2017 (8) TMI 1518 - AT - Central Excise

Valuation - inclusion of trading items which were bought out items by the appellant in the assessable value - Held that - In the instant case, these items, which were bought out, are totally independent and optional. These are not even the accessories as stated by the Ld. Counsel for the appellant during the course of argument. In the instant case, it is admitted position that the assessee supplied the bought out items to the buyers only to ask for. In such a situation, the assessee buys the aforesaid components/items from the market and supplied to the buyers on their option - Hon ble Supreme Court in the case of Commr. of Central Excise, Trichy v. Neycer India Ltd. 2015 (5) TMI 494 - SUPREME COURT , observed that the value of the bought out items cannot be included in the assessable value of own manufactured goods under Section 4 of the Central Excise Act, 1944. Impugned order do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against duty demand and penalty on trading items included in assessable value of manufactured goods.

Analysis:
The appellant, engaged in manufacturing machineries and trading welding items, appealed against the duty demand and penalty imposed by the Department. The dispute revolved around whether the trading items should be included in the assessable value of the manufactured goods. The Department contended that the trading items were bought out by the appellant and should be included, while the appellant argued against their inclusion.

Upon review, it was noted that the Department raised objections leading to a duty levy of ?7,37,077 along with a penalty. During arguments, the Department's counsel cited a Supreme Court case where a matter was remanded back for reconsideration. In contrast, the appellant's counsel referred to a Tribunal case stating that bought out goods not forming part of finished goods should not be included in the assessable value under Section 4 of the Central Excise Act, 1944.

After considering the facts and legal precedents, it was concluded that the trading items bought out by the appellant were independent and optional, not forming part of the finished goods. The Supreme Court's observation that bought out items' value cannot be included in the assessable value was crucial. As the appellant supplied these items to buyers only upon request, the inclusion of their value in the assessable value was deemed unwarranted. Therefore, the impugned order was set aside, and the appeal by the appellant was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the independent nature of the trading items and their optional inclusion, leading to the exclusion of their value from the assessable value of the manufactured goods.