Trading concern not treated as manufacturer for excise; bought-out components could not be added on an unpleaded undervaluation theory.

A trading concern with no factory or manufacturing infrastructure cannot be treated as the manufacturer for central excise purposes merely because it arranges supply of textile machinery parts and bought-out items through other units. Liability cannot be fastened on an unpleaded theory of undervaluation or related-person dealings when the show cause notice proceeds on a different basis. On the admitted facts, the concern had no direct role in manufacture, assembly, erection, or commissioning, so the demand and penalties could not be sustained. Bought-out components supplied in the course of trading also could not be added to the assessable value on that footing.

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Issues: Whether a trading company having no manufacturing unit could be treated as the manufacturer liable to central excise duty for textile machinery fabricated by other units and delivered through it, and whether the value of bought-out components procured by it could be added to the assessable value.

Analysis: The notice showed that the actual manufacturing activity was carried on by other units, while the appellant was engaged in trading and arranging supply of machine parts and bought-out items to customers. The finding of liability against the appellant was based on a theory of undervaluation and related-person dealings, but that basis was not the case set out in the show cause notice. On the admitted facts, the appellant had no factory, no manufacturing infrastructure, and no direct role in manufacture, assembly, erection, or commissioning. In such a situation, the appellant could not be treated as the manufacturer, and the value of bought-out items supplied in the course of trading could not be added to the assessable value on the footing adopted by the adjudicating authority.

Conclusion: The appellant was not liable to be treated as the manufacturer for excise duty purposes, and the demand and related penalties could not be sustained.

Final Conclusion: The common order confirming duty and penalties was unsustainable, and the appeals were allowed.

Ratio Decidendi: A trading concern with no manufacturing unit cannot be fastened with central excise liability as the manufacturer merely because it arranges supply of manufactured parts and bought-out components to customers, and such bought-out items cannot be added to assessable value on an unpleaded theory of undervaluation.

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