Whether cost of additional testing is included in assessable value?

PJ/Case Law /2016-17/3233

Case:- BHARAT BIJLEE LTD.VERSUSCOMMISSIONER OF C. EX., MUMBAI
Citation:- 2016 (336) E.L.T. 78 (Tri. - Mumbai)
Brief Facts:- The brief facts are that the goods are sold after the quality control by the appellants’ own quality control department and after certifying by the ISI. The testing in dispute is conducted at the request of the PHED. It is also not disputed that the goods are sold without the testing by the DGS & D to other wholesale dealers as the Assistant Collector gave a categorical finding that the goods are sold to other dealers without subjecting the goods to, the additional testing by the DGS & D. It is also an admitted fact that the customer, namely, PHED in this case, is bearing the expenditure incurred for carrying out the testing by the DGS & D. Although, according to the agreement, the appellants were paying initially and getting it reimbursed by PHED. It is also true that these tests are conducted before the goods are removed from the factory. It is also an admitted fact that the additional testing is optional. It is also not disputed that the normal testing charges to the satisfaction of ISI which are necessary for making the goods marketable are included in the assessable value.
Appellant’s Contention:- The appellant submits that the first appellate authority has not considered the view of the Larger Bench in its proper perspective. He would then draw attention to the said judgment and submit that the issue of inclusion of additional testing charges is settled in favour of the appellant. As regards the inclusion of the cost of documentation charges he would take us to the specimen purchase order and submits that the drawings which are given with the order are not charged, but additional set of drawings are charged and the value does not get included as these documentation charges are post-clearance of the final goods manufactured by the appellant.
Respondent Contention:- The Revenue (AR) submits that the cost of additional testing needs to be included in the assessable value as the said tests are required as per the Indian standards. He would draw our attention to the statement of technical persons of the appellant and submit that the charges which were recorded were the minimum testing required for marketing of the products manufactured by the appellant.
Reasoning of Judgment:- The submissions made by both sides, the statement of Deputy General Manager indicates that the tests which are required to be conducted on the Transformers, the statement also records that the appellant conducts all the tests and which are required for their own quality control tests to market the final products. We cannot find anything in the statement which states that the appellant has recovered the cost of this mandated testing from the customers. The appellant has been stating before the lower authorities that that additional testing which is carried out by the appellant is at the behest of their customers; the revenue is unable to bring on record that these tests were not carried out on request of the appellant’s customers. Revenue has not produced any evidence to negate the claim of the appellant. We have find that the learned counsel was correct in submitting that the issue is now squarely settled by the Apex Court in the case of Shree Pipes Ltd. The Tribunal in the case of Shree pipes Ltd. Held that the duty is chargeable on the price which the manufacturer gets at the time and place of removal of goods. The finding of the Collector that the testing is necessary to make the goods marketable, is based on no evidence as the Assistant Collector gave a categorical finding that there are sales to other dealers without subjecting it to DGS & D test. Further, it is admitted fact that ISI testing is already done. We, therefore, are of the view that the additional testing charges conducted at the instance of customers and whose cost is borne by the customers is not includible in the assessable value. The appeal is allowed and the order of the Collector is set aside.

The appeal is accordingly allowed.
Decision:-Appeal allowed.
Comment:-The essence of the case is that additional testing conducted at the request of buyer is not includible in the assessable value of the goods for the purpose of levy of excise duty. Only mandatory testing done by manufacturer for all customers is includible in the assessable value of goods.
Prepared by:- Bharat Chouhan

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PJ/Case Law /2016-17/3233

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