2005 (4) TMI 423 - AT - Central Excise

Summary

Issues Involved:
1. Valuation for assessment to Central Excise duty of parts used captively in the production of tractors.
2. Whether the captively consumed parts and the sold parts are identical and should be valued similarly.
3. Applicability of Section 4(1)(2) of the Central Excise Act versus Rule 6 of the Central Excise Valuation Rules.

Issue-Wise Detailed Analysis:

1. Valuation for assessment to Central Excise duty of parts used captively in the production of tractors:

M/s. Escorts Limited, the appellant, is a manufacturer of tractors and motor vehicles, which also manufactures parts such as hydraulic gear and hydraulic distribution assembly in-house. The common issue in these appeals is the valuation for assessment to Central Excise duty of these parts when used captively in the production of tractors. The appellant contended that these parts should be valued separately under Rule 6 of the Central Excise Valuation Rules, as they are not identical to the parts sold in the market.

2. Whether the captively consumed parts and the sold parts are identical and should be valued similarly:

The Revenue argued that the captively consumed parts should be assessed at the value at which the same parts are sold, as per Section 4(1)(2) of the Central Excise Act. The appellant countered that the captively consumed parts are not identical to those sold in the spare parts market, pointing out differences such as packing, marking, and rustproof painting. The Revenue, however, maintained that these differences do not change the identity of the goods, asserting that the hydraulic gear and hydraulic distribution assembly are identical irrespective of their use. The adjudicating authority and the Commissioner (Appeals) both rejected the appellant's claim, stating that the goods are identical in specification and quality, and thus, the sale value of the spare parts should be the assessable value for the captively consumed parts.

3. Applicability of Section 4(1)(2) of the Central Excise Act versus Rule 6 of the Central Excise Valuation Rules:

The three Show Cause Notices issued to the appellant proposed valuation based on different grounds. The first two notices were in terms of Section 4(1)(a)(iii) of the Central Excise Act, which deals with sales through related persons, while the third notice referred to Rule 6(b)(1) of the Central Excise Valuation Rules. Despite the different grounds, the common proposal was to assess the captively consumed parts at the sale value of the spare parts. The appellant's initial defense was that the original equipment (OE) buyer and the spare parts buyer were different classes of buyers, which was later supplemented by the claim that the goods were different. However, the authorities consistently held that the goods are identical and should be valued similarly.

Conclusion:

The Tribunal concluded that the Revenue's position, whether based on Section 4(1)(a) or Rule 6(b)(1), was consistent in treating the captively consumed parts and the sold parts as identical, thus justifying the same assessable value. The appeals were rejected, upholding the view that the captively consumed parts should be assessed at the sale value of the spare parts.

(Pronounced on 21-4-2005)