Whether installation, erection charges are to be included in assessable value for payment of excise duty?

PJ/Case Law/2014-15/2377

Case:-M/s HERCULES HOISTS LTD Vs COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III

Citation:-2014-TIOL-1829-CESTAT-MUM

Brief facts:-The appellants are in appeals against the impugned orders wherein duty has been demanded by the ld. authorities on installation, erection and commissioning charges on the ground that same are required to be included in the assessable value.

As common issue is involved in both the appeals, therefore, both are taken up for disposal together. The appellants M/s Hercules Hoists Ltd. are manufacturer of Cranes & Hoists and they cleared these goods to their customers on payment of excise duty. In some cases, at the request of the customer, they also undertook erection, commission and installation of the Cranes & Hoists at the customer's premises and charged commissioning and installation charges. On this activity, they discharged Service Tax under the taxable service category of 'Erection, Commission & Installation Service". The Revenue has demanded the excise duty on the said activity of erection, commission and installation on the ground that these activities are integrally connected with the sale of Cranes & Hoists and, therefore, the charges received in connection with erection, commission and installation should be included in the assessable value of the goods supplied. Accordingly, show-cause notices were issued and demands confirmed along with interest and penalties. Aggrieved of the same, the appellant is before the tribunal.

We have perused the appeal memorandum, wherein it is stated that they are undertaking erection, commission and installation activities only at the request of the customers in certain cases for which they are raising separate bills. On such activity, they are also discharging Service Tax liability in accordance with law. The rendering of service is different from the manufacture and, therefore, the charges received for the services rendered cannot form part of the assessable value of the goods supplied and hence, these charges are not includable in the assessable value of the goods and, therefore, the impugned demands are not sustainable.

Appellant’s contention:-None appeared the appellant and there is a request for adjournment.

Respondent’s contention:-The learned Add. Commissioner (AR) appearing for the Revenue reiterates the findings of the lower authorities and submits that erection, commissioning and installation is integrally connected with supply/sale of goods and, therefore, the value of such services rendered should be included in the assessable value of the goods supplied.

Reasoning of judgment:-The Hon’ble notice that this issue had come up several times before this Tribunal and this Tribunal has consistently held that erection, commissioning and installation activity undertaken and amount charged separately, cannot form part of the assessable value of the goods supplied. Some of these decisions are De Nora India Ltd. - 2010 (262) ELT 1098 (Tri-Mum), Ashida Electronics Pvt. Ltd. - 2011-TIOL-220-CESTAT-MUM 2011 (272) ELT 395 (Tri-Mum) and Puissance De DPK - 2013 (297) ELT 443 (Tri-Chen) = 2013-TIOL-1535-CESTAT-MAD. The Hon'ble Apex Court has also considered this matter in the case of Nichrome Metals Works Pvt. Ltd. - 2002 (139) ELT A301 (SC)in the order passed by the Tribunal and reported in 1996 (88) ELT 448, wherein the Tribunal held that erection, commissioning and installation charges should not be included in the assessable value of the goods supplied and dismissed the appeal filed by the Revenue against the Tribunal's order. In view of the above judicial pronouncements with which they respectfully agree, they find that the impugned orders are not sustainable in law and the demands of duty made by including the erection, commissioning and installation charges in the assessable value of the Cranes & Hoists cannot be sustained in law as manufacture and rendering of services are distinct and different activities and have been taken under separate contracts.

In view of the above, the impugned demands are not sustainable in law and accordingly, they set aside the impugned orders and allow the appeals with consequential relief, if any, in accordance with law.

Decision:- Appeal allowed.

Comment:- The substance of the case is that if erection, commissioning and installation activity is undertaken on the request of customers, the amount charged separately cannot form part of the assessable value of the goods for the purpose of charging excise duty, particularly if service tax has already been paid on the said errection, commissioning and installation activity. Manufacture and rendering of services are distinct and different activities and have been undertaken under separate contracts and so the said charges would not form part of the assessable value of goods for charging excise duty.

Prepared by:- Monika Tak

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PJ/Case Law/2014-15/2377

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