2005 (9) TMI 425 - AT - Central Excise

Summary

Issues:
1. Whether the value of bought out items should be included in the assessable value of optical fibre cables for duty calculation.

Analysis:
The case involved an appeal by the Revenue against an order by the Commissioner (Appeals) regarding the inclusion of the value of bought out items in the assessable value of optical fibre cables. The respondents, who are manufacturers of optical fibre cables, were served with a show cause notice demanding duty on bought out items such as cable jointing kits, termination box, and patch cords, cleared along with the optical fibre cable consignments without including their price in the assessable value of the cables. The lower authority imposed penalties on the respondents for this omission. However, the Commissioner (Appeals) held that the bought out items do not become part of the cables themselves but play a role in laying down the cable network. He concluded that the value of bought out items should not be added to the assessable value of the cables. The Revenue contended that the bought out items are accessories of the optical fibre cables and their value should be included in the cable's value for assessment. The Revenue referred to Chapter Note 4 of Section XVI of the schedule to support their argument that all components, including cables and bought out items, should be treated as one commodity for assessment purposes.

Upon hearing both sides, the Tribunal examined the contentions and found that the bought out items are not parts of the cables. The Tribunal emphasized that the bought out items are not accessories of the cables and do not contribute to the cables' function. The Tribunal rejected the Revenue's appeal, stating that since the bought out items are not parts or accessories of the cables, their value should not be included in the assessable value of the optical fibre cables for duty calculation. The Tribunal clarified that the principle of classification mentioned in the Chapter Notes does not impact the inclusion of the bought out items' value in the assessment of the cables. Therefore, the Tribunal upheld the Commissioner (Appeals)'s decision and dismissed the Revenue's appeals.

This judgment clarifies the distinction between bought out items and the main product for duty calculation purposes, emphasizing that bought out items that do not form part of the main product should not have their value included in the assessable value of the main product.