Per Shri V.K. Ashtana :

This is an appeal by revenue against the order-in-appeal No. 132/94 (M) dated 16.05.94 passed by the Collector of Central Excise (Appeals), wherein, the order-in-original has been set aside and that appeal allowed. The issue involved is whether the value of the "Circlips" which are bought out items but often packed along with the automobile pistons and gudgeon pins by the appellants is to be included in the assessable value of the said piston assembly.

2. Heard learned Consultant Shri Vijayaraghavan for the respondents and learned JDR Smt. Aruna Gupta for the appellants.

3. Briefly, the undisputed facts involved are that the respondents are manufacturers of automotive pistons, gudgeon pins etc. Their supplies are both to OE manufacturers of automobile engines as well as to wholesale buyers as replacement spares. Supplies to OE buyer is normally under one invoice which covers 3 items viz., pistons, gudgeon pins and circlips, but they are packed separately and not as a kit. For clearance as replacement spares, the respondents give an option to the buyer as to whether he wants all the 3 items packed together or he wants to purchase only the piston and the gudgeon pins minus the circlips. In these kind of supplies certain types of pistons and gudgeon pins bearing specified part numbers are supplied without circlips and others with circlips.

4. Learned JDR submits that the order-in-original rightly held that the value of circlips supplied along with pistons and gudgeon pins is includable in the value of the final product. This is for the following reasons:-

a) The function of the circlips is to retain the gudgeon pins on to the piston shaft in a particular position so that there is no lateral movement. In view of this function the piston and the gudgeon pins cannot be coupled together effectively without using the circlip and, therefore, the circlip constitutes an essential part of the said sub-assembly.

b) At the time of clearance the three items are packed together as a kit.

c) In view of this the circlips are not accessories but essential components of this sub-assembly.

d) Learned JDR cited the case of Michrome Metal Works Vs. CCE reported in 1996 (88) ELT 448 (Tri.), wherein, it has been held that bought out items supplied along with excisable goods are essential parts of the goods and enriches its value and hence includable in assessable value in the absence of any evidence that they were for trading activity.

5. Learned Consultant submits that there is no infirmity in the impugned order-in-appeal for the following reasons:-

a) Since circlips are not always supplied along with pistons and gudgeon pins, therefore, this clearly demonstrates that it is not an essential item.

b) It is not in dispute that circlips are not manufactured by them but are merely bought out by them and, therefore, with respect to these the respondents only engaged in trading activity.

c) Simply because sometimes they are packed together as a single kit, it does not make circlips an essential components of this sub-assembly.

d) Circlips are general purpose items clearly covered under sub-heading 7318.21 of the Central Excise Tariff Act, 1985 and these bought out items must have been assessed to duty under that classification. Therefore, they cannot be classified as parts of pistons which in turn are parts of IC engines.

e) Cited the case of M/s. Surana Telecom Limited in which the Hon'ble Andhra Pradesh High Court in W.P. No. 8818/97 has held that cable jointing kit is not excisable as no manufacture is involved. This kit comprises of a number of items out of which some are bought out and some are manufactured by the petitioner and the bought out items include clips. These are placed together in one kit which has a distinct name as above. He submitted that in their case also while pistons and gudgeon pins were manufactured, circlips were purchased from outside and all of them were placed in a single container and, therefore, the r