2018 (6) TMI 117 - AT - Central Excise

Valuation - inclusion of value of bought out items (supplied free of cost) - Demand of Duty on the basis of MRP on the bought out staple pins cleared in separate master cartons from the factory of the appellant supplied free of cost with the stapler manufactured by the appellant - whether the value of staple pins is not required to be included in the value of stapler? - inclusion of value of staple pins on the assessable value of stapler - multipiece package or not - CBEC Circular No.673/64/2002-Cx dated 20.10.2002 - extended period of limitation invoked Held that - The multipiece package means a package containing two or more individual packaged or labelled pieces of the same commodities of identical quantity intended for sale - Admittedly stapler and staple pins are different commodities and the staple pins were given free along with staplers in that circumstance it cannot be termed it as two or more individual packaged or labelled pieces of the same commodity or identical quantity are packed in the present case. In fact stapler and staple pins even not cleared in single package or unit container and these are also not cleared together in single carton. In that circumstance it cannot be said that these goods cleared in multipiece package - para 4 (ii) of CBEC circular No. Circular No.673/64/2002-Cx dated 20.10.2002 is not applicable to the facts of this case. The staple pins are not manufactured by the appellant but these are bough out items and it is a fact on record that the appellant has not manufactured staple pins and these staple pins are supplied by the appellant free of cost - the value of bought items (supplied free of cost) shall not form the part of assessable value of staplers. Extended period of limitation - Held that - As the issue is debatable in nature the extended period of limitation is not invokable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether duty is payable on staple pins supplied free of cost with staplers by the appellant.

Analysis:
1. The appellant appealed against an order demanding duty, interest, and penalty for the period April 2007 to April 2010. The case involved the appellant, engaged in manufacturing staplers, clearing staple pins along with staplers under a promotional scheme.

2. The appellant argued that they are not liable to pay duty on staple pins as they procured them from other manufacturers, who paid duty or availed exemptions. The appellant did not undertake any manufacturing process on the staple pins, and the value was already included in the stapler's MRP.

3. The appellant cited legal precedents to support their contention that duty is not payable on bought-out staple pins. They emphasized that the value of bought-out staple pins should not be included in the assessable value of staplers.

4. The Revenue contended that the MRP on staple pins should be added for assessment and valuation. They relied on a circular for valuation of multi-piece packages, which the appellant argued was not applicable to the case.

5. The main issue was whether duty was payable on the bought-out staple pins supplied free with staplers. The Tribunal analyzed a circular regarding multi-piece packages and the definition of multi-piece package under relevant rules.

6. The Tribunal found that the stapler and staple pins were different commodities, not packed together, and not cleared in single cartons, thus not constituting a multi-piece package. The circular cited by the Revenue was deemed inapplicable.

7. Referring to a Supreme Court case, the Tribunal held that the value of bought items supplied free should not be part of the assessable value of staplers. Given the debatable nature of the issue, the extended period of limitation was deemed inapplicable.

8. Consequently, the impugned order was set aside, and the appeal was allowed, providing consequential relief if any. The Tribunal's decision was based on the legal principles and precedents discussed during the proceedings.