2004 (7) TMI 518 - AT - Central Excise

Summary

Issues:
Valuation of captively consumed goods under Rule 6(b)(i) vs. Rule 6(b)(ii) of Central Excise Valuation Rules.
Applicability of the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944.

Valuation of captively consumed goods under Rule 6(b)(i) vs. Rule 6(b)(ii) of Central Excise Valuation Rules:
The case involved the appellants manufacturing "Bleach Liquor" through the chlorination of Caustic Soda Lye, an intermediate product. Initially, they determined the assessable value of captively consumed Caustic Soda Lye using the Cost Construction Method under Rule 6(b)(ii). However, they later requested to shift to Rule 6(b)(i) based on the price at which they sold similar goods to M/s. SIV Industries. The dispute arose when the department demanded duty based on Rule 6(b)(ii) and rejected the price charged to SIV Industries as the basis for valuation. The Tribunal held that the negotiated price between the appellants and buyers could be adjusted under Rule 6(b)(i) to determine the value of captively consumed goods, emphasizing that negotiated prices were not excluded from consideration under the rule.

Applicability of the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944:
The department issued a show cause notice invoking the extended period of limitation for demanding duty on Caustic Soda Lye captively consumed by the appellants during a specific period. The Tribunal found that the notice was issued beyond the normal limitation period and that there was no suppression of facts by the appellants. The Tribunal highlighted that the department was aware of how the appellants were valuing the goods for captive consumption since May 1994. The appellants had clearly informed the authorities of their switch from Rule 6(b)(ii) to Rule 6(b)(i) for valuation. As a result, the Tribunal concluded that the demand of duty was time-barred and set aside both the duty demand and the penalty imposed on the appellants.

In conclusion, the Tribunal allowed the appeal, setting aside the duty demand and penalty, as the department's demand was beyond the normal limitation period and there was no suppression of facts by the appellants. The Tribunal emphasized the applicability of negotiated prices in determining the value of captively consumed goods under Rule 6(b)(i) of the Central Excise Valuation Rules, rejecting the department's contention that such negotiated prices were not suitable for valuation purposes.