Optional bought out item cost excluded from excisable value where the item was not inseparable from the final product.

The assessable value of insulating varnish did not include the cost of a catalyst supplied as an optional bought out item, because the option to supply it was asserted at the earliest stage and was not rebutted by the Revenue. Earlier Tribunal decisions were applied to hold that optional bought out items are excluded from excisable value when they are not shown to be an inseparable part of the manufactured product. The contrary decision relied on by the Revenue was treated as distinguishable on its facts, since optional supply was not established there. The departmental challenge therefore failed, and the exclusion of the catalyst value from assessment was sustained.

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Issues: Whether the value of catalyst supplied with insulating varnish as an optional bought out item was includible in the assessable value of the insulating varnish for central excise duty.

Analysis: The respondents' stand that supply of catalyst was optional was taken at the earliest stage and was not rebutted by the Revenue. On those facts, the principle applied in earlier Tribunal decisions was that the cost of optional bought out items is not includible in the assessable value of the final product. The cited decision relied upon by the Revenue was found distinguishable because, on its facts, optional supply of bought out items was not established.

Conclusion: The value of the optional catalyst was not includible in the assessable value of insulating varnish, and the departmental appeal failed.

Final Conclusion: The impugned order excluding the catalyst value from assessment was sustained, with no basis found to interfere with the relief granted to the assessee.

Ratio Decidendi: The cost of a bought out item supplied optionally and not shown to be an inseparable part of the manufactured product is not includible in the assessable value of that product for central excise duty.

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