2011 (12) TMI 505 - AT - Central Excise

Summary

Issues:
Waiver of pre-deposit of duty, interest, and penalty under Section 11AC of the Central Excise Act, 1944 based on the classification of bought out items used in the manufacture of parts of boilers.

Detailed Analysis:

1. Classification of Bought Out Items:
The applicants sought waiver of pre-deposit of duty, interest, and penalty amounting to &8377; 3,66,92,144/- under Section 11AC of the Central Excise Act, 1944. The issue revolved around whether the value of bought out items used in conjunction with parts manufactured on-site for the erection and commissioning of steam boilers should be added to the assessable value of the boilers. The applicants contended that they were manufacturing parts of the boilers, paying appropriate duty, and procuring auxiliary items from other manufacturers for direct supply to the site. They argued that since the bought out items were not cleared from the factory along with the parts, their value should not be added to the boilers' assessable value.

2. Legal Precedents and Arguments:
The Revenue, represented by the Chief Commissioner (A.R.), relied on the Tribunal's decision in the case of C.C.E., Pune I v. Thermax Bobcock & Wilcox Ltd., asserting that parts of boilers classified as bought out items and directly supplied to the site should have their value added to the assessable value of goods cleared from the factory. In contrast, the applicants cited the Tribunal's decision in T & I Ltd. v. C.C.E., Dibrugarh, emphasizing that bought out items supplied directly to the site should not be included in the assessable value. The contention was whether the applicants, by receiving orders for erection and commissioning, were obligated to supply all essential parts of the boilers, manufactured or procured, for inclusion in the assessable value.

3. Tribunal's Analysis and Decision:
The Tribunal analyzed the facts, noting that the applicants manufactured and cleared parts of boilers on payment of duty, without claiming classification as boilers in SKD condition. Referring to the precedent of Thermax Bobcock & Wilcox Ltd., where parts were classified as boilers due to manufacturing claims, the Tribunal distinguished the present case. It observed that the bought out items were not cleared along with the parts manufactured by the applicants. Consequently, the Tribunal found a strong prima facie case for waiver of dues, as the bought out items did not come to the factory and were not cleared with the parts of the boilers. Thus, it waived the pre-deposit of duty, interest, and penalties, staying recovery during the appeal's pendency.

This comprehensive analysis of the judgment highlights the core issue of classification of bought out items in the context of manufacturing parts of boilers, the legal precedents cited by both parties, and the Tribunal's decision based on the specific circumstances of the case.