The Mumbai Bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) has held that charges recovered towards optional “type testing” of transformers at the request of customers cannot be included in the transaction value for the purpose of levy of excise duty.
The bench of Ajay Sharma (Judicial Member) and Rajeev Tandon (Technical Member) noted that “type testing” was neither mandatory nor part of the manufacturing process. It was conducted only in select cases, based on specific customer requirements, often where buyers lacked testing facilities or sought additional assurance. Such tests were performed on a random or selective basis and not on every unit, reinforcing their optional nature.
The dispute arose from an order passed by the Commissioner (Appeals), who had upheld the inclusion of “type test charges” in the assessable value of transformers while setting aside the penalty. The assessee challenged this finding before the Tribunal, contending that such charges were for a separate service and not part of the manufacturing process or sale consideration.
The core issue before the Tribunal was whether amounts collected for conducting “type tests”—performed only when specifically requested by customers—could be treated as part of the transaction value of the manufactured goods. The Department had argued that these charges formed part of the consideration for sale and should therefore attract excise duty.
Rejecting the Department’s stand, the Tribunal observed that the manufacturing process of transformers was complete once the goods were assembled and subjected to routine and mandatory quality control tests. At that stage, the goods became marketable, and excise duty was discharged accordingly.
The Tribunal held that “type test charges” could not be considered incidental or ancillary to manufacture. Nor could they be treated as a condition precedent for sale. Instead, they were characterized as consideration for a distinct, post-manufacturing service rendered at the behest of the buyer.
The Bench further emphasized the settled legal principle that only those elements which are intrinsically linked to the manufacture and sale of goods at the time and place of removal can be included in the assessable value. Charges for optional services performed after completion of manufacture, especially when not a condition of sale, fall outside the ambit of “transaction value.”
A key factor influencing the Tribunal’s decision was that the assessee had already been discharging service tax on these charges, treating them as a separate taxable service. The Tribunal observed that levying excise duty on the same consideration would lead to impermissible double taxation.
The Bench also relied on its earlier decisions in the assessee’s own case on identical facts, where it had consistently held that such charges are not includible in assessable value. These decisions, having attained finality, were found binding in the absence of any contrary ruling.
The Tribunal set aside the impugned order to the extent it upheld the inclusion of “type test charges” in the assessable value and confirmed the duty demand. The appeal was allowed with consequential relief.
Case Details
Case Title: Crompton Greaves Ltd Versus Commissioner Of Central Excise
Citation: JURISHOUR-1068-CES-2026(MUM)
Case No.: Excise Appeal No. 87060 Of 2016
Date: 30.04.2026
Counsel For Appellant: Viraj Reshamwala, Advocate
Counsel For Respondent: Xavier Mascarenhas, Superintendent (AR)
