Supreme Court Rules That Bought-Out Items at Site Cannot Be Included in Assessable Value of Boilers

Case Name: Lipi Boilers Ltd. v. Commissioner of Central Excise, Aurangabad

Citation: 2025 INSC 1297

Date of Judgment/Order: 10 November 2025

Bench: Justice J.B. Pardiwala and Justice Sandeep Mehta

Held: The Supreme Court held that the value of duty-paid bought-out items delivered directly to the site cannot be included in the assessable value of boilers cleared in CKD condition because the revenue failed to establish that the final erected boiler was “excisable goods.” The Court emphasised that excisability under Section 3 must be proven before applying Section 4 for valuation, and that boilers permanently embedded to earth and becoming immovable property are not marketable goods. Accordingly, the CESTAT erred in ignoring foundational principles and wrongly relying on contract price to inflate assessable value.

Summary: The assessee manufactured boiler components at its factory and cleared them on payment of duty, while several bought-out items were supplied directly from vendors to the buyer’s site. The revenue alleged undervaluation for non-inclusion of these bought-out items in the assessable value. The Assistant Commissioner and Commissioner (Appeals) accepted that the erected boiler became immovable property and thus not excisable. However, the CESTAT reversed these findings and restored the demand based on contract price. The Supreme Court examined the distinction between levy and valuation, movability and marketability tests, and noted multiple errors in the CESTAT’s approach, particularly ignoring the assessee’s long-standing plea that erected boilers are immovable property. The Court reaffirmed that tariff classification cannot determine excisability and that mere presence in the Tariff Schedule does not suffice unless conditions under Section 3 are satisfied.

Decision: The Supreme Court allowed the appeals, set aside the CESTAT’s order, and restored the orders of the lower authorities that had dropped the demand. It held that no excise duty, interest, or penalty was payable and that invocation of the extended limitation unde