2005 (7) TMI 512 - AT - Central Excise

Summary

Issues: Valuation of products supplied based on purchase orders without deductions questioned.

The judgment revolves around the valuation of products supplied by the appellants, who manufacture Petrol Bunk Pumps, as per purchase orders placed by Petroleum Distributing Companies. The primary issue is the rejection of the transaction price by the department, which sought to invoke Rule 5 of Valuation Rules, 1975 for a specific period and Rule 6 of Valuation Rules, 2000 for another period without substantial evidence of additional consideration for the sales. The department questioned the tender prices approved by Petroleum Companies based on figures of Warranty allocation break up obtained during an audit. The warranty service was outsourced to a third party after a certain date, and the allocation of warranty costs among the factories was considered by the department to be additional consideration. The appeal challenges these allocations and the invocation of valuation rules.

Upon hearing both sides, the Tribunal found that there was no concrete evidence of any additional amount flowing from buyers to sellers regarding warranty or any other aspect. The allocations of warranty costs were deemed to be an accounting exercise among the company's factories and not additional consideration to affect the sale price. The absence of a Chartered Accountant Certificate, which the Additional Commissioner used as a basis for dismissal, was considered unjustified. The Tribunal emphasized that the company's internal cost allocations do not impact the normal sale price or transaction price under the relevant sections. Consequently, there was no justification to invoke valuation rules in this case, as the sale price approved by tenders, without any deductions claimed, was deemed appropriate for duty payment.

The Tribunal concluded that there was no merit in the case to warrant further exploration of other issues raised. As a result, the appeal was allowed, and the previous order was set aside. The judgment highlights the importance of concrete evidence and adherence to established valuation principles in determining the duty payable on goods supplied, particularly in cases where no additional consideration is proven beyond the agreed transaction price.