Bought-out items that are not essential parts of a manufactured product and become immovable upon installation are not includable in the assessable value for excise duty; furthermore, extended limitation cannot be invoked for disputes involving legal interpretation or those arising from audits.

P. ANJANI KUAMR :

M/s JSL Life Style Ltd., the appellants, are engaged in the manufacture of articles of stainless steel such as utensils, stainless steel modular kitchens etc; the appellants discharged the applicable central excise duty at the time of the clearance of the goods; during the conduct of an audit, it was observed by the department that the appellant procures orders for installation of modular kitchens and certain products are not manufactured by them; the same are procured from outside and cleared along with the manufactured items by paying duty on the value which includes the bought-out items. In some cases, the appellants supply the bought-out items directly from the head office to the site where they are installed. Department was of the opinion that the value of such items is also includable in the assessable value of the goods cleared by them. Accordingly, a show cause notice dated 19.01.2016 was issued, demanding central excise duty of Rs.21,15,758/-, for the period 2011-12 to 2015-16 along with interest and penalty, invoking extended period of limitation, was issued. The proposals in the show cause notice were confirmed vide OIO dated 20.01.2017. On an appeal filed by the appellants, Commissioner (Appeals) vide impugned order dated 30.11.2017. Hence, this appeal.

2. Shri R.K. Hasija assisted by Shri Shivang Puri, learned counsel for the appellants, submits that the period involved in the case is April 2011 to August 2015 and the show cause notice issued on 19.01.2016 invoking extended period; the appellants were regularly filing the ST-3 Returns; the audit was conducted on 07.11.2012 and therefore, the department was aware of the full facts in 2012 itself; extended period cannot be invoked as the detection was on the basis of an audit and there was no intent to evade payment of duty on the part of the appellants; mere non-payment of duty does not amount to suppression of facts etc. rendering the case liable for invocation of extended period. He relies on the following cases:

 Visen Organic Industries Pvt. Ltd. – 2008 (223) ELT 244 (Tri. Mumbai)

 Asia Automative – 1999 (113) ELT 841 (Tri.)

 Aditya College of Competitive Exam – 2009 (16) STR 154 (Tri. Bang.)

 Anand Nishikawa Co. Ltd. – 2005 (188) ELT 149 (SC)

 Uniworth Textiles Ltd. – 2013 (288) ELT 161 (SC)

3. Learned Counsel further submits that central excise duty is leviable on manufactured goods and not on bought-out items; the fact that the appellants are paying duty when the bought-out items are cleared from the factory along with the manufactured items, is not controverted; the activity of the appellant involves installation and erection of modular kitchens at customer’s premises and when they are installed at the customer’s premises, they become immovable and excise duty is not leviable; in the impugned case, the dispute is about the items traded by head office and supply directly to the site of the customer; the items include kitchen hoods, hobs, chimneys, ovens, microwaves and fittings, which are not integral part of the modular kitchen and therefore, it cannot be said that the value is includable. Department’s reliance on MIL (India) Ltd. -2007 (210) ELT 188 (SC) is incorrect as the Hon’ble Apex Court did not hold that the value of bought-out items per se is includable in the assessable value; rather the issue is to be decided on case- to case basis. He further submits that the items fixed/ installed by them do not take the character of manufactured goods. He relies on the following cases:

 India Tube Mills & Metal Industries – 2017 (353) ELT 353 (Tri. Mumbai)

 Emerson Network Power (India) Pvt. Ltd. – 2004 (176) ELT 168 (Tri.)

 Bharat Heavy Electricals Pvt. Ltd. – 2000 (119) ELT 350 & 578 (Tri.)

 Fujitsu India Telecom Ltd. – 2003 (151) ELT 354 (Tri.)

 Gordhandas Desai Ltd. – 2005 (179) ELT 557 (Tri.)

 Unitech Power Tranmission Ltd. – 2018 (4) TMI 902- CESTAT Mumbai

 Best & Cromption Engineering Ltd. – 2001 (11) TMI 657-C