2006 (2) TMI 438 - AT - Central Excise

Summary

Issues: Valuation of excisable goods based on sale price vs. cost of production, rejection of transaction values, grading of goods for duty evasion

In this case, the appellant, a manufacturer of Video Magnetic Tapes (VMT) and Blank Video Cassettes (BVC), challenged an order requiring valuation of goods based on cost of production for central excise duty calculation instead of the sale price. The period of dispute was 1996-97 to 1999-2000. The appellant contended that duty liability should be based on the normal price at which goods are sold in wholesale, as sales were to independent wholesale buyers with sale price as the sole consideration. The appellant relied on the judgment in C.C.E., New Delhi v. Guru Nanak Refrigeration Corpn. The Tribunal found the valuation based on cost of production to be a misdirection, reiterating that excisable goods should be valued based on the normal price at which they are sold, unless such price is not available. The Tribunal referred to the judgment in the aforementioned case to support this position.

The Tribunal emphasized that the absence of valid reasons to doubt the genuineness of sale price means that goods were sold at the normal price, as per Section 4(1)(a) of the Central Excise Act. The Tribunal dismissed the appeal, upholding the wholesale price as the correct price, following previous rulings. In this case, no grounds were provided for rejecting the transaction values, and it was not argued that the transaction values did not reflect actual sale prices. Therefore, the re-valuation order was deemed unsustainable.

Regarding the grading of VMT, the Revenue alleged that different values based on tape grade were unacceptable due to the lack of separate entries in statutory excise records before the goods became liable to ad valorem duty. The appellant explained that grading was done even before duty liability at specific rates, with combined entries made in production records. The Revenue failed to produce evidence challenging the grading process or proving it was a means to evade duty. Consequently, the contention against grading was deemed unsustainable. The impugned order was set aside, and the appeals were allowed with consequential relief granted to the appellant.