D.C. Mandal, Member (T)

1. The brief facts of the case are that the appellants were undertaking manufacture of boilers and fabrication of steel works at site. They opted for assessment on the basis of invoice value under Notification No. 120/75-C.E., dated 30-4-1975. The Department initiated proceedings under the Central Excises and Salt Act and the Rules framed thereunder on the ground that they suppressed the contents of the contracts entered into by them in respect of three items of work as mentioned below and they did not pay the appropriate Central Excise duty under Item 68 of the Central Excise Tariff and thereby made a short payment of Rs. 44,232.69. The details regarding the three items of work and the view taken by the lower authorities are stated below:-

(i) Fabrication and erection of steel work and sheet roofing :

This work was executed by the appellants on behalf of Thirumalai Chemicals Limited, Sipcot, Ranipet. There was a contract dated 16-12-1976 for this work and the amount of contract was Rs. 57,253.82. The appellants raised an invoice for Rs. 57,253.82 vide invoice No. 00220 dated 16-12-1978, but they did not pay Central Excise duty, which, according to the calculation of the Department, was Rs. 2,862.69 at 5% on Rs. 57,253.82. The appellants' contention before the lower authorities was that contract was for fabrication and erection of structural steel work at the site. Prior to 18-6-1977, vide Notification No. 54/75-C.E., dated 1-3-1975, the goods falling under Tariff Item 68 were fully exempted, so far as the appellants are concerned as the number of workers employed by them in their factory did not exceed 49. They also contended that mere erection of fabricated materials at the site of the customers did not constitute manufacture as defined in Section 2(f) of the Central Excises and Salt Act, 1944. The Assistant Collector of Central Excise held that the premises of Thirumalai Chemicals Limited was a factory and since the process of erection involved bringing into existence of the structural steel work, "manufacture" as defined in Section 2(f) of the Central Excises and Salt Act was involved. He also held that the goods were manufactured at the site of Thirumalai Chemicals Limited after 18-6-1977 as the invoice was issued on 16-12-1978 for Rs. 57,253.82. He, therefore, held that duty of Rs. 2,862.69 at the rate of 5% on Rs. 57,252.82 was payable by the appellants as the Exemption Notification No. 54/75-C.E., dated 1-3-1975 was not available after 18-6-1977. This decision was confirmed by the Collector (Appeals).

(ii) Kothari (Madras) Limited :

The appellants entered into a contract with Kothari (Madras) Limited on 27-6-1977 for supplying and erection of two boilers at the site of Kothari (Madras) Limited for a contract value of Rs. 3.6 lakhs. The appellants cleared the first boiler on 30-12-1977 and the second boiler on 2-2-1978 and paid the Central Excise duty at 2% on the value of Rs. 1,26,500/-per boiler declared in the relevant gate passes. They deducted transportation and insurance charges, loading and unloading charges, erection and commissioning charges and test charges from the contract value. The appellants contended before the Assistant Collector that these elements were to be deducted from the contract price as they did not form part of the assessable value as defined in Section 4 of the Central Excises and Salt Act. According to them these were post-manufacturing expenses, not forming part of the assessable value. The Assistant Collector held that since the contract provided for designing, manufacture, erecting, installation, test and commissioning, manufacturing process was completed only after the two boilers had been erected and commissioned at the site of Kothari (Madras) Limited. Therefore, expenses incurred by the appellants for these purposes would form part of the assessable value. He held that duty at 5% ad valorem was payable on the contract and invoice price of Rs. 3.6 lakhs fo