Order date – 12 December 2022

Facts –

• The Appellant, M/s. Thermax Ltd. are engaged in the manufacture of various types of excisable goods viz. "Boilers, Thermo Fluid Heater, Hot Water Generator, Economiser Super Heater, Vapour Absorption Heat Pump, etc." falling under Chapter 84 of the First Schedule to the Central Excise Tariff Act, 1985.
• On scrutiny of the records, it was observed that appellant executed various composite Contracts for sale of the above said excisable goods, which include Erection & Commissioning of the Boilers, at customer's site.
• While determining the transaction value of the excisable goods, the elements like spares, bought out items/ parts, which are used in Erection/Installation/Commissioning of the Boilers, were not taken into account, as required under Section 4(1) (a) of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation Rules, 2000.
• During the period from July 2000 to March, 2004, appellant had willfully suppressed the transaction value with an intention to evade duty of the finished goods by not adding the cost of essential spares/bought out parts, charges of Erection, Installation and Commissioning etc.
• Accordingly duty along with interest and penalty was imposed on the appellant,

Issue –

• Whether the value of bought-out items received at the site and used in the erection of boilers are liable to be added to the assessable value of boilers under the Central Excise Act?

Order –

• The Tribunal observed that finding of the Commissioner that all the systems received at the site of the erection of the Boiler, do not essentially constitute as essential parts of the boiler required for the erection and commissioning of the boiler. Certain parts as noted by the Hon’ble Apex Court will be in nature of auxiliaries etc., however they in view of the HSN explanatory note continue to be classified as Boiler under heading 8402.10 and not under the heading 8402.90. 
• The Tribunal relied on the decision of this Tribunal in case of the Appellant [2005 (182) E.L.T. 336 (Tri. – Mumbai)] held that the Commissioners’ contention that because a boiler has been removed in unassembled form from the respondents’ factory the value of bought out items should not be included is incorrect; accordingly, set aside to that part of the Commissioner’s order.
• Further impugned order also has sought to add certain undetermined charges under the category of design and engineering head, in the garb of brought out items. The charge of undervaluation of the goods has been made even without reference to the supplier of these brought out items. If there was any undervaluation of these items then the demand of duty should have been made on the supplier of these brought out items. Admittedly and undisputedly these brought out items were not even brought into the premises of appellant.
• Appeals are allowed as the impugned orders cannot be sustained on grounds of jurisdiction and merits.