2023 (8) TMI 118 - AT - Central Excise

Valuation - non-inclusion of value of certain bought out items in the assessable value of the service equipment system manufactured and cleared by the appellant - demand alongwith interest and penalty - HELD THAT - Neither the show-cause notice nor the impugned order brings forth anything to contradict the statement - it is found that the impugned order, other than alleging that the appellants have manufactured systems of the service stations, did not go to verify the actual product manufactured; no Panchnama has been drawn to show whether the bought-out items are fitted with the items manufactured by the appellants and cleared; the classification of the excisable goods manufactured by the appellants is also not mentioned. In the absence of this cogent evidence, it cannot be established that the equipment manufactured by the appellant is incomplete and cannot work independently without the bought-out items in question. The show-cause notice or the impugned order do not make it clear as to why only 4 out of 103 bought-out items were considered for inclusion in the assessable value of the systems said to have been manufactured by the appellant; the only reason cited was that the systems as well as the bought-out items were cleared under the same invoice; it is not clear as to how, in such circumstances, other items, than the 4 discussed, are not considered for inclusion. Therefore, there are no evidence has been brought out to prove that the parts supplied as bought-out items by the appellants are integral parts of the equipment manufactured by them. In the instant case, the Department could not prove conclusively that the bought-out items in dispute are integral part of the equipment manufactured; Department did not even prove that the same are fitted into the system, manufactured by the appellants, at least by the use of screwdriver technology. From the statements, of the experts in the field, recorded by the Department, it is clear that the said items are sold together for ease of convenience of the customers rather than the necessity of the functioning of articles manufactured. Therefore, the appellant s arguments is strong and the demand of Rs.11,78,980/- disputed by the appellants requires to be set aside. The impugned order is modified to the extent of limiting the duty confirmed to Rs.23,50,637/- which stands paid by the appellant along with interest and 25% of the penalty. Hence, the appeal is partly allowed.

Summary

Issues involved:
The issue in this case involves determining whether the value of bought-out items like compressor, battery chargers, vice bench, and hydro meter is includable in the assessable value of the service equipment system manufactured and cleared by the appellant.

Summary:

Background:
The appellants, engaged in the manufacture of excisable goods, were visited by officers who observed violations related to the assessable value of goods. A show-cause notice was issued, leading to a demand for duty, which was later reduced on appeal.

Appellant's Argument:
The appellants argue that the bought-out items are not essential for completing the manufacture of the items they clear. They contend that these items have independent functioning and are not subjected to any manufacturing process by the appellants.

Department's Argument:
The Department asserts that the bought-out items are necessary to create a complete service equipment system, as they are supplied along with manufactured items on one invoice. They claim that only a few essential bought-out items need to be included in the assessable value.

Court's Analysis:
The Court found discrepancies in the Department's case, noting that the experts' statements indicated that the equipment sold by the appellants function independently. The Court observed that no evidence proved the bought-out items were integral to the manufactured equipment.

Decision:
The Court ruled in favor of the appellants, setting aside the disputed duty demand and limiting the confirmed duty to the amount already paid by the appellant. The appeal was partly allowed in favor of the appellants.

Conclusion:
The Court's decision highlighted the lack of evidence supporting the inclusion of bought-out items in the assessable value of the manufactured equipment. The judgment emphasized the importance of proving the integral nature of items to be included in the assessable value.