2025-VIL-88-SC-CE
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CENTRAL EXCISE Supreme Court Cases

Central Excise - Inclusion of value of duty paid bought out items in assessable value of boilers cleared in CKD condition - Appellant cleared boilers in completely knocked down (CKD) condition from its factory after paying duty. Revenue issued notice alleging that the value of the duty paid bought out items delivered directly at the buyer's site should have been included in the assessable value of the boilers - Vide the impugned order, the CESTAT upheld the demand of duty along with interest - Whether the value of the duty paid bought out items delivered directly at the buyer's site is liable to be included in the value of the boiler cleared by the appellant from its factory in CKD condition, for the assessment of central excise duty – HELD - Merely the presence of a product in the Tariff Schedule does not determine its excisability, the first and primary inquiry must be whether the item satisfies the conditions of the charging section under Section 3 of the CEA, 1944 - The revenue has, erroneously relied upon the ‘transaction value’ derived from the ‘contract price’ to argue that the excise duty on the boiler has to be computed on the basis of the contract price. However, for the revenue to contend that the contract price would become the basis of the ‘transaction value’ for the purpose of determination of the payable excise duty, it has to first establish that the final product of the contract itself is excisable – The ‘transaction value’ under Section 4 of the CEA, 1944 merely serves as the basis for computing the quantum of excise duty payable, but cannot determine excisability. The final product that emerges as a result of performing the obligations under the contract, does not constitute excisable goods under the CEA, 1944. Consequently, the base value of the boiler on which excise duty is to be levied, cannot be equated with the total contract price – The mere size and weight of the boiler make it impossible to assemble the boiler before erection, and that the process of assembly and erection of the boiler is essentially intertwined in such a manner that such an installed boiler cannot be readily dismantled by merely removing nuts and bolts and reassembled at another site without causing extensive damage to the boiler to an extent so as to reduce its value to mere scrap. Consequently, the base value of the boiler on which excise duty is to be levied, cannot be equated with the total contract price. Therefore, for the assessment of central excise duty, the value of the duty paid bought out items delivered directly at the buyer's site is not liable to be included in the value of the boiler cleared from factory in CKD condition – The impugned order by the Tribunal is set aside and the assessee appeal is allowed - Whether the show cause notice is legal and valid under the extended limitation period as provided under the proviso to Section 11A(1) of the Central Excise Act, 1944 – HELD – The show cause notice issued under the proviso to Section 11A(1) of the Central Excise Act, 1944, invoking the extended period of limitation, is not legal and valid. There was no evidence to show that the appellant had wilfully suppressed any material information with an intention to evade payment of duty - Mere omission to give correct information does not amount to suppression of facts unless it was deliberate to evade payment of duty. in the absence of any deliberate act on the part of the assessee with an intention to evade being established by the revenue, the essential precondition of wilful suppression with intent to evade duty is not satisfied. Consequently, the invocation of the extended period of limitation under the proviso to Section 11A(1) is held to be not tenable in law.
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