Custom, Excise & Service Tax Tribunal
Unknown vs Represented By : Shri Paritosh Gupta ... on 11 February, 2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad COURT Appeal No. : E/40,41,42,43,44/2006-DB E/594/2012-DB Arising out of : OIA Nos. 84 to 88/ 2006 (Ahd-III) CE/ DK/ Comr (A) dated 29.06.2006 Passed by : The Commissioner (A), CE, Ahmedabad II For approval and signature : Mr. H.K. Thakur, Hon.ble Member (Technical) Mr. M.V. Ravindran, Hon.'ble Member (Judicial) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : 1. M/s Intellicon Pvt Ltd 2. Mr Sameer Parekh, 3. Ms Meeta Trivedi 4. Mr Pradeep H Shah, 5. Mr Asish C Shah 6. CCE & ST, Ahmedabad III Represented by : Shri Paritosh Gupta (Adv.) Respondent (s) : 1. CCE & ST, Ahmedabad III
2. M/s Intellicon Pvt Ltd Represented by : Shri G P Thomas (AR) CORAM :
Mr. H.K. Thakur, Hon.ble Member (Technical) Mr. M.V. Ravindran, Hon.'ble Member (Judicial) Date of Hearing : 27/01/2014 Date of Decision : 11/02/2014 ORDER No. A/10163-10168/2014 dated 11.02.2014 Per : Mr. H K Thakur, These appeals E/ 40-44/ 2006-DB are directed against Orders in Appeal Nos. 84 to 88/ 2006 (Ahd-III) CE/ DK/ Comr (A) dated 29.06.2006 passed by the Commissioner (Appeals-II), Central Excise, Ahmedabad.
2. Since the issue involved in the above appeals is the same, therefore, all of these are being disposed of by a common order.
3. In Appeal No. E/ 40/ 2006-DB, filed by the main appellant M/s Intellicon Private Limited, manufacturer of EPABX systems, the issue to be decided is whether the value of bought-out LCC (Line Circuit Card) supplied separately as traded goods, along with the EPABX systems, is includible in the assessable value of the EPABX systems for the purpose of charging central excise duty.
4. Shri Paritosh Gupta, learned advocate appearing on behalf of the appellants, argued that the main appellant had been selling the EPABX systems to its various customers with or without LCCs; that the purchase of LCCs by the customers of the EPABX from the appellant was optional and not mandatory; that EPABX was fully manufactured and saleable commodity without even a single LCC; and that most of the EPABX systems manufactured by the appellant were actually sold without even a single LCC thereby proving beyond doubt that the EPABX system was not only known as fully manufactured goods in the trade without LCCs but was being actually sold as such without LCC in the market. He relied upon the following case laws in support of his argument that the value of bought out LCC sold separately along with the manufactured EPABX system was not includible in the assessable value:
(a) Webel Telecommunications (India) Limited Vs. Collector of Central Excise, Calcutta [ 1987 (32) ELT 453 (Tribunal)];
(b) National Radio and Electronics Co. Limited Vs. Collector of Central Excise, Bombay [1995 (76) ELT 436 (Tribunal)];
(c) Beaco Weir Limited Vs. Commissioner of Central Excise, Madras [1997 (95) ELT 140 (Tribunal)];
(d) Diamond Clock Manufacturing Co. Limited Vs. CCE, Pune [1988 (34) ELT 662 (Tribunal)] ; and
(e) Neptune Equipments Private Limited Vs. Commissioner of Central Excise, Ahmedabad [2010 (259) ELT 588 (Tri. Ahmd.)].
5. On the other hand Shri G. P. Thomas (AR) argued that the LCC was essential and integral part of the EPABX system without which the whole EPABX system could not function and hence the value of the LCC includible in the assessable value of the EPABX system when sold along with the system.He stongly defended the orders passed by the Adjudicating authority and the first appellate authority
