Case Law Details
Oil Lube Systems Vs Commissioner of Central Excise (CESTAT Chandigarh)
Introduction: This article covers the recent CESTAT Chandigarh order in the case of Oil Lube Systems Vs. Commissioner of Central Excise. The appeal involves the inclusion of the value of bought-out items in the assessable value of service equipment systems. The CESTAT quashes the excise duty demand due to lack of proof that the bought-out items are essential for the functioning of the supplied goods.
Analysis: The appellants, Oil Lube Systems, were alleged to have violated excise duty rules by not including the value of certain bought-out items in the assessable value of goods cleared by them. A show-cause notice was issued, demanding duty, cess, interest, and penalties. The Original Authority confirmed the demand, which was later reduced on appeal.
The appellant’s argument was that the bought-out items, like compressors and battery chargers, had independent functioning and were not required to be supplied along with the excisable goods. The appellant supplied the goods along with bought-out items upon customer request, but the Department included the value of only four out of 103 bought-out items in the assessable value. The Department relied on statements from experts in the field, but the statements confirmed that the items had independent functions and were supplied together for customer convenience.
The CESTAT found no cogent evidence proving that the bought-out items were integral to the equipment manufactured by the appellants. The Department failed to demonstrate that the bought-out items were essential for the functioning of the supplied goods. The CESTAT quashed the excise duty demand, partially allowing the appeal.
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