1996 (5) TMI 225 - AT - Central Excise

Summary

Issues: Valuation of insulators made of porcelain supplied with Galvanised Iron (GI) pins; Classification under Central Excise Tariff; Inclusion of cost of GI Pins in determining duty liability; Applicability of exemption Notification; Limitation period for duty determination.

In the appeal before the Appellate Tribunal CEGAT, New Delhi, the issue revolved around the valuation of insulators made of porcelain supplied with Galvanised Iron (GI) pins. The dispute arose from the classification of the insulators under the Central Excise Tariff, specifically under Item No. 23B and later Item No. 68. The Revenue contended that the cost of GI Pins should be considered in determining the duty liability of the insulators, leading to the issuance of multiple show cause notices covering the period from 1975 to 1983. Initially, the Assistant Collector held that GI Pins were not integral parts of the insulators but optional accessories supplied at the customer's discretion, thereby setting aside the demands. However, the Collector of Central Excise (Appeals), Calcutta overturned this decision and confirmed the duty demands.

During the hearing, the appellant's advocate argued that the GI Pins were bought out items supplied only on specific customer demands and were not included with all insulators. He emphasized that separate invoices were raised for GI Pins as they were not manufactured by the appellants. The advocate cited legal precedents to support the argument that the cost of optional goods like GI Pins should not be included in the assessable value of the insulators. Additionally, he challenged the invocation of the extended limitation period for duty determination, highlighting the absence of allegations of suppression or clandestine removal in the show cause notices.

In response, the Revenue representative contended that the GI Pins were essential for the functionality of the supplied goods, asserting that their value should be factored into the duty liability calculation. It was argued that the non-disclosure of supplying GI Pins and the issuance of separate invoices created discrepancies.

The Tribunal analyzed the facts and legal arguments presented. It noted that the insulators were classified under Item No. 68 and were exempted under Notification No. 120/75-C.E. The Tribunal acknowledged that the GI Pins were bought out items supplied separately and were not inherently part of the insulators. Referring to relevant case law, the Tribunal concluded that when optional goods like GI Pins do not enter the manufacturing process of the cleared goods, their cost should not be added to the assessable value. The Tribunal determined that the GI Pins, being insulator fittings, were not integral to the insulators themselves, and thus their cost should not be included in the duty assessment.

Ultimately, the Tribunal ruled in favor of the appellant, setting aside the order-in-appeal issued by the Collector of Central Excise (Appeals), Calcutta. The decision was based on the merit of the case, and the Tribunal did not delve into the question of limitation period applicability, thereby accepting the appeal and providing relief to the appellant.