2010 (9) TMI 374 - AT - Central Excise

Valuation bought out items - generators and filters supplied along with paint booth supply being optional - value of the hot air generator and filter blower supplied by the appellant at the insistence of their customers, for quick drying of paint of articles painted in paint booth, is not required to be added in the assessable value of paint booth - demand and penalty set aside. As the issue involved being a legal issue, is capable of entertaining two different views, the appellant cannot be attributed with any mala fide intention on their part. The appellants having discharged their duty liability on the paint booth being manufactured by them, the non-disclosure on their part about buying and selling of the hot air generator and filter blower, cannot be held to be on account of any mala fide intention. As such, we also hold the demand to be barred by limitation. It is well settled law that for invoking the longer period of limitation, there has to be positive suppression or mis-statement with an intent to evade duty. The non-disclosure of the fact of supply of generator and filter, which they were not legally obliged to disclose, would not amount to positive suppression on their part.

Summary

Issues involved: Classification of goods under Central Excise Tariff Act, 1985; Inclusion of value of hot air generator and filter blower in assessable value of paint booth; Invocation of extended period of limitation for raising demand of duty.

Classification of goods: The appellant manufactured paint booths and other automobile service equipment, clearing them under Tariff Heading 8424.00. The Revenue contended that hot air generator and filter were integral parts of the Paint and Drying Booth Cabinet, classifying it under Heading 8419.10 instead. A show cause notice was issued demanding duty, interest, and penalty.

Inclusion of value of hot air generator and filter blower: The appellant argued that the paint booth was a complete commodity sold without the generator and filter, which were optional items for enhancing efficiency. The Commissioner confirmed duty by treating the entire realization as cum-duty price. The Tribunal found that the generator and filter were not brought to the factory or supplied with the paint booth, concluding they were not part of the goods manufactured by the appellant.

Extended period of limitation: The Tribunal held that the demand of duty was barred by limitation as the non-disclosure of supplying the generator and filter did not indicate any mala fide intention on the part of the appellant. Positive suppression or misstatement with intent to evade duty is required for invoking the extended period of limitation, which was not present in this case. The demand of duty and penalty were set aside, allowing the appeals of the appellants with consequential relief.