Excise valuation of bought-out components excluded from assessable value where separately purchased items are not manufactured goods

Bought-out piston rings and circlips were held outside the assessable value of piston assemblies because excise valuation can extend only to goods manufactured by the assessee, not to independently procured items supplied along with them. Although the Revenue relied on expert opinion treating the rings and circlips as essential parts of a piston assembly, the tariff scheme treated the goods as parts of engines, and separate purchase, sale and billing showed that they were not part of the manufactured goods. Supply or assembly convenience did not convert bought-out components into manufactured goods. The demand and penalty were not sustainable.

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Issues: Whether the value of bought-out piston rings and circlips was includible in the assessable value of piston assemblies cleared by the manufacturer.

Analysis: The dispute turned on whether piston rings and circlips, though used with pistons in an assembly, could be treated as parts of the manufactured piston so as to enlarge the assessable value. The expert opinion relied upon by the Revenue described them as essential parts of a piston assembly, but the tariff scheme treated the goods as parts of engines and not as a single composite piston assembly. The items were also separately bought, sold and billed, and the fact that they were sometimes supplied together or assembled for convenience did not make the bought-out items part of the manufactured goods. Excise duty being on manufacture, valuation could extend only to the goods manufactured by the assessee and not to independently procured items merely supplied along with them.

Conclusion: The bought-out piston rings and circlips were not includible in the assessable value of the piston assemblies, and the demand and penalty could not be sustained.

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