2024 (8) TMI 199 - AT - Central Excise

Valuation - inclusion of bought-out items in the assessable value or not - extended period of limitation. Valuation - HELD THAT - It is seen that the appellants are supplying pre-fabricated buildings/ shelters to the Indian Army as per the purchase order place on them; however, the appellants are not manufacturing all the items required; some items they are procuring from outside and supplying the same along with the items manufactured by them which are basically steel structures. It is not the case of the respondents that the said bought-out items are supplied by them as per the requirement of the Indian Army; it is also not the case that these items are only accessories of the items supplied by them and are not essential parts of the items supplied by them. Records indicate that the respondents are supplied pre-fabricated buildings to the Indian Army; the invoices issued by them were for the supply of pre-fabricated buildings only and not for the items which they have claimed to have supplied. The assessment of the items cleared by a manufacturer is to be made on the basis of what is cleared from the factory. It is evident that the appellants have supplied pre-fabricated buildings, although in a disassembled manner, valuation has to be done accordingly. Therefore, the value of the bought-out items requires to be included in the assessable value of the goods. Extended period of limitation - HELD THAT - Understandably, looking into the fact that the supplies being to Indian Army and some items were bought-out and sent along with the goods manufactured by the respondents, it is possible that the respondents entertained a belief that the they are not required to include the value of bought-out items in the assessable value of the impugned goods. It has been held by the Tribunal that when a case is made out of audit proceedings, extended period cannot be invoked. Accordingly, the extended period cannot be invoked in the instant case and duty requires to be confirmed for normal period. The duty confirmed for the extended period set aside - the duty for the normal period is confirmed - penalty imposed under Section 11AC is set aside - appeal allowed in part.

Summary

Issues:
Central Excise duty on bought-out items in assessable value.

Analysis:
The case involved a dispute regarding the inclusion of the value of bought-out items in the assessable value for Central Excise duty. The appellant, a manufacturer supplying prefabricated shelters to the Indian Army, claimed that certain items were bought-out and not manufactured by them. The Revenue issued a Show Cause Notice demanding duty on the bought-out items. The Commissioner initially dropped the proceedings, but the Revenue appealed.

The Department argued that as per Section 4(1) of the Central Excise Act, the transaction value should include amounts payable by the buyer to the assessee. They contended that the bought-out items were essential parts of the shelters supplied and should be included in the assessable value. The Department cited various cases to support their argument.

The Tribunal observed that the appellant supplied prefabricated buildings to the Army, including bought-out items along with items manufactured by them. The invoices issued were for the supply of complete prefabricated buildings. The Tribunal held that the value of bought-out items should be included in the assessable value, following the decision in the case of Frick India Ltd. The Tribunal emphasized the distinction between classification and valuation in excise duty assessment.

Regarding the invocation of the extended period for duty confirmation, the Tribunal noted that no evidence was presented to show intent to evade duty. The Tribunal concluded that the extended period could not be invoked solely based on audit findings. Duty was confirmed for the normal period, and the penalty imposed was set aside.

In the final decision, the Tribunal set aside the duty confirmed for the extended period, confirmed the duty for the normal period, and set aside the penalty imposed under Section 11AC. The appeal was partly allowed based on the above terms.