value. It is further stated that if a manufacturer sets up a quality control unit to check the quality of the product or maintain particular standard to comply with the one prescribed by institutions like ISI, such testing charges become part of the manufacturing cost and should be included in determining the assessable value. The fact that the inspection charges are borne by the buyer will not affect the includibility of such charges in the assessable value and they cannot be regarded as being in the nature of optional charges. In this connection, it is pointed out in the appeal that the record showed that the inspection charges were actually paid by the respondent and only at a later point of time the same was reimbursed by the customers. The claim that the manufacture of the product, namely, storage tank was complete as soon as it was fabricated had been wrongly accepted by the Collector (Appeals) since the inspection of the tank was vital from the point of view of safety and quality and hence the charges incurred on account of inspection should have been included in the assessable value of the goods.

4. We have taken note of the contentions raised in the appeal. The purchase order relating to the goods in question has been placed on the respondent by the Vikram Sarabhai Space Centre. The purchase order contains the remark that approved third party inspection charges at Rs. 10,500/- will be extra and that such inspection shall be carried out and certificate for the same should be furnished along with the original documents. It is clear from this that the said third party inspection is carried out as per the requirement of the customer. Any assessee manufacturing any goods would have his own quality control and testing arrangements and any third party inspection carried out at the instance of institutional or Government department order would be extra inspection carried out by specialised inspection agencies. In a similar matter relating to the question of includibility of optional testing charges carried out at the instance of the buyers, the Tribunal had held that the same was not includible. That was in Shree Pipes Ltd. v.C.C.E. reported in 1992 (59) E.L.T. 462. The finding of the Tribunal has been upheld by the Supreme Court on appeal by the Collector. We hold that the ratio of the aforesaid decision will squarely apply to the present case. Accordingly, we see no reason to interfere with the finding of the Collector (Appeals). We uphold the same and dismiss the appeal.