1998 (9) TMI 256 - AT - Central Excise

Summary

Issues:
1. Classification of welding rectifier as a component of a complete welding machine or a separate trading item.
2. Entitlement to the benefit of exemption Notification No. 175/86.
3. Whether the demand is barred by limitation.

Analysis:
1. Classification of Welding Rectifier:
The dispute revolved around whether the welding rectifier purchased from the open market should be considered a component of a complete welding machine or a separate trading item. The Collector held that the rectifier, wire feeder, and welding torch together formed an integral part of the welding set, citing a purchase order from the Controller of Stores, Central Railway. The Collector concluded that the rectifier was an essential component of the welding set, justifying inclusion in the assessable value. However, the appellant argued that the rectifier was an independent item supplied along with the torch and feeder, not assembled in their factory, and should not be considered an essential component. The Tribunal agreed with the appellant, noting that the rectifier was a separate item supplied along with the other components, and was not essential to the welding set's function.

2. Entitlement to Exemption:
The appellant contended that since the rectifiers were purchased separately and supplied along with the torch and feeder, they should be entitled to the benefit of exemption Notification No. 175/86. The Collector, on the other hand, argued that the rectifier, when supplied with the welding set, formed a new product with a distinct character, justifying inclusion in the assessable value. The Tribunal disagreed, ruling that the rectifier was not an essential component of the welding set, and therefore, the appellant was entitled to the benefit of the exemption.

3. Limitation Issue:
Regarding the limitation of the demand, the Collector justified invoking a larger period based on the appellant's declaration that the rectifier was a trading item, indicating their knowledge of its value. The appellant argued that proper records were maintained, and the declaration did not amount to suppression of facts. The Tribunal found in favor of the appellant, stating that the declaration did not constitute suppression, and the department should have directed the appellant to include the rectifier's value in the welding set if necessary. Consequently, the impugned order was set aside on the point of limitation, and the appeal was allowed on merits and limitation, providing relief to the appellants.