Customs, Excise and Gold Tribunal - Bangalore
Millipore (India) Ltd. vs Commissioner Of C. Ex., Bangalore on 5 March, 2002
Equivalent citations: 2002(142)ELT572(TRI-BANG)
ORDER G.A. Brahma Deva, Member (J)
1. Arguing for the appellant, Shri Parameswaran submitted that the short point to be considered in this case is whether value of the cartridges should be included or not in determining assessable value of the goods manufactured and cleared by the assessee. He also submitted that apart from that other issues are also involved in this instant case. He said that value as such cannot be included because it was not fitted to the main item at the time of clearing. In support of his contentions he referred to the decisions of the Tribunal in the case of Collector of Central Excise, Bhubaneswar v. Radiant Electronics Ltd. reported in 1996 (85) E.L.T, 102, wherein it was held that when the bought out items are supplied besides manufactured articles the value of such bought out articles is not includible even if they are essential for the operation of manufactured goods provided they are not fitted or attached to the goods before clearance and no process is undertaken for such bought out items. He said that in the instant case, the cartridges are not fitted to the main item i.e. MFS at the time of clearance.
2. Smt. Radha Arun, drew our attention to Para 27 of the impugned order which reads as under :-
"27. Annexure C2 is in relation to the various types of filters generally described as Micro Filtration Systems (MFS), partly cleared under Trading Invoices - (Cartridges) and partly under Manufacturing Invoices (Housing), and they have not paid duly on those filters cleared under Trading Invoices. The allegation in respect of this Annexure is that the assessees have deliberately raised 2 invoices - (1) Manufacturing invoice for Housings, (2) Trading Invoice for Cartridges. Since the Cartridges are integral parts of the Micro-Filtration System, its value should have been included in the assessable value of the Micro-Filtration System. The learned Advocate submitted that the assessees manufacture only Stainless Steel Housings meant for the MFS They do not assemble or manufacture Cartridges meant for HPWS. These cartridges cannot be used for MFS. The assessees were importing cartridges and these cartridges were sold directly to the customers as a part of the trading activity. The customers fit these cartridges into the housings manufactured and cleared by the assessees. It was also submitted that MFS is complete without cartridges. The cartridges are consumables and depending upon the use of the buyers of MFS housing, they periodically purchase the cartridges from MIPL or any other source, ft was the submission of the learned Advocate that since the assessees do not assemble or integrate cartridges with the Housings in their premises the value of the cartridges cannot be included in the value of the MFS. 1 have considered the submissions of the learned Advocate. In answer to question No. 105, Shri Sudhir Kant, Vice President of M/s. MIPL has stated that cartridges are integral parts of the High Purity Water System without which the purification of water cannot be done. The admitted position is that the Housings manufactured by M/s. MIPL are cleared on payment of duty and the cartridges imported which are meant for the housings are cleared without payment of duty.
The Honourable Tribunal in the case of Ingersoll Rand (India) Ltd. v. CCE, Bangalore reported in 1997 (20) RLT 722, have held that the drifter though is an imported item, since it is sent along with the Crawler Drill, its value has to be included in the assessable value of the Crawler Drill as the drifter is an integral part of Crawler Drill. In the case of Collector of Central Excise, Bhubanes-war v. Orient Engineers Pvt. Ltd., reported in 1995 (77) E.L.T. 188 it was held by the Tribunal that the price of bought out Electric Motor is includible in the assessable value of the Vibrating Feeder since it is an integral part of the Vibrating Feeders. Therefore, I am of the considered view that the imported cartridges which are integral parts of the Housings should be included in the assessable value of the Micro Filtration Systems. But it is seen from the records that the entire value of the cartridges have been included for the purpose of arriving at the differential duty liability. It is the submission of the learned Advocate that for a given Housing only a given number of cartridges are initially required for integration - for example, Single Place Housing needs 1 No. of Cartridge, 3 place Housing needs 3 Nos. of Cartridges and 5 place Housing needs 5 Nos. of Cartridges as described in the manufacturing Invoices. Other Cartridges are supplied as spares.
I agree with the submission of the learned Advocate. Since only a given quantity of cartridge is required for the original equipment and the rest of the cartridges are supplied as spares, only value of those cartridges which are integral parts of the MFS should be taken into consideration for arriving at the assessable value. It has been emphasized in the case of M/s. Gujarat State Fertilizers Co. Ltd. v. Collector of Customs, Bombay reported in 1996 (88) E.L.T. 549 that parts initially used in the assembly or manufacture of machines are treatable as component parts and if extra parts are imported and supplied these are in the category of spares. It is an admitted fact that the entire cartridges imported have not gone into the initial assembly of the Micro Filtration System. Accordingly, the duty liability works out. to Rs. 3,04,921 A."
Referring the averments in Para 27, she said that the Commissioner has given a clear finding that "Since only a given quantity of cartridge is required for the original equipment and the rest of the cartridges are supplied as spares, only value of those cartridges which are integral parts of the MFS should be taken into consideration for arriving at the assessable value". She submitted that whenever the cartridges were cleared along with the main item, they are considered to be an integral part of the main item. Accordingly Department was justified in denying the value of the cartridges.
3. There is no clear finding by the Commissioner whether cartridge was fitted to the main item at the time of clearance. It was vehemently argued that it was not fitted. In view of this factual discrepancy, we are of the view that the matter has to be examined in detail. In the view we have taken, we are remanding the matter to the concerned adjudicating authority to examine the issue afresh and to pass an order in accordance with law on providing an opportunity to the party. All the connected issues are kept open. Thus this appeal is disposed off in the above terms.