1997 (12) TMI 166 - AT - Central Excise

Issues Involved:
1. Includibility of costs incurred towards cutting, painting, and external lipping for arriving at the assessable value of flush doors.
2. Determination of the stage at which the flush doors become excisable.
3. Whether attachment of lipping and making key holes can be considered processes incidental or ancillary to the manufacture of flush doors.

Issue-wise Detailed Analysis:

1. Includibility of Costs for Assessable Value:
The primary issue in the appeal is whether the costs incurred for additional processes such as kick plate fixing, vision hole cutting, rebate cutting, and external lipping should be included in the assessable value of the flush doors. The appellants argued that these additional features are provided only upon specific customer requests and are not part of the standard manufacturing process. They cited the Supreme Court decision in CCE v. Oriental Timber Industries, where it was held that the duty is payable at the stage when the plywood is manufactured and not when it is cut into circles. They also referred to the Tribunal's decision in Universal Luggage Manufacturing Co. Ltd v. CCE, which held that optional accessories should not be included in the assessable value. The appellants contended that the flush doors become excisable as soon as they are ready for clearance in their standard form, and any subsequent embellishments should not be charged to duty.

2. Stage at Which Flush Doors Become Excisable:
The appellants argued that 99% of the flush doors are sold without the additional features, and therefore, the duty should be assessed based on the value of these standard doors. They referred to the Supreme Court decision in J.K. Spinning and Weaving Mills Ltd. v. UOI, which held that the duty is payable on yarn at the spindle stage and not after it is sized. They contended that the flush doors should be considered excisable as soon as they are manufactured and ready for clearance, and any subsequent processes should not affect the assessable value.

3. Processes Incidental or Ancillary to Manufacture:
The department, represented by Shri V. Thyagaraj, argued that the value for assessment should be based on the condition in which the goods leave the factory and the price at which they are sold. They contended that the additional features enrich the value of the flush doors and should be included in the assessable value. The department asserted that the appellants manufacture two types of flush doors - with and without the additional features - and that the cost of these features should be included in the assessable value, similar to the inclusion of machining costs in the valuation of castings.

Judgment:
The Tribunal considered the arguments from both sides and referred to the Supreme Court decision in Metal Box India Ltd v. CCE, Madras, which emphasized that the assessable value should be based on the price at which the goods are sold at the time of clearance from the factory. The Supreme Court held that all expenses incurred up to the date of delivery, including post-manufacturing operations, should be included in the assessable value. Applying this principle, the Tribunal concluded that the additional features such as lipping and key holes enrich the value of the flush doors and should be included in the assessable value. The Tribunal dismissed the appeal, holding that the lower authority rightly demanded duty based on the enriched value of the flush doors at the time of clearance from the factory.

Conclusion:
The Tribunal upheld the inclusion of costs for additional processes in the assessable value of flush doors, emphasizing that the value should be based on the condition in which the goods are sold at the time of clearance from the factory. The appeal was dismissed, affirming the demand for duty based on the enriched value of the flush doors.

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