Plywood Tops Not Includible in Assessable Value of Folding Cots: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, has held that the value of bought-out plywood tops cannot be added to the assessable value of folding cots manufactured by M/s Shree Durga Industry. While upholding excise duty on folding cots as manufactured goods, the bench of R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) set aside a major portion of the demand amounting to approximately Rs. 2.74 crore, along with interest and penalties. A Show Cause Notice dated 05.05.2016 was issued by the Directorate General of Central Excise Intelligence (DGCEI), proposing a central excise duty demand of ₹3,32,10,665 for the period 2011–12 to 2014–15 (up to May 2015). The demand related to the clearance of folding steel cots with or without plywood tops. The adjudicating authority confirmed the entire demand along with interest and imposed penalties on the firm, M/s Shree Durga Industry, and its partner Shri Goldi Sethi. Aggrieved, the appellants approached CESTAT. The issue raised was whether fabrication of folding cots amounts to “manufacture” under Section 2(f) of the Central Excise Act, 1944? Yet another issue raised was whether the value of plywood tops procured from the market and supplied optionally with the folding cots could be included in the assessable value of the cots? The appellant contended that cutting, bending, and welding MS pipes to fabricate folding cots did not amount to manufacture. However, after examining the process and the final product, the Tribunal held that the activity resulted in a new, distinct, and marketable product known as a “folding cot.” The Bench observed that the transformation of MS pipes into a usable folding cot satisfied the test of manufacture under Section 2(f) of the Central Excise Act, 1944. Notably, the appellant admitted that after crossing the SSI exemption threshold, the duty payable on folding cots worked out to ₹58,59,681. The Tribunal upheld this duty liability along with applicable interest. The core dispute centered around the inclusion of plywood tops in the assessable value of folding cots. The department argued that folding cots and plywood tops were supplied together and formed a composite product. However, the Tribunal found the plywood tops were purchased from open market traders. They were standard commercial plywood, not specialized or uniquely manufactured by the appellant. In several instances, plywood tops were invoiced and transported separately. The use of plywood was optional; folding cots could alternatively be fitted with cotton tape. The plywood tops were not essential components for the cot to function. The Tribunal emphasized that the plywood boards were traded goods and their use was based on the option of the buyer (Indian para-military forces such as BSF and CISF). They were not integral parts of the folding cot. The Tribunal reiterated that the value of bought-out optional items cannot be added to the assessable value of manufactured goods. The demand of approximately ₹2.74 crore attributable to the value of plywood tops was set aside in full, along with corresponding interest and penalties. The Tribunal noted that the appellant had supplied goods under DGS&D rate contracts to government agencies. No excise duty was charged in invoices. The appellant entertained a bona fide belief that fabrication did not amount to manufacture. The admitted duty of ₹58.59 lakh was not contested on limitation grounds. The Tribunal held that invocation of extended period and imposition of penalty under Section 11AC was not justified. Both the penalty on the firm and the personal penalty on Shri Goldi Sethi were set aside. Case Details Case Title: M/s. Shree Durga Industry Versus Commissioner of Central Excise, Kolkata-V Commissionerate Case No.: Excise Appeal No. 76598 of 2017 Date: 17.02.2026 Counsel For Appellant: Indranil Banerjee, Advocate Counsel For Respondent: A. Mukherjee, Authorized Representative Click Here To Read Order Read More: Repeated Non-Appearance & Adjournment Culture: CESTAT Dismisses Appeal for Default Under Rule 20

Plywood Tops Not Includible in Assessable Value of Folding Cots: CESTAT

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