2011 (6) TMI 729 - AT - Central Excise

Tribunal sets aside orders, remands for re-computation, penalties revoked, fresh decision required.

WALCHANDNAGAR INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., PUNE-III

WALCHANDNAGAR INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., PUNE-III - 2014 (311) E.L.T. 274 (Tri. - Mumbai) Issues Involved:1. Inclusion of the value of bought-out items in the assessable value of Centrifugal Machines.2. Applicability of excise duty on bought-out items supplied directly to customers.3. Re-computation of differential duty considering duty paid on bought-out items.4. Extension of cum-duty benefit.5. Imposition of penalties on the appellants.Issue-wise Detailed Analysis:1. Inclusion of the Value of Bought-Out Items in the Assessable Value of Centrifugal Machines:The core issue was whether the value of bought-out items like electric motors and control panels, which were directly supplied to customers, should be included in the assessable value of the Centrifugal Machines manufactured by the appellants. The appellants argued that these items were not integral parts of the machines and were not manufactured by them, hence should not be included in the assessable value. They cited several precedents where it was held that excise duty is a tax on manufacture and should be restricted to goods manufactured by the assessee. The Tribunal, however, noted that the centrifugal machines were incomplete without these items, as they were essential for the machines to function. The Tribunal referred to various purchase orders where the appellants had guaranteed the performance of the machines along with the bought-out items, indicating their integral nature. The Tribunal concluded that the value of these bought-out items should be included in the assessable value of the centrifugal machines.2. Applicability of Excise Duty on Bought-Out Items Supplied Directly to Customers:The appellants contended that since the bought-out items were supplied directly to customers and did not enter their factory premises, no excise duty could be levied on them. They argued that excise duty is applicable only on goods manufactured by the assessee. The Tribunal, however, relied on the Supreme Court's decision in the MIL India Ltd. case, which stated that the inclusion of the value of bought-out items in the assessable value depends on the facts of each case. The Tribunal observed that the centrifugal machines were tested with electric motors and control panels before dispatch, indicating that these items were essential for the machines' functionality. Therefore, the Tribunal held that the value of bought-out items supplied directly to customers should be included in the assessable value of the centrifugal machines.3. Re-computation of Differential Duty Considering Duty Paid on Bought-Out Items:The Tribunal noted that the Commissioner had previously allowed the adjustment of duty paid on bought-out items while calculating the differential duty. This benefit was not challenged by the Revenue and should have been considered during the de novo adjudication. The Tribunal directed the original adjudicating authority to re-compute the differential duty after adjusting the duty paid on bought-out items, treating the value as cum-duty value.4. Extension of Cum-Duty Benefit:The appellants requested the extension of the cum-duty benefit, arguing that the amount realized should be treated as inclusive of duty. The Tribunal agreed with this submission and directed the original adjudicating authority to consider the cum-duty benefit while re-computing the differential duty.5. Imposition of Penalties on the Appellants:The Tribunal observed that the dispute was a continuing one and involved interpretation of law and valuation. The initial order dated 18-12-1989 had already taken the view that no penalty was imposable, and the extended period was not invocable. Considering the ongoing nature of the dispute and the question of law interpretation, the Tribunal set aside the penalties imposed on the appellants in various orders.Conclusion:The Tribunal set aside the impugned orders and remanded the matter to the original adjudicating authority for re-computation of differential duty after considering the duty paid on bought-out items and treating the value as cum-duty value. The penalties imposed on the appellants were also set aside. The Tribunal emphasized the need for a fresh decision in terms of the observations made, ensuring a reasonable opportunity for the appellants to present their case.