2016 (6) TMI 917 - AT - Central Excise

Valuation - manufacture and sale of Dry Charged Batteries - inclusion of products viz. electrolyte and micro porous vent plug with float supplied as bought out items - whetehr electrolyte can be treated as a part of the battery - Held that - HSN notes for the Chapter Heading 8507 clearly make a mention that electric accumulators (storage batteries) remain classified under Chapter 8507 even if they are presented without the electrolyte. This proves that the subject item could be manufactured without the electrolytes and could be bought without electrolytes. In other words it is a choice of the customer to buy the said item namely dry charged batteries without the electrolytes; and the customer(s) can buy electrolytes if choose to do so separately. We find on record that there has not been any cenvat credit taken for the electrolytes supplied separately and the electrolyte has been supplied by the respondent in separate packing as a bought out item only. Items namely electrolytes and micro porous vent plug with float are not to be treated as parts/components of dry charged batteries covered under Chapter 8507.00 of Central Excise Tariff for the purpose of computation of assessable value for payment of duty of central excise. - No demand - Decided against the revenue.

Summary

Issues:
- Inclusion of electrolyte and micro porous vent plug with float in the assessable value of dry charged batteries.

Analysis:
The appeal pertains to a case involving the classification and assessable value of Dry Charged Batteries under Chapter heading 8507.00 of the Central Excise Tariff. The Revenue challenged an Order-in-Original that dropped proceedings against the respondent regarding a show-cause notice dated 22.03.2002. The main contention of the Revenue was that electrolyte and micro porous vent plug with float, cleared along with the batteries, should have been included in the assessable value of the batteries as integral parts necessary for their functioning.

The Revenue argued that these items were essential components of dry batteries without which the batteries could not function properly. However, the respondent contended that dry charged batteries could be supplied separately without electrolytes, relying on technical literature and judicial decisions supporting their position. They highlighted that dry charged batteries were marketable without electrolyte, and customers had the option to purchase electrolytes separately.

The Commissioner, in the impugned order, held that the selling price of electrolyte and micro porous vent plug with float should not be included in the assessable value of the batteries. The order reasoned that electrolyte was not a part of the battery when supplied separately, and the vent plug was an optional accessory provided in addition to the battery. The order relied on technical literature and judicial decisions to support this conclusion.

The Tribunal carefully considered the arguments, technical literature, and relevant case laws. It noted that dry charged batteries could be supplied without electrolytes based on customer preferences. The Tribunal found that the supplied items were additional components provided separately and not integral parts of the batteries. It emphasized that no cenvat credit had been taken for these items, further supporting the exclusion of their value from the assessable value of the batteries.

Ultimately, the Tribunal upheld the impugned order, concluding that electrolytes and micro porous vent plug with float were not to be treated as parts of dry charged batteries for the purpose of computing the assessable value for central excise duty payment. The Revenue's appeal was rejected based on the technical evidence, literature, and judicial precedents presented in the case.