Bought-out rectifier treated as separate item, not integral welding-set component; assessable value and extended limitation were rejected.

A separately purchased and separately supplied bought-out rectifier did not lose its independent identity merely because it acted as the power source for a welding set. The analysis states that Section Note 4 of Section XVI applies only where components form a complete machine, and here the rectifier was not treated as an integral component requiring inclusion in assessable value or denial of exemption under Notification No. 175/86. It also explains that the extended limitation period was unavailable because the records disclosed the rectifier as traded goods and there was no suppression of material facts.

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Issues: (i) Whether the welding rectifier, purchased from the market and supplied along with the welding torch and wire feeder, formed an integral component of the welding set so as to require inclusion of its value in the assessable value and to deny exemption under Notification No. 175/86; (ii) whether the demand was barred by limitation and the extended period was invocable.

Issue (i): Whether the welding rectifier, purchased from the market and supplied along with the welding torch and wire feeder, formed an integral component of the welding set so as to require inclusion of its value in the assessable value and to deny exemption under Notification No. 175/86.

Analysis: The rectifier was a bought-out item, separately ordered and separately priced, and no further work or assembly was done on it before supply. It functioned as a power source, but that fact alone did not make it a component of the welding set. The Tribunal held that Section Note 4 of Section XVI applied only where individual components go to form a complete machine, and the facts showed that the rectifier retained its separate identity. The reasoning in the cited authority dealing with assembled bought-out components was distinguishable.

Conclusion: The rectifier was not an essential component of the welding set, and its value was not required to be included in the assessable value; the assessee was entitled to the exemption consequence flowing from that conclusion.

Issue (ii): Whether the demand was barred by limitation and the extended period was invocable.

Analysis: The department had been informed that rectifiers were traded goods and proper records were maintained. There was no suppression of material facts merely because the assessee treated the rectifier separately in its records. In the absence of concealment, the extended period could not be sustained.

Conclusion: The demand was barred by limitation and invocation of the extended period was not justified.

Final Conclusion: The impugned order was set aside on merits as well as on limitation, and the appeal succeeded with consequential relief.

Ratio Decidendi: A separately purchased and separately supplied bought-out item does not become an integral component of the final excisable machine merely because it performs a necessary ancillary function, and the extended period of limitation cannot be invoked absent suppression of material facts.

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