2016 (8) TMI 940 - AT - Central Excise

Valuation - Demand of differential duty - appellant s paying duty on MRP basis only on the food processor basic unit whereas bundled food processor accessories into a separate packing with a separate MRP but paid duty on the accessories under the transaction value - whether the food processor basic units as well as accessories are to be assessed together under MRP - Held that - accessories when packed separately, do not contain any electric motor. It is common knowledge that the accessories can function only in conjunction with the basic food processor unit, which contains the motor. These accessories are specifically designed to work with the food processor and cannot be used inter-changeably with any other machine. It is also obvious that the food processor basic unit is of no use to the customer without the accessories, which are essential for exploiting the entire function of the food processor. This leads us to the reasonable conclusion that the bifurcation of the complete food processor into basic unit and other essential parts described as optional accessories and packed in separate boxes and marked with separate MRPs and cleared in equal numbers, has been done with the purpose of wrongly claiming lower rates of excise duty under Section 4 for the accessories. Accordingly, the food processor basic unit along with the accessories are to be assessed together as electric mechanical domestic appliance with self contained electric motor and are chargeable to duty on MRP basis. Consequently, the demand for differential duty upheld. - Appeals disposed of

Summary

Issues:
Assessment of excise duty on domestic kitchen appliances under MRP basis - Classification of accessories for assessment - Allegation of wrongful duty claim - Suppression of facts by the appellant - Imposition of penalties.

Assessment of Excise Duty on Domestic Kitchen Appliances under MRP Basis:
The appellant, engaged in manufacturing domestic kitchen appliances, filed an appeal against the Commissioner (Appeals) order regarding the assessment of excise duty under Section 4 A of the Central Excise Act. The goods manufactured by the appellant fell under CTH 8509 and were assessed on MRP basis. The dispute arose when the appellant started paying duty only on the basic unit of the food processor, excluding the accessories. The Department contended that both the basic unit and accessories should be assessed together under MRP. The Tribunal found that the accessories, though packed separately, were essential for the food processor's functioning and designed to work only with the basic unit. The appellant's practice of separately packaging accessories with different MRPs aimed at claiming lower excise duty rates. Consequently, the Tribunal upheld the demand for the differential duty.

Classification of Accessories for Assessment:
The primary issue revolved around the classification of accessories for assessment under MRP basis. The appellant argued that the accessories were optional and sold separately, thus not subject to MRP assessment. However, the Tribunal noted that the accessories were integral to the food processor's operation and were specifically designed to work with the basic unit. The authorities found that equal numbers of basic units and accessories were cleared, indicating the necessity of accessories for the product's functionality. Therefore, the Tribunal concluded that the accessories should be assessed together with the basic unit under the category of electric mechanical domestic appliances with a self-contained electric motor.

Allegation of Wrongful Duty Claim and Suppression of Facts:
The appellant contended that they did not suppress any facts as they had informed the Department about the change in pricing structure before implementing it. The Tribunal observed that the demand for duty did not invoke the proviso to Section 11 A alleging suppression. While upholding the demand for differential duty based on interpretation, the Tribunal found no grounds for imposing penalties, as there was no justification for the same. Consequently, the penalties on the appellant and the Director were set aside, and the appeal was disposed of accordingly.

This judgment clarifies the assessment of excise duty on domestic kitchen appliances under MRP basis, addresses the classification of accessories for assessment, evaluates the allegation of wrongful duty claim, and considers the issue of suppression of facts by the appellant, ultimately determining the imposition of penalties based on the interpretation of relevant provisions.