2010 (12) TMI 390 - AT - Central Excise

Demand - Misdeclaration of value - Appellants are engaged in the manufacture of tea dryers which are cleared as Tempest Combination Tea Dryer from the factory of production at Tezpur under the cover of invoices mentioning different specifications - Held that - In respect of the parts which are procured and supplied by the head office at Kolkata which had not gone into the factory at Tezpur and directly sent to the tea estates we find as the same are not cleared from the factory of production at Tezpur as parts of machine therefore are not liable for central excise duty as the same are to be treated as traded item. - Heater is not essential part of the machine manufactured and cleared by the Appellant. Commissioning and installation is not part of manufacture and also over-hauling of machine does not amount to manufacture therefore the demand in this respect is not sustainable - In respect of bought out items the value of which is to be added to the assessable value of the machine the Appellants are entitled for credit in accordance with law - Decided in the favour of assessee

Summary

Issues:
- Duty demand on un-assembled components
- Demand on over-hauling, re-installation, and commissioning charges
- Treatment of bought out items in assessable value
- Liability of duty on heaters
- Personal penalty on individual appellant

Analysis:

The appeal was filed against an order confirming duty demand and penalty on the firm for dispatching essential components of Tempest Combination Tea Dryers in un-assembled conditions. The adjudicating authority upheld the demand on this account and also on charges related to over-hauling, re-installation, and commissioning. The contention of the appellant was that appropriate duty was being paid on what was manufactured in the factory, while bought out items were not subjected to duty. The main dispute was regarding heaters, with the appellant arguing that heaters were not part of the machine manufactured by them. They also disputed demands related to over-hauling, installation, and commissioning charges, stating that these activities did not amount to manufacturing. The appellant explained the assembly process and transportation of dryers during the proceedings.

The Tribunal found that the parts used in the manufacture of dryers in the factory of production should have their value added to the assessable value of the machine cleared from the factory. However, parts procured and supplied directly to tea estates from the head office were not liable for central excise duty as they were treated as traded items. Regarding heaters, the Tribunal noted that the demand was for more dryers than the heaters supplied by the appellant, and heaters were not considered essential parts of the machine. The demand on over-hauling, installation, and commissioning charges was deemed unsustainable as these activities did not constitute manufacturing, and there was no allegation of price suppression in the Show Cause Notice.

The appellant agreed to re-calculate the duty and pay it within three months, with the adjudicating authority reassessing the duty liability and penalty. The appellant was entitled to credit for bought out items in accordance with the law. The personal penalty on one of the appellants was set aside as there was no finding of intent to evade duty payment. The appeal of the individual appellant was allowed, and the appeals were disposed of accordingly.