2023 (12) TMI 780 - AT - Central Excise

Valuation of goods - inclusion of value of the bought-out-items supplied directly to the customer's place, in the assessable value of the Industrial Furnaces - HELD THAT - It is observed that the agreement entered by the Appellant in this case was a composite contract for supply and installation and commissioning of the industrial furnace at the customer's premises. The Appellant has duly discharged duty on the supply of components manufactured by them. They have supplied the bought out items directly to the customer's premises where the furnace was erected by utilizing both the bought out items and the goods manufactured by them. The bought out items used in erection of the furnace makes it a part of the immovable property, after erection of the furnace. Hence, no excise duty can be charged on the supply of such bought out items - no excise duty can be charged on the supply of such bought out items. It is observed that after erection of the furnace, the bought-out items are part of the immovable property - the value of bought out items, which are traded goods of the Appellant, are not includable in the assessable value for the purpose of charging central excise duty. Accordingly, the demand confirmed in the impugned order is not sustainable and is set aside. Since the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise. Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the demand of Central Excise Duty including AED, NCCD, Ed. Cess, and secondary and higher Ed. Cess amounting to Rs. 3,64,96,755/- confirmed for the period of 2010-2011 and 2014-2015 by invoking the extended period of limitation.

Summary:
The Appellant, engaged in manufacturing excisable goods, filed an appeal against the Order-in-Original confirming the demand of Central Excise Duty. The Appellant argued that excise duty was payable only on components manufactured by them, not on bought-out items used for erection of the furnace. They cited precedents to support their contention.

The Appellant contended that the bought-out items supplied were part of the immovable property under a composite contract with customers, hence not subject to excise duty. They also argued against the invocation of the extended period of limitation, citing no fraud or intent to evade duty.

After hearing both sides, the Tribunal analyzed the nature of the agreement between the Appellant and customers. It was found that the bought-out items became part of the immovable property after erection of the furnace, thus not liable for excise duty. Precedents were cited to support this conclusion.

The Tribunal referenced the decision in TRANSRAIL LIGHTING LTD. case and other judgments to emphasize that bought-out items supplied with manufactured goods are not includible in the assessable value for excise duty purposes. Consequently, the demand for excise duty was deemed unsustainable, leading to the appeal being allowed.

In conclusion, the impugned order confirming the demand was set aside, and the appeal by the Appellant was allowed.