By TIOL News Service

MUMBAI, MAR 17, 2016: THE appellants are engaged in the manufacture of Vial Washing Machines, Ampoules Washing Machines & Sterilization Tunnels etc. During the course of audit in February 2003, it was revealed that the appellants have recovered integration/commissioning charges from their customers over and above the declared transaction value in the invoices raised by them, by raising commercial invoice.

A SCN was issued proposing demand of CE duty of Rs.1,56,800/- on the integration/commissioning charges collected by the appellant.

As the allegations leveled were confirmed along with interest and penalty and this order was upheld by the Commissioner (Appeals), the appellant is before the Tribunal.

The appellant submitted that integration and commissioning charges is towards the installation, erection and commissioning of the machines at site and this activity is independent to manufacture and sale of machines, therefore, the same cannot be added in the assessable value. It is further submitted that after removal of the machines from the appellant's premises, the activities of carrying out the installation, erection at site of the customers results into an immovable property and, therefore, it is not excisable, any amount recovered towards non-excisable activity cannot form part of the assessable value of the excisable machines cleared from the factory.

The AR emphasized that as per the definition of transaction value, it is clear that any amount towards sale of goods, paid or payable, shall be a part of the transaction value. Reliance is placed on the decisions in Alidhara Textool Engineers Pvt Ltd - 2009-TIOL-370-CESTAT-AHM, Roofit Industries Ltd - 2015-TIOL-87-SC-CX in support.

The Bench while inter alia relying upon its decision in Kirloskar Oil Engines Ltd. - 2012-TIOL-1057-CESTAT-MUM observed -

"6. We find that the appellant have raised two invoices one is towards sale of the machines and second for integration and commissioning of the machines supplied to the customers. Integration and commissioning is an independent activity which can be performed either by the appellant or any outside agency, charges recovered towards integration and commissioning charges is not related to the sale of the goods but it is for independent and distinct identified activity. Once the goods are fully manufactured and cleared from the factory, activity of erection - installation carried out subsequently the charges therefore cannot be included in the assessable value. It is not the case of the Revenue that in the light of integration and commissioning charges appellant have suppressed the sale value of the machines, but it is also not the case that value charged for the integration and commissioning is over valued therefore the amount charged for integration and commissioning has to be accepted..."

Holding that integration and commissioning charges of the machines cannot be included in the transaction/assessable value of the machines, the impugned order was set aside and the appeal was allowed.

(See 2016-TIOL-643-CESTAT-MUM)