The Tribunal in the case of M/s. Baroda Machinery Manufacturers held that cost of bought out items being an integral part of a final product is to be included in assessable value {1997 (91) ELT 88 CT}.
M/s. KEC International Limited, in Nagpur Commissionerate of Central Excise, fabricated galvanized steel parts with holes for tightening bolts and nuts as per approved design for erection of transmission line towers and cleared these parts on payment of duty under sub-heading 7308.90 to customer’s site for erection of transmission line tower as per agreement. For erection of tower, assessee had bought out nuts and bolts from market and sent them directly to site. The value of nuts and bolts was not included in the assessable value for the purpose of determining duty. As nuts and bolts were an integral part of the tower, the value should have been included in the assessable value. This resulted in undervaluation with short levy of duty of Rs.72.69 lakh from April 1999 to March 2000.
On this being pointed out (November 2000 and January 2002), the Ministry stated (December 2003) that the value was not includible, since nuts and bolts were procured outside the factory and sent directly to site. It was further stated that the Supreme Court in case of M/s. Triveni Engineering and Industries held that, structures assembled and erected at site by rigid foundation which could not be dismantled without substantial damage to their components and could not be reassembled at any site after dismantling, were not excisable being immovable property.
Reply of the Ministry is not tenable as nuts and bolts are integral parts of the structure without which the tower cannot be erected. The Supreme Court judgement quoted by the Ministry is not applicable in this case as the towers can be erected at another site after dismantling with the help of nuts and bolts without substantial damage to the components. Therefore, towers do not become immovable property and fail the test of permanency, hence are excisable as per Supreme Court judgement in the case of M/s. Triveni Engineering {2000 (120) ELT 273 (SC)} and M/s. Sirpur Paper Mills Limited {1998 (97) ELT 3 (SC)}. It was noticed that the same assessee had included value of nuts and bolts in the assessable value of towers cleared from July 2000 onwards lending credence to the audit stand. Moreover, another assessee viz., M/s. Hundai Unitech Limited in the same Commissionerate had included the value of nuts and bolts in the assessable value of towers for payment of duty.
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