Tribunal excludes bought-out items from valuation for excise duty, rejects Revenue's integration argument

The Tribunal upheld the Order-in-Original, ruling that the bought out items for waste heat recovery boilers need not be included in the valuation for central excise duty. The respondent's procurement of these items directly to clients' premises, where they became immovable after assembly, supported this decision. The Tribunal rejected the Revenue's argument that the items were integral to the boilers, emphasizing the distinction in the supply process. The appeal was dismissed, affirming the correctness and legality of the initial order.

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Issues:
Valuation of bought out items for central excise duty on waste heat recovery boilers.

Analysis:
The appeal was filed by Revenue against an Order-in-Original regarding the valuation of bought out items for central excise duty on waste heat recovery boilers. The respondent, a manufacturer of waste heat recovery boilers, procured certain bought out items like valves, PLC panel, and silencers, which were directly delivered to the clients' premises. Revenue authorities contended that the value of these bought out items should be included in the valuation for central excise duty. However, the adjudicating authority, after due process, concluded that the bought out items need not be included in the valuation of the boilers. The Revenue challenged this decision, leading to the appeal.

The Revenue argued that the bought out items were essential and integral parts of the manufactured boilers, forming a composite work order, and should be included in the assessable value. They relied on a Tribunal judgment upheld by the Supreme Court to support their position.

On the other hand, the respondent contended that the orders were for the supply of waste heat recovery boilers, and the value of bought out items was not separately indicated. The respondent did not avail CENVAT credit on the central excise duty paid for the bought out items. They distinguished the Revenue's relied-upon judgment based on the direct supply of bought out items to the clients' site.

Upon careful consideration, the Tribunal found that the adjudicating authority's decision was correct. The respondent procured bought out items directly supplied to the clients' site, with the suppliers paying applicable central excise duty. The Tribunal referenced previous judgments to support their decision, emphasizing that the waste heat recovery boilers became immovable after assembly at the clients' site. Therefore, the reasoning adopted by the adjudicating authority was deemed correct and legal, leading to the upholding of the impugned order and the rejection of the appeal.

In conclusion, the Tribunal upheld the impugned order, stating it was correct, legal, and free from any infirmity. The appeal was rejected, and the decision was pronounced in open court on 14.03.2019.

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