CCE & C, PUNE-I Vs. VOLTAS LTD.

JUDGEMENT

(1.) VOLTAS Ltd. the respondent to this appeal, entered into a contract with Karnataka Electricity Board for turnkey job of remodeling of electrical distribution system of Mysore palace at Mysore and manufacture transformers in pursuance thereof. Notice issued to the respondent demanded duty alleged to be short paid on the ground that designing and engineering charges totalling Rs. 46,000/ - had not been taken into account. It appears that the Assistant Collector initially confirmed the demand and the assessee appealed to the Collector (Appeals). The Collector (Appeals) remanded the matter to the Assistant Collector to verify whether the drawing and designing charges were in respect of the transformers or whether they were in respect of designing and lay out of the distribution system of the palace. The Assistant Collector passed orders after considering the submissions that the assessee made. The assessee appealed this order. The Collector (Appeals) accepted the contention of the assessee that these charges related to lay out preparations, wiring and cabling work etc. in the palace and therefore were not relatable to the manufacture of the transformers and allowed the appeal. Hence this appeal by the Collector. We have heard the departmental representative, the respondent being absent and unrepresented despite issue of notice.

(2.) THE schedule of rates for the turnkey project which formed part of the purchase order indicates Rs. 26,000/ -. Rs. 20,000/ - and Rs. 8.000/ - against items 3, 11(a) and 11(b) respectively. Item 3 is for a 11KV/250V Delta/Delta transformer; item 11(a) is for a 250/100V 100 KVA transformer and 11(b) is for one 250/440v 25 KVA transformer. It is difficult to see how, in the manufacture of a transformer, what is termed as 'designing and engineering charges' are incurred on account of engineering or designing aspect with regard to the palace. The function of a transformer is to step up or down (up in this case) the voltage of the electricity. While the capacity of other parameters relating to it would be guided by the requirements of the circuit of which it will form a part, this does not lead to conclusion that charges for design of the circuit is inevitably the price of such transformers. It is only those charges relating to the construction at site of installation that may not form directly relating to it in the case of manufacture. As such would be related to the distribution such as cabling, earthling etc. It is also to be noted that against each of these headings there are separate charges payable by the buyer towards the cost of installation at site of toying and commissioning, The Assistant Collector's finding is that these charges form part of the cost of manufacture. Unless the assessee could show that these are not related to the charges of manufacturer, they would be included. The assessee was not able to show before the Assistant Collector any such evidence. The claim made before him that "the design of power distribution system is co -related to the transformer only to the extent that the capacity of the transformers indicates the quantum of power to be distributed and once the claim is decided upon, the design and drawing work related to the system had nothing to do with the transformer" is hard to accept without any evidence. After all, the design and engineering charges is specifically attributed to the schedule of the transformer and not to part of the distribution cost. No further material was produced before the Collector (Appeals). The only reason that the Collector (Appeals) advances is that the department has not proved that there were part of manufacturing process. In our view, such prove is contained in the schedule that we referred to above. We are therefore of the view that these cost should form part of the manufacture value. Appeals allowed. Impugned order of the Collector (Appeals) set aside and the order of the Assistant Collector is restored.