2023 (4) TMI 709 - AT - Central Excise

Valuation - Erection Commissioning services - inclusion of value of bought out items supplied as such along with manufactured goods, in the assessable value or not - HELD THAT - There is no dispute on the fact that appellant are manufacturing lattice mast and during the course of manufacture no bought out items are used in the manufacture. The bought out items which is subject matter of the present dispute are purchased and thereafter sold as trading activity by the appellant. Even though the bought out items are supplied by the appellant as trading activity but the same is not part and parcel of the manufacture of lattice mast. At the most, this bought out items are used for completing and erection and installation of High Mast Tower. There is clear distinction between lattice mast manufactured by the appellant and High Mast Tower erected and installed at the site of the customers - it is clear that bought out items are neither used as parts nor accessories of the lattice mast as they are not required for manufacture of lattice mast. Therefore, trading activity of above items is separate activity which is independent from the manufacturing activity of the appellant. The manufacturing of lattice mast is an independent manufacturing activity for which except the material used in making lattice mast no further bought out items are required. Therefore, the bought out items in any way not taking part in the manufacture of lattice mast. This issue has been considered in various judgments that if any bought out items are supplied along with manufactured items, the value of the same cannot be included in the value of manufactured goods and this issue has been considered in KERALA STATE ELECTRONIC DEV. CORPN. VERSUS COMMR. OF C. EX., TRIVANDRUM 2007 (10) TMI 198 - CESTAT, BANGALORE where it was held that Bought out items such as cable, cards, etc., used for installation of machinery and its functioning, fact that they are bought out items on which excise duty has already been paid is not disputed - Hence value of such bought out items cannot be included in assessable value of machinery. There are many judgments cited by the learned Counsel wherein it was consistently held that value of bought out items supplied along with manufactured goods cannot be included in the assessable value of the manufactured goods. Therefore, the issue is no longer res-integra. Appeal allowed.

Summary

Issues Involved:
1. Inclusion of the value of bought-out items in the assessable value of manufactured goods.
2. Jurisdiction of the Commissioner, Silvasa.
3. Nature of High Mast Tower as immovable property.
4. Warranty implications on bought-out items.
5. Availability of Cenvat credit and cum duty price benefit.
6. Invocation of the extended period of limitation.

Summary:

1. Inclusion of the Value of Bought-Out Items:
The primary issue is whether the value of bought-out items supplied along with the manufactured lattice mast should be included in the assessable value of the manufactured goods. The appellants argued that the bought-out items are not part of the manufacturing process of the lattice mast and are supplied as a trading activity. The Tribunal found that the bought-out items are not used as parts or accessories in the manufacture of the lattice mast, and their value should not be included in the assessable value of the lattice mast. This conclusion aligns with several judicial precedents, including decisions in "Unitech Power Transmission Limited" and "Neycer India Limited," which upheld that the value of bought-out items supplied optionally cannot be included in the value of the manufactured goods.

2. Jurisdiction of the Commissioner, Silvasa:
The appellants contended that the Commissioner, Silvasa, lacked jurisdiction to issue show cause notices as the High Mast Towers emerged at the customers' sites, which are outside the jurisdiction of the Commissioner. The Tribunal did not explicitly address this issue in the judgment, focusing instead on the merits of the case.

3. Nature of High Mast Tower as Immovable Property:
The appellants argued that High Mast Towers are immovable properties once erected at the site and cannot be considered manufactured goods liable to excise duty. This argument was supported by the Supreme Court's decision in "Triveni Engineering & Industries Vs. CCE," which held that no excise duty is chargeable on immovable property. The Tribunal acknowledged this point, noting that the High Mast Tower is permanently attached to the earth and becomes immovable.

4. Warranty Implications on Bought-Out Items:
The appellants argued that providing a warranty for bought-out items does not imply that these items are part of the lattice mast. The Tribunal did not explicitly address this issue in the judgment, focusing on the broader argument that bought-out items are not part of the manufacturing process.

5. Availability of Cenvat Credit and Cum Duty Price Benefit:
The appellants claimed that if the demand for duty on bought-out items is confirmed, they should be entitled to Cenvat credit for the duty paid on these items and the benefit of cum duty price. The Tribunal did not explicitly address this issue, as the main argument regarding the non-inclusion of bought-out items in the assessable value was upheld.

6. Invocation of the Extended Period of Limitation:
The appellants argued that the extended period of limitation is not applicable as there was no willful suppression or misstatement of facts. The Tribunal found that the department was aware of the appellants' trading activities and the non-inclusion of bought-out items in the assessable value, making the invocation of the extended period of limitation incorrect. This conclusion was supported by precedents such as "CCE vs. Punjab Chem & Pharm."

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals with consequential relief, based on the merits of the case that the value of bought-out items should not be included in the assessable value of the lattice mast. The judgment aligns with established legal precedents and clarifies that the trading activity of bought-out items is separate from the manufacturing activity.