Assessable value of factory-cleared goods excludes separately supplied bought-out items installed at the customer's premises.

Duty on bought-out items supplied to a customer's site cannot be sustained on a ground that goes beyond the show cause notice; a new theory that manufacture arose only at the site was outside the notice and unsupported by factory-stage assembly. Where excisability is said to arise only at the customer's premises, enforcement must be by the proper officer having territorial jurisdiction over that site, and a demand by an officer without such jurisdiction is not sustainable. Bought-out items separately installed at the customer's premises are not includible in the assessable value of goods cleared from the factory when no factory-stage assembly, erection, or testing is shown.

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Issues: (i) Whether duty could be demanded on bought-out items supplied to the customer's site on the footing that they were integral and essential parts of the complete machine, and whether a Revenue plea extending to manufacture at the customer's site was within the scope of the show cause notice; (ii) Whether, if excisability was said to arise only at the customer's premises, the demand could be raised by the Central Excise Officer who had no territorial jurisdiction over that site; (iii) Whether bought-out items installed at the customer's premises were includible in the value of the excisable goods cleared from the factory.

Issue (i): Whether duty could be demanded on bought-out items supplied to the customer's site on the footing that they were integral and essential parts of the complete machine, and whether a Revenue plea extending to manufacture at the customer's site was within the scope of the show cause notice.

Analysis: The notice proceeded on the allegation that the bought-out items were integral and essential to the complete machine. It did not propose a demand on the separate basis that manufacture arose only after assembly or erection at the customer's site. A ground of appeal cannot travel beyond the charge set out in the notice. The facts also showed that no assembly or erection was carried out in the factory so as to support the Revenue's expanded theory.

Conclusion: The Revenue's enlarged contention was beyond the scope of the notice and could not sustain the demand.

Issue (ii): Whether, if excisability was said to arise only at the customer's premises, the demand could be raised by the Central Excise Officer who had no territorial jurisdiction over that site.

Analysis: If the goods were said to become excisable only at the customer's premises, the levy could be enforced only by the proper officer having jurisdiction over that site. A demand raised by an officer lacking such territorial jurisdiction was not legally sustainable.

Conclusion: The jurisdictional objection succeeded and the demand was not valid on this footing.

Issue (iii): Whether bought-out items installed at the customer's premises were includible in the value of the excisable goods cleared from the factory.

Analysis: The established line of authority treated bought-out items supplied separately and installed at the customer's site as outside the value of the goods manufactured and cleared from the factory, especially where no factory-stage assembly, erection, or testing was shown. The Board's circulars and the cited decisions supported the settled view that such items were not to be treated as part of the assessable manufacture from the factory.

Conclusion: Bought-out items installed at the customer's premises were not includible in the assessable value of the factory-cleared goods.

Final Conclusion: The Revenue failed to show any legal error in the order under challenge, and the demand and penalty were not restored.

Ratio Decidendi: A duty demand cannot be sustained on a ground that travels beyond the show cause notice, and bought-out items separately supplied and installed at the customer's premises are not part of the assessable value of the goods manufactured and cleared from the factory.

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