2008 (9) TMI 300 - AT - Central Excise

Valuation under section 4 of central excise act, 1944 supply of UPS system and batteries - In his report, the Superintendent clearly stated that nothing had been identified evidencing clearance of batteries along with UPS; however, certain invoices have been identified indicating direct dispatch of batteries from the premises of suppliers of batteries to customers to whom DBE sold UPS systems held that revenue cannot challenge, the verification carried out by its own Superintendent - the value of battery cannot be included in the assessable value of UPS system for the reason that it has been verified and found that no UPS systems together with batteries were matter remanded to verify and pass the fresh orders where such verification is absent.

Summary

Issues:
1. Undervaluation of UPS systems by non-inclusion of battery value.
2. Relationship between related parties affecting assessable value.
3. Inclusion of value of batteries in the assessable value of UPS systems.

Issue 1: Undervaluation of UPS systems by non-inclusion of battery value
The case involved M/s. D.B. Electronics Pvt. Ltd. (DBE) being accused of undervaluing UPS systems by not including the value of batteries supplied along with them. The central excise officers discovered this during a visit to DBE's factory. A show cause notice was issued proposing duty recovery and penal action. The Collector's order dropped the proceedings, but the Revenue appealed. The Tribunal held that the value of batteries should only be added to the assessable value of UPS systems when both were cleared together. The issue regarding related parties' impact on assessable value was also decided in favor of DBE.

Issue 2: Relationship between related parties affecting assessable value
The show cause notices raised the issue of DBE and M/s. Vistar Electronics Pvt. Ltd. being related parties, suggesting the invoice value of UPS systems as the correct assessable value. However, the Tribunal ruled in favor of DBE, stating that the invoice value was appropriate. Subsequent notices were issued covering the same issue, but the Commissioner found no grounds to include battery costs in the assessable value of UPS systems, leading to the proceedings being dropped.

Issue 3: Inclusion of value of batteries in the assessable value of UPS systems
The Assistant Commissioner initially demanded payment by including the value of batteries in UPS systems. The Commissioner (Appeals) later overturned this decision, stating that the value of batteries should not be included in the assessable value of UPS systems. The Tribunal upheld this decision, emphasizing that batteries should only be added to the value when cleared together. Factual verification was crucial, and the case of M/s. D.B. Technologies Pvt. Ltd. was remanded for further investigation to determine if batteries were indeed cleared along with UPS systems. If verified, the value of batteries would be included in the UPS systems' value. The appeal was allowed for remand based on this requirement.