2017 (5) TMI 46 - AT - Central Excise

Spare parts not part of final product: Tribunal orders separate duty assessment

The Tribunal held that spare parts supplied with excavator loaders should be assessed separately and not considered part of the final product. Demanding ... CENVAT credit - spare parts - along with excavator, supplied kits which are in the nature of spares parts - department is of the view that the goods supplied along with the excavator are clearances of inputs on which cenvat credit has been taken and therefore, the appellants are required to reverse the amount of equal to the cenvat credit taken on inputs - Held that: - in the appellants own case for the earlier period on the identical issue this Tribunal remanded the matter back to the adjudicating authority - we also remand matter back to the adjudicating authority to pass an appropriate order after affording reasonable opportunity to the appellant to present their case - appeal allowed by way of remand. Issues involved:- Appeal against impugned orders regarding denial of cenvat credit on inputs supplied along with excavator loaders.- Whether spare parts supplied with excavator loaders are to be considered part of the final product or assessed separately.- Validity of demanding duty separately on spare parts supplied along with excavator loaders.- Remand of the matter back to the adjudicating authority for fresh adjudication.Analysis:The appellant, engaged in manufacturing Excavator Loaders, appealed against orders denying cenvat credit on inputs supplied with the loaders. The case revolved around supplying spare parts along with excavators at a maintained overall price due to market conditions. The department contended that these spare parts were clearances of inputs on which cenvat credit had been taken, requiring the appellant to reverse the credit amount. Various show cause notices were issued, leading to confirmed demands against the appellant, including interest and penalties. The appellant argued for a remand based on a previous Tribunal decision where the demand had been dropped during remand proceedings. The Tribunal considered both sides' submissions and observed that spare parts supplied with excavators did not become part of the loaders. The Tribunal agreed with the appellant's argument that demanding duty separately on spare parts after charging duty on the composite price was akin to double taxation. The Tribunal directed the original authority to determine the value of excavators and spare parts separately for duty liability calculation, setting aside lower authorities' orders and remanding the matter for fresh consideration. The Tribunal emphasized granting a reasonable opportunity for the appellant to present their case during the fresh adjudication.The Tribunal's decision highlighted that spare parts supplied with excavators should not be considered part of the final product and should be assessed separately. The Tribunal acknowledged the market strategy of maintaining the overall price by supplying spare parts and deemed demanding duty separately on spare parts as double taxation. The Tribunal remanded the matter back to the adjudicating authority to determine the value of excavators and spare parts separately for appropriate duty liability calculation. The Tribunal stressed affording the appellant a reasonable opportunity to present their case during the fresh adjudication process.