2006 (12) TMI 46 - AT - Central Excise

Valuation (Central Excise) Alleged the appellant manufacture and clearance of machines in contravention of Rule 4,6,8,10,11 and 12 of CE rules After considering all the facts authority allow the appeal with consequential relief.

Summary

Issues: Valuation of semi-finished goods for inter-unit transfer

Comprehensive Analysis:

Issue 1: Valuation of semi-finished goods for inter-unit transfer

The appeal arose from an Order-in-Original (OIO) by the Commissioner of Central Excise, dropping the allegation of contravention of specific CE Rules but confirming the differential duty and imposing a penalty under Section 11AC of the CE Act for the valuation of goods for inter-unit transfer. The contention of the appellants was that the goods cleared were semi-finished goods to their own units, and the Commissioner's direction to assess them as fully finished goods was unsustainable in law. The appellants argued that the goods should be valued based on the condition in which they are removed for further manufacture to the other unit, achieving fully finished status only at the receiving unit. The appellants cited a similar case and referred to various Apex Court judgments to support their argument.

Issue 2: Applicability of Rule 7 and Rule 8 for valuation

The Bench carefully considered the facts alleged in the Show Cause Notice, noting that the goods cleared were indeed semi-finished and had not reached a fully finished condition. The Bench referred to a previous judgment where it was held that excisable goods not sold but used for further processes in a sister unit should be assessed based on their condition at the time of removal from the factory. The Bench analyzed Rule 7, emphasizing that it applies when goods are not sold from the factory but transferred to a depot, which was not the case in the scenario of semi-finished goods transferred for further manufacture. The Bench concluded that the Commissioner's reasoning was unsound, and upholding the orders would lead to double taxation on the same product. Therefore, the impugned order was set aside, and the appeal was allowed based on the precedent judgment.

In conclusion, the judgment addressed the valuation of semi-finished goods for inter-unit transfer, emphasizing the importance of assessing goods based on their condition at the time of removal for further manufacture. The Bench's analysis of relevant rules and previous judgments supported the decision to set aside the impugned order and allow the appeal.