1987 (4) TMI 166 - AT - Central Excise

Valuation - Excise duty charged on raw material to be included in assessable value of finished product

Summary

Issues:
Central Excise duty on electric motor portion of pump-set to be added to assessable value for charge of Central Excise duty.

Analysis:

The judgment revolves around the dispute regarding whether the Central Excise duty on the electric motor portion of the pump-set should be included in the assessable value for the charge of Central Excise duty. The period in question is from 1-10-75 to 30-9-76. The Tribunal examined the arguments presented by both parties, perused the records, and considered the matter thoroughly.

The Tribunal referred to the Supreme Court judgment in the case of Empire Industries Limited, which established that the full intrinsic value of an article must include the cost of all raw materials and components. The Tribunal also cited Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944, which allows exclusion of taxes paid on finished goods but not on raw materials and components. Additionally, the Tribunal mentioned a previous order by the Tribunal in Appeal No. E-2884/84-A of M/s. Khaitan Fans (P) Ltd., which was confirmed by the Supreme Court, emphasizing the principles of valuation based on actual duty paid by the assessee on the article.

Two main arguments were presented by the appellants. Firstly, they argued that since an electric motor as a whole did not come into existence during the manufacturing process of the pump-sets, there should be no duty payable on it. However, the Tribunal rejected this argument, stating that duty on components such as rotors and stators must be considered for the valuation of the finished goods. Secondly, the appellants invoked exemption notification No. 84/72-CE, claiming that duty paid on electric motors or rotors or stators was set off at the time of paying duty on the pump-set. The Tribunal considered this argument valid if the appellants did not retain any portion of the duty with themselves.

Ultimately, the Tribunal remanded all twenty appeals to the Assistant Collector for verification. The Assistant Collector was instructed to determine whether the appellants retained any duty with themselves. If it was confirmed that no duty was retained, the demand for duty should be withdrawn. However, if duty was retained, the demand could only be enforced to the extent of the duty retained by each appellant, subject to the relevant time limits. The judgment concluded by allowing all twenty appeals by way of remand for further verification and action by the Assistant Collector.