Zebra Ltd. is engaged in the manufacture of various types of machines. It had supplied one machine to Tiger & Co. at a price of ₹17,00,000 (excluding taxes and duties). Following additional amounts were charged from

Computation of Excise Duty payable on Machine by Zebra Ltd. Particular Amount (in ₹) Price of Machine (excluding taxes and duties) 17,00,000 Installation and Erection Charges (Note 1) - Packing Charges (Note 2) 8,000 Design and engineering charges (Note 3) 6,000 Cost of Material (supplied free of charge by buyer) used in production of machine (Note 4) 10,000 Pre-Delivery inspection charges (Note 5) 2,000 Bought out accessories (Note 6) - Assessable Value 17,26,000 Excise Duty @ 12.5% on Assessable Value 2,15,750 Notes: Installation, erection and commissioning charges should be included only if such installation etc. results in a movable property, as in the present case, machine is permanently affixed to earth therefore such installation etc. does not result in emergence of movable property, hence not includible. ( Circular No. 643/34/2002 CX dated 01.07.2002 ). Amount charged from buyer in relation to packaging (whether primary or secondary) will be included ( Circular No. 354/81/2000 TRU dated 30.06.2000 ). As per Rule 6 of Valuation Rules, 2000 , design and engineering charges will be included in computation of assessable value as such payment is 'in connection with sale'. Cost of material supplied free of charge by buyer will form a part of assessable value as it is additional consideration flowing from the buyer to seller ( Explanation 1 to Rule 6 of the Central Excise Determination of Price of Excisable Goods Rules 2000 ). Since, pre delivery inspection charges are charged by the manufacturer, the same is includible in the assessable value. Bought out accessories, supplied along with the machinery, assumed to be non essential, and thus not been included.