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TMI Blog2015 (10) TMI 1103X X X X Extracts X X X X X X X X Extracts X X X X ..... pings etc. were manufactured by appellant No.1 and supplied to EID Parry India Ltd. EID Parry India Ltd. paid certain amounts to appellant No.1 for the equipment supplied by them and also paid certain amounts to appellant No.2 for the engineering, consultancy and designing. The case of the Revenue is that the amount paid to appellant No.2 will form part of the assessable value of the equipment supplied by appellant No.1. This is based upon the fact that it is only based upon the engineering, consultancy and designing and the drawings given by appellant No.2 to EID Parry India Ltd. who in turn gave the same to appellant No.1 that the appellant has been able to manufacture the said goods and supplied to EID Parry India Ltd. 2. Similarly, appellant Nos. 1 and 2 entered into a contract with another company viz. Triveni Engg. Works Ltd. for the manufacture and supply of similar equipment and took certain advances. However, before the project could be implemented, the order was cancelled. Appellant Nos.1 and 2 retained the advances as the demurrage/liquidation charges. Thereafter appellant No.1 found a new customer, Vamorganic Chemicals Ltd. who after discussion, asked appellant No.1 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on flowing to IBI and, therefore, there is no reason to include the value for the same. It was further submitted that alternatively, even if it is presumed that some additional consideration is flowing, still the correct quantification of the same is required to be carried out. It was submitted the detailed break up of the scope of work group wise with billing break up and project consultancy break up of various amounts received by IBIC to substantiate the proportionate amount of the drawing and engineering consultancy amount which is in relation to mechanical machines so manufactured by IBI could only be part of it. It was further submitted that the Commissioner should include only Rs. 22 lakhs received by appellant NO.2 relating to mechanical equipment. The Commissioner has erred in confirming the duty corresponding to the total amount of Rs. 91 lakhs by excluding only the civil works. 4. As far as the supplies made by appellant No.1 to Vamorganic Chemicals Ltd. are concerned, it was submitted that appellant No.1 fails to understand as to how consideration received by appellant No.2 from Triveni Engineering Works Ltd. can be included in the assessable value of the goods sold by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR, on the other hand, submitted that appellant No.2 as per the agreement entered into with EID Parry India Ltd., has separately charged for the activities of process designing, mechanical equipment, civil engineering, electrical piping, measuring and control instrumentation and insulation. The learned AR further submitted that as far as civil works are concerned, the Commissioner has already excluded the same but other activities are integrally connected with the manufacturing of the equipment supplied by appellant No.1 and, therefore, expenditure incurred on those activities would be considered as an additional consideration and would form part of the assessable value. He further submitted that it would be seen from the impugned order that there are some activities within the above mentioned broad categories which may not be integrally connected with the manufacture of the equipment but since the separate value for such activities are not available, the Commissioner had no option but to include the entire amount for each of the above mentioned activities. The learned AR took us through the findings of the Commissioner to support the contention. It was further submitted that as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has given his findings as under:- "After examining each of the- process break up of each item given in the billing schedule my findings are as follows:- 1. PROCESS DESIGNING It is seen from the Annexure IBIC V of agreement between M/s. IBIC and M/s. EID that the process includes plant design, basis specifying plant capacity, raw material and utility, quality and quantity and included diagram equipment identified by item number including title and shown in their approximate elevations, equipment for utilities, package-units as block diagrams, identification of heating and insulation of process pipes, vessels and heat exchangers, main items of instrumentation illustrated and control function required for the process, final numbering of instrumentation, indication of interlocks as required for safe operation of the process plant, final indication of utility lines, values, instrument. It is further specified at A-3 equipment list specifying the item number, name of the equipment, principal materials: of construction to be used, main dimensions and the capacity. These activities are directly attributable to manufacture of machine and equipment manufactured by M/s. IB1. Without t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping isometrics, pipe support list, piping material take-off list, valve specification and material take-off list etc. But the assessee has not given any break up of the same. The entire amount of Rs. 32 Lakhs attributed to these items of wok is includible in the assessable value. 5. MEASURING AND CONTROL INSTRUMENTS. As per para F to annexure IBIC-V specifying control instruments which includes instrument reference number, quantity, lint- size, fluid in contact, working conditions, materials of construction, connection rating, dimensions, allowable pressure drop, fluid flow rate and conditions, relief valve parameters, specification, alarm settings, control ranges, interlocking diagram and description, identification of failure position, draft of instrument arrangement in panel, instrument loop diagram, instrument, material take-off list. These activities arc directly attributable to manufacture machine and equipment by the assessee. The entire amount of Rs. 21 Lakhs attributed to these items of wok is includible in the assessable value. 6. INSULATION. As per para H to the annexure SB1C refers general specification of the insulation indicating the operating temperature a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n were not related to manufacture of machinery and equipment manufactured by them cannot be accepted." 7. We have also gone through Annexure 5 of the agreement between appellant No.2 and EID Parry India Ltd. and we find entirely in agreement with the findings of the Commissioner that most of the activities are relating to pre-fabrication, engineering and design stage. It is on the basis of this designing that the appellant is fabricating various equipment, instruments, pipings, insulations etc. The expenditure on such activities would, therefore, form part of the assessable value of the machinery and equipment manufactured by appellant No.1. In fact without these engineering drawings, it was not possible for appellant No.1 to fabricate and manufacture the equipments which they have supplied. We also note that in some cases there are some activities which may not be necessary at the manufacturing stage. However, since no separate amount has been indicated for such post manufacturing activities, the entire amount is required to be added. During the course of the hearing, the Bench has queried from the counsel for the appellant the list of the equipments or other items which have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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