1998 (7) TMI 174 - AT - Central Excise

Appellate Tribunal rules in favor of manufacturer in excise duty dispute

The Appellate Tribunal CEGAT, New Delhi dismissed the appeal by the Collector of Central Excise, affirming the order-in-appeal that dropped the demand ... Valuation Issues:- Appeal against order-in-appeal reversing order-in-original and dropping the demand.- Inclusion of value of spare parts in assessable value of goods cleared.- Interpretation of duty liability on replacement parts supplied.Analysis:The appeal before the Appellate Tribunal CEGAT, New Delhi involved the Collector of Central Excise challenging the order-in-appeal that reversed the order-in-original and dropped the demand. The case revolved around the inclusion of the value of spare parts in the assessable value of goods cleared by the respondent, a manufacturer of Food Processors and excisable goods. The respondent was clearing food processors, but the spare parts like relay and rotary switches were not mentioned in the price lists or classification lists. The issue arose when the Department proposed a demand for differential duty on the value of these spare parts supplied either free of cost or for consideration to wholesale dealers. The respondent argued that as these spare parts were not manufactured by them and were supplied for replacement during and after warranty periods, their value should not be added to the assessable value of the food processors.The Assistant Collector initially confirmed the demand based on a Tribunal decision but the Collector (Appeals) later reversed this decision, leading to the Department's grievance. The show cause notice clarified that the demand related only to the cost of rotary switches and relays supplied as replacement or spare parts. The Tribunal emphasized that duty had already been paid on the correct assessable value of the food processors when initially cleared. The value of replacement parts supplied later, whether free or for a price, should not be added to the value of the complete products cleared earlier. The Tribunal distinguished the reported decision of W.H. Brady & Co. v. Collector, stating that the spare parts in that case were manufactured and cleared by the appellant, making them dutiable.In the W.H. Brady & Co. case, the Tribunal found that the spare parts were excisable goods and dutiable, as the manufacturer had cleared them without following procedures or paying duty. The manufacturer had agreed to discharge the duty liability, leading the Tribunal to uphold the duty payment requirement. The Tribunal in the present case concluded that the reported decision did not establish a contrary principle of law. It highlighted that the supply of bought-out spare parts was part of the trading activity of the appellant. Ultimately, the Tribunal found no grounds to interfere with the order passed by the Collector (Appeals) and dismissed the appeal, affirming that the value of spare parts need not be included in the assessable value of the food processors.