Bought-out items supplied directly to customer for furnace installation exempt from central excise duty under composite contract

CESTAT Kolkata held that bought-out items supplied directly to customer premises for industrial furnace installation are not includable in assessable value for central excise duty. The tribunal ruled that under a composite contract for supply, installation and commissioning, bought-out items become part of immovable property after furnace erection, thus exempt from excise duty. The appellant had already discharged duty on manufactured components. Demand for duty, interest and penalty was set aside as unsustainable. Appeal allowed.

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Issues:
The issues involved in the judgment are the demand of Central Excise Duty including AED, NCCD, Ed. Cess, and secondary and higher Ed. Cess amounting to Rs. 3,64,96,755/- confirmed for the period of 2010-2011 and 2014-2015 by invoking the extended period of limitation.

Summary:
The Appellant, engaged in manufacturing excisable goods, filed an appeal against the Order-in-Original confirming the demand of Central Excise Duty. The Appellant argued that excise duty was payable only on components manufactured by them, not on bought-out items used for erection of the furnace. They cited precedents to support their contention.

The Appellant contended that the bought-out items supplied were part of the immovable property under a composite contract with customers, hence not subject to excise duty. They also argued against the invocation of the extended period of limitation, citing no fraud or intent to evade duty.

After hearing both sides, the Tribunal analyzed the nature of the agreement between the Appellant and customers. It was found that the bought-out items became part of the immovable property after erection of the furnace, thus not liable for excise duty. Precedents were cited to support this conclusion.

The Tribunal referenced the decision in TRANSRAIL LIGHTING LTD. case and other judgments to emphasize that bought-out items supplied with manufactured goods are not includible in the assessable value for excise duty purposes. Consequently, the demand for excise duty was deemed unsustainable, leading to the appeal being allowed.

In conclusion, the impugned order confirming the demand was set aside, and the appeal by the Appellant was allowed.

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