1981 (7) TMI 240 - CGOVT - Central Excise

Summary

Issues:
Assessable value determination under Rule 6(b)(i) vs. Rule 6(b)(ii) of Central Excise (Valuation) Rules.

Analysis:
The judgment pertains to a case where the petitioners, electronic component manufacturers, challenged the assessment of the value of Aluminium cans manufactured for captive consumption. The petitioners argued that the value should be determined under Rule 6(b)(i) based on comparable goods supplied by a third party, while the authorities assessed it under Rule 6(b)(ii) based on cost of production. The Appellate Collector upheld the assessment under Rule 6(b)(ii), considering the difference in sector size between the petitioners and the third-party supplier. However, the Government accepted the petitioners' contention that the goods were similar and held that Rule 6(b)(i) should apply if the goods are comparable.

The Government's analysis focused on the interpretation of Rule 6(b)(i) and Rule 6(b)(ii) of the Central Excise (Valuation) Rules. Rule 6(b)(i) states that the assessable value of captively utilized goods should be based on comparable goods produced by the assessee or another party, with adjustments for relevant factors. On the other hand, Rule 6(b)(ii) applies if the value cannot be determined under Rule 6(b)(i) and is based on cost of production. The Government found that the goods in question were indeed comparable, rejecting the argument that sector size differences made them non-comparable. As such, the Government held that Rule 6(b)(i) should determine the assessable value in this case.

The judgment also addressed the Editor's Comments, emphasizing the importance of considering size and type differences between units producing goods under assessment and comparable goods. The Editor highlighted that mere similarity of use is not sufficient to establish comparability, using the example of footwear produced by different-sized units. The Editor stressed the need for suitable adjustments based on unit size and type differences, as permitted under the proviso to Rule 6(b) of the Central Excise (Valuation) Rules.

In conclusion, the Government set aside the Order-in-Appeal and allowed the revision application, determining that the assessable value of the goods should be based on comparable goods under Rule 6(b)(i) rather than cost of production under Rule 6(b)(ii). The judgment clarified the application of valuation rules and the importance of considering comparability factors in such assessments.