Important Point
Installation and commissioning charges which are post-manufacturing expenses taken by the manufacturer from their customers cannot be included in the assessable value of the goods, namely, the Boiler, as they are not excisable goods and hence would not be exigible to excise duty under Central Excise and Salt Act, 1944.

Judgment

S. Saghir Ahmad, J.-In this appeal in which four sets of court fees have been paid, the correctness of the common judgment passed by the Customs Excise and Gold (Control) Appellate Tribunal (for short, ‘the Tribunal’) in the three appeals filed by the Revenue and one filed by the present appellants, is questioned.

2. The appellants manufacture high pressure Boilers, Process Heat Equipment etc. as per requirements of the customers. The manufacturing process includes pre and post manufacturing steps. Since Boiler has to be manufactured according to the requirements of the customers, the pre-manufac­turing process includes the inspection of site where the Boiler is to be installed and the making of its drawings and designs etc. for which the appellants charge and had all along charged sepa­rately from its customers. The post-manufacturing steps include the installation, erection and commissioning of the Boiler at the site for which also the appellants have charged specific amounts from their customers under separate invoices.

3. Three separate show cause notices dated December 26, 1983; February 3, 1984 and July 30, 1984 were issued to the appellants in which it was pointed out that during the period from 1.2.1983 to 30.6.1984, the appellants had supplied Boilers but had not included the designing and engineering charges and the erection and commissioning charges in the assessable value even though such charges were recovered by them from their customers on separate invoices. It was indicated in these no­tices that the designing and engineering, erection and commissioning charges etc. were the charges which constituted the value of the “products” and were, therefore, assessable to excise duty. Consequent­ly, an amount of Rs. 1,14,990.71 was demanded from them.

4. The Assistant Collector, Central Excise by his separate orders dated May 2, 1985; May 7, 1985 and June 1, 1985 held that the expenses on designing and engineering charges were expenditure incurred on the goods produced and consequently it constituted the part of the value of the goods. As regards erection and commissioning charges, it was held that since the sale would be complete only on the erection and commissioning of the Boiler at the customers’ site, the expenses in­curred in erection and commissioning of the Boiler would also be included in the value of the goods. The demand was confirmed only for Rs. 78,454.50 as excise duty.

5. These orders were challenged by the appellants before the Collector of Central Excise (Appeal), Bombay and the Collector by his common order dated December 18, 1985 disposed of all the three appeals with the finding that the designing and engineering charges were includible in the value of the goods but erection and commissioning charges were in the nature of post-manufacturing expenses and cannot be treated as part of the assessable value of the goods.

6. The Revenue, thereafter, filed three appeals before the Tribunal which have been allowed by the impugned judgment.

7. There was another appeal before the Tribunal which was filed against the show cause notice dated August 4, 1987 issued by the Collector of Central Excise to the appellants for the period from April, 1982 to May, 1987 alleging that the appellants had not included and reflected in the invoice prices, the amounts separately recovered in separate invoices from their customers directly relating to their manufacturing activities for (1) designing and engineering; (2) tech­nical services and training charges and (3) erection and commissioning charges. In the show cause notice, excise duty amounting to Rs. 65,33,098/- was demanded under Rule 9(2) read with Section 11A(i) of the Central Excise Act, 1944. The appellants refuted the allegations made in the show cause notice but the Collector confirmed the demand and imposed a penalty of Rs. 17 lakhs on the appellants. It was against this order that an appeal was filed before the Tribunal by the appellants. These four appeals w