The essentiality of items and the nature of charges are crucial factors in determining their inclusion in the assessable value under the Central Excise Act.

JUDGMENT

S.H. KAPADIA, J.- THIS CIVIL APPEAL UNDER SECTION 35-L(B) OF THE CENTRAL EXCISE ACT, 1944 (HEREINAFTER REFERRED TO AS "THE ACT") IS A SEQUEL TO CIVIL APPEALS NOS. 4247-48 OF 2000, HENCE, IT IS NOT REQUIRED TO RESTATE THE FACTS OF THE CASE.

2. IN THIS CIVIL APPEAL, A SHORT QUESTION WHICH ARISES FOR DETERMINATION IS WHETHER THE DEPARTMENT WAS RIGHT IN INCLUDING THE COST OF SOCKETS AND THE VALUE OF SERVICE CHARGES IN THE ASSESSABLE VALUE OF MS/GI PIPES.

3. THE APPELLANT HEREIN HAD FILED ITS PRICE LISTS UNDER RULE 173-C IN THE FORM OF PART II IN RESPECT OF MS/GI PIPES FOR APPROVAL WITH THE DEPARTMENT, IN WHICH IT CLAIMED DEDUCTION TOWARDS SERVICE CHARGES AND COST OF SOCKETS FROM THE ASSESSABLE VALUE OF MS/GI PIPES. ACCORDING TO THE DEPARTMENT, THE SOCKETS FITTED TO THE PIPES WERE THE ESSENTIAL PARTS OF THE PIPES; THEY ENABLED THE FUNCTIONING OF PIPES AND IN THE ABSENCE OF THE SOCKETS, THE SAID MS/GI PIPES COULD NOT BE SAID TO HAVE BEEN COMPLETED AS THE SOCKETS WERE THE ESSENTIAL PARTS FOR JOINING THE PIPES TO EACH OTHER. ACCORDING TO THE DEPARTMENT, SERVICE CHARGES WERE NOT DEDUCTIBLE FROM THE ASSESSABLE VALUE OF THE PIPES, AS THE SAID CHARGES WERE PAID BY THE ASSESSEE TO MADHYA PRADESH LAGHU UDYOG NIGAM LTD. FOR PROCURING ORDERS/PAYMENTS FROM VARIOUS DEPARTMENTS OF THE STATE GOVERNMENT AND THAT THE MATTER WAS SQUARELY COVERED BY THE DECISION OF THIS COURT IN COROMANDEL FERTILIZERS LTD. V. UNION OF INDIA1.

4. ACCORDING TO THE APPELLANT, SOCKETS WERE BOUGHT OUT DUTY-PAID ITEMS. THEY WERE INDEPENDENT EXCISABLE GOODS ANSWERING DIFFERENT TARIFF CLASSIFICATION CONTAINED IN THE SCHEDULE TO THE TARIFF ACT. ACCORDING TO THE APPELLANT, THE SOCKETS WERE NOT MANUFACTURED BY THEM. ACCORDING TO THE APPELLANT, THE SOCKETS WERE DUTY-PAID ACCESSORIES. ACCORDING TO THE APPELLANT, THE SOCKETS WERE NOT COMPONENTS OF MS/GI PIPES. ACCORDING TO THE APPELLANT, THE ACTIVITY OF FITTING A SOCKET ON ONE END OF THE PIPE HAS NOT BEEN MENTIONED IN THE NOTE TO CHAPTER 73. IT IS ALSO NOT MENTIONED IN THE SECTION NOTE UNDER WHICH CHAPTER 73 FALLS AND, THEREFORE, THE COST OF THE SOCKETS WAS NOT INCLUDIBLE IN THE ASSESSABLE VALUE OF MS/GI PIPES. AS REGARDS THE SERVICE CHARGES, THE APPELLANT SUBMITTED THAT THE SAID CHARGES WERE NOT CONNECTED TO THE MANUFACTURE OF MS/GI PIPES; THAT, THE SERVICE CHARGES WERE PAID TO THE MADHYA PRADESH LAGHU UDYOG NIGAM LTD. WHEN GOODS WERE SUPPLIED TO VARIOUS DEPARTMENTS OF THE STATE. GOVERNMENT AND SINCE THE CHARGES WERE INCURRED BY THE ASSESSEE BEYOND THE POINT OF CLEARANCE, THE SAID CHARGES WERE NOT INCLUDIBLE IN THE ASSESSABLE VALUE OF THE PIPES. ACCORDING TO THE APPELLANT, THESE CHARGES DID NOT CONTRIBUTE TO THE CHARACTER OF THE GOODS IN QUESTION. THEY WERE LIKE INSPECTION CHARGES OR STORAGE CHARGES AND, THEREFORE, THEY WERE NOT INCLUDIBLE IN: THE ASSESSABLE VALUE OF THE PIPES.

5. WE DO NOT FIND ANY MERIT IN THE ABOVE ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANT. THE ESSENTIAL BASIS OF VALUATION UNDER SECTION 4 OF THE ACT IS THE WHOLESALE CASH PRICE CHARGED BY THE APPELLANT. NORMAL PRICE UNDER SECTION 4(1)(A) CONSTITUTED A MEASURE FOR LEVY OF EXCISE DUTY. IN THE PRESENT CASE, WE ARE CONCERNED WITH ASSESSMENT AND NOT WITH CLASSIFICATION. DUTY UNDER SECTION 4 WAS NOT LEVIABLE ON THE "CONCEPTUAL VALUE" BUT ON THE NORMAL PRICE CHARGED OR CHARGEABLE BY THE ASSESSEE. (SEE UNION OF INDIA V. BOMBAY TYRE INTERNATIONAL LTD.2).

6. ON FACTS OF THIS CASE, THE ADJUDICATING AUTHORITY HAS FOUND THAT PIPES WERE CLEARED FROM THE PLACE OF REMOVAL (FACTORY GATE) WITH THE SOCKETS FITTED THERETO. FURTHER, THE APPELLANT HAD CHARGED ITS CUSTOMERS FOR THE SAID SOCKETS. IT IS TRUE THAT IN THE PRESENT CASE, THE SOCKETS WERE BOUGHT BY THE APPELLANT FROM THE MARKET BEFORE THEY WERE FITTED TO THE SAID MS/GI PIPES. HOWEVER, THE APPELLANT HAD CLEARED THE PIPES FITTED WITH THE SOCKETS AND IT HAD CHARGED ITS CUSTOMERS FOR THE PIPES FITTED WITH THE SOCKETS AND, THEREFORE, THE DEPARTMENT WAS RIGHT IN LOADING THE PRICE OF THE PIPES WITH THE COST OF THE SOCKETS.

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