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2022 (12) TMI 1047 - AT - Central ExciseValuation - non-inclusion of value of Bought Out items received at site and used in the Erection of Boilers have in the assessable value of the Boilers - contravention of provisions of Rule 4, Rule 5, Rule 6, and Rule 8 of the Central Excise Rules, 2002 - short paid excise duty - extended period of limitation - HELD THAT - The finding of the Commissioner that all the systems received at the site of the erection of the Boiler, do not essentially constitute as essential parts of the boiler required for the erection and commissioning of the boiler. Certain parts as noted by the Hon ble Apex Court will be in nature of auxiliaries etc., however they in view of the HSN explanatory note continue to be classified as Boiler under heading 8402.10 and not under the heading 8402.90. Undisputedly the goods which have been cleared by the Appellants have to be assessed in the form in which they were cleared by the appellant. In the case of RELIANCE TEXTILE INDUSTRIES LTD. VERSUS UNION OF INDIA 1992 (3) TMI 86 - HIGH COURT OF JUDICATURE AT BOMBAY , Hon ble High Court held It is not in dispute that when base yarn undergoes texturising process to bring into existence texturised yarn, then separate excise duty is leviable for the process of manufacture. In these circumstances, it is impossible to accede to the submission urged on behalf of the department that at the time of clearance of base yarn, the petitioners are liable to pay excise duty which is required to be paid after the texturised yarn comes into existence. The provisional assessment made by the department, therefore, is unsustainable. Having held so we also find merits in the submission made by the appellant that the goods as per the turnkey contract entered by them emerged only at the site of customer which do not fall within the jurisdiction of the Pune Commissionerate. Accordingly the issues relating to excisablity and valuation of the goods as per the turnkey contract could not have been determined by the Commissioner Pune, having jurisdiction over the factory/ factories of the appellant. From the reading of the order of the Hon ble Apex Court in COMMISSIONER VERSUS SIEMENS LTD. 2003 (5) TMI 535 - SC ORDER it is quite evident that Hon ble Supreme Court has not recorded any finding in respect of the issue of the inclusion of the value of the brought out items in the value of the boiler. On the contrary Hon ble Supreme Court has not taken up the issue for consideration as that question was not raised in the show cause notice which was the foundation for the entire proceedings. Hon ble Supreme Court order cannot be said to declaration of law on the subject, when Supreme Court itself observes for the deletion of the para 10 and 11 (b) if the there is no demand made in respect of the brought out items in the show cause notice. Commissioner has in the impugned order not recorded any finding in this respect in the impugned order, as to whether any demand was made in the show cause notice in that case or not. Hence we do not find any merits in the sole reliance placed in the impugned order on the said decision of the tribunal and Hon ble Supreme Court. In the present case by the impugned order, revenue has not sought to add the value of the brought out items in the assessable value but has sought to add the some value which they have determined. Impugned order records that there is difference in value which has been shown by the appellant while raising the invoices on the customer and the value at which these brought out items had been invoiced by the supplier of the brought items. Further impugned order also has sought to add certain undetermined charges under the category of design and engineering head, in the garb of brought out items. The charge of undervaluation of the goods has been made even without reference to the supplier of these brought out items. If there was any undervaluation of these items then the demand of duty should have been made on the supplier of these brought out items. Admittedly and undisputedly these brought out items were not even brought into the premises of appellant - Undisputedly after erection of the goods manufactured and cleared by the appellant and other brought out items at the site of Customer, what emerges is a immovable property which as such is not excisable. As we find that impugned orders cannot be sustained on grounds of jurisdiction and merits, we do not consider the other grounds urged by the appellant in appeals and during course of argument - there are no merits in the impugned orders so as to sustain them. Appeal allowed.
Issues Involved:
1. Inclusion of the value of bought-out items in the assessable value of Boilers and Pollution Control Equipment. 2. Allegation of suppression of material facts by the appellants. 3. Applicability of erection and commissioning charges in the assessable value. 4. Jurisdiction of Pune-I Commissionerate to adjudicate the matter. 5. Applicability of extended period for demand and imposition of penalties. Detailed Analysis: 1. Inclusion of the Value of Bought-Out Items: The primary issue revolves around whether the value of bought-out items, which are essential for the functionality of Boilers and Pollution Control Equipment, should be included in the assessable value. The Tribunal referred to the case of Thermax Babcock & Wilcox Ltd. and various other judgments, concluding that the bought-out items are essential and integral parts of the Boilers and Pollution Control Equipment. Consequently, their value must be included in the assessable value as per Section 4(1)(b) of the Central Excise Act, 1944, read with Rule 6 of the Valuation Rules, 2000. 2. Allegation of Suppression of Material Facts: The Tribunal noted that the appellants had suppressed material facts by not including the value of bought-out items in the assessable value of Boilers and Pollution Control Equipment. This suppression was with the intent to evade Central Excise duty. The Tribunal upheld the invocation of the proviso to Section 11A(1) of the Central Excise Act, 1944, for the extended period from July 2000 to March 2004. For the remaining period, Section 11A(1) was deemed sufficient for the duty demanded. 3. Applicability of Erection and Commissioning Charges: The Tribunal reaffirmed that erection and commissioning charges cannot be treated as part of the assessable value chargeable to Central Excise duty. This is a settled law, and the duty demand of Rs. 7,49,22,418/- related to erection and commissioning charges was dropped. 4. Jurisdiction of Pune-I Commissionerate: The Tribunal addressed the issue of jurisdiction, stating that the differential duty sought to be demanded and recovered is on the value of bought-out items supplied directly to Boiler assembly sites by vendors. Since the appellant's company is located within the jurisdiction of Pune-I Commissionerate, the adjudication of the show cause notices (SCNs) is within the competence of the Principal Commissioner, Central Excise, Pune-I Commissionerate. 5. Applicability of Extended Period and Penalties: The Tribunal upheld the application of the extended period for demanding duty due to the deliberate suppression of facts by the appellants. Penalties were imposed under Rule 173 Q of the erstwhile Central Excise Rules, 1944, and Rule 25 of Central Excise Rules, 2001/2002, read with Section 11AC of the Central Excise Act, 1944. Conclusion: The Tribunal concluded that the value of bought-out items must be included in the assessable value of Boilers and Pollution Control Equipment. The appellants' suppression of material facts justified the invocation of the extended period for demand and imposition of penalties. However, erection and commissioning charges were excluded from the assessable value. The jurisdiction of Pune-I Commissionerate to adjudicate the matter was affirmed. Consequently, the appeals were allowed in part, with specific directions for recovery of duty and penalties.
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