6. We have considered the arguments of both sides and perused the case records.
7. We note that in the present case most of the EPABX systems were sold without LCCs thereby proving that the EPABX without LCCs was fully manufactured goods and that the supply of LCCs (bought out item) was optional depending upon the requirement of the customers. The LCC is not fitted into the EPABX system at the time of clearance from the appellants factory, but the same is supplied separately from their trading unit situated within separately demarcated premises in the same plot B-20, GIDC Electronic Estate, Sector 25, Gandhinagar. In the matter of National Radio and Electronics Co. Limited Vs. Collector of Central Excise, Bombay (supra), the Tribunal held in Para 4.6 as follows:
4.6 We have considered the submissions on this issue. It was held in the case of Kerala State Electronics Development Corporation that Battery is an integral and indispensable part of the UPS system and, accordingly, value of battery is to be included in the assessable value of UPS system. If it was purely optional whether cost of such optional item was to be included or not was not an issue in that case. Similarly issue with reference to optionality was neither raised nor considered in the cases referred to by the Departmental Representative in support of his contentions as it was rightly pointed out by Shri Hidayatullah. There may be conflicting decisions on the issue whether cost of bought out items is to be included or not in determining the assessable value of the main product manufactured by the assessee depending upon the nature, characteristic and essentiality of the bought out items if they were supplied with the main item. But we do not find such conflicting decision on the issue with reference to optionality. Hence we do not find any justification to refer it to a larger Bench. We have taken the view in the case of Uptron India Ltd., that the value of bought out items is includible even if they are not essential for the operation of manufactured goods provided they are fitted or attached to the goods before clearance. If the parts or accessories are fitted at the option of the customer then they cannot be described as essential or integral parts of the products to which they are affixed or attached and their cost is not includible in the value of the main product unless there are special provisions in the relevant tariff entry. Although matter was remanded by giving a direction to examine whether they were essential or optional ones, but it was held to exclude the cost of bought out items if they were optional. Similarly, in the present case also it was contended before us that battery and other bought out items were supplied to customers on a purely optional basis according to their individual requirements wherever specifically they placed orders for supply of such items. This aspect was not examined by the authorities below. Since the factual position requires thorough examination on this issue, we are remanding the matter to the concerned Adjudicating Authority for detailed examination. The Jurisdictional Assistant Collector is directed to examine this issue with reference to the nature of contract between the parties and if the bought out items are only optional and if there are instances where the item manufactured by the assessee was supplied without these bought out items as contended on behalf of the party then the value of such items is to be excluded. The Assistant Collector is directed to pass an order on detailed examination after providing an opportunity to the party. 7.1 In the case of Webel Telecommunications (I) Limited Vs. Collector of Central Excise, Calcutta (supra), the Tribunal held as follows:
7. We have considered the arguments of both sides. We have perused the invoices. The appellants have, before us, asserted that their equipment can be sold without the cable and did mention some institutions who purchase the goods without the cables. There is nothing in the impugned order to show that the base stations and walkie talkie do not function without the cable. The unchallenged statement that the appellants sell the units without cable shows that the cable could not be considered as an essential part of the equipment. It is also beyond doubt that these cables are bought out-items and are dealt with by the appellants as part of their trading operations and not as part of their manufacturing activities. We have also perused a copy of the Appellate order passed by the Collector on 6.10.1986 in respect of the same appellants.
8. Taking into consideration all these facts and circumstances, we hold that for the purpose of assessment of the base stations and walkie talkies manufactured by the appellants, the value of cable which is not an integral part of the sets but is an optional accessory should not be included in the value of the sets. Accordingly we allow this appeal. 7.2 Similarly, in the case of Diamond Clock Manufacturing Co. Limited Vs. CCE, Pune (supra), the Tribunal held as under:
23. The appellants claim that Anand Traders have supplied bought-out items to their customers. These consisted of cable, bracket and adopter. It appears that these three are essential for the operation of the meter but they are not manufactured by the appellants nor they are fitted into the machines before clearance. If this is the factual position and only incomplete machines are cleared from the Diamonds factory, the value of such parts supplied to customers by Anand Traders later should not be included. 7.3 We find that the appellants case is squarely covered by the aforesaid decisions of the Tribunal.
8. In view of the above observations, the main appellants appeal No E/ 40/ 2006-DB is allowed by setting aside the Order in Appeal dated 29.06.2006 passed by the Commissioner (Appeals-II), Central Excise, Ahmedabad.
9. As the main appeal succeeds on merits, there is no point in imposition of on the other appellant. Accordingly, appeals filed by Shri Sameer Parekh, Smt. Meeta Trivedi, and Shri Pradeep H. Shah, are also allowed by setting aside the Orders in Appeal dated 29.06.2006 passed by the Commissioner (Appeals-II), Central Excise, Ahmedabad.
10. Appeals filed by the appellants are allowed.
(Pronounced in the Open Court on 11.02.2014) (M.V. Ravindran) (H.K. Thakur) Member (Judicial) Member (Technical) swami 5