2009 (11) TMI 887 - AT - Central Excise

Valuation - valuation done on the basis of cost construction method applying CAS-4 - absence of comparable prices - Held that - There are no comparable prices available. The Department has merely taken the indicative prices given in the invitation to tender document set out by TWAD Board inviting quotations. The same does not indicate either actual or comparable prices of the pipes. Thus, the valuation adopted by the Department is not based on any comparable value and the same cannot be approved. Appeal allowed - decided in favor of appellant.

Summary

Issues: Valuation of pipes for a turnkey project under Central Excise Valuation Rules

Analysis:
The judgment by the Appellate Tribunal CESTAT Chennai involved a dispute regarding the valuation of pipes used in a turnkey project under the Central Excise Valuation Rules. The appellants had been awarded a turnkey project by Tamilnadu Water & Drainage Board (TWAD Board) to lay pipelines for water supply, where they were required to lay PSC pipes and maintain them for one year. The appellants paid duty on the pipes based on the cost construction method applying CAS-4 and adding 15%/10% to the cost. The Departmental authorities, however, discarded this valuation and adopted the price given in the tender invitation document by TWAD Board, adjusting it based on the total contract value.

The learned counsel for the appellants argued that no separate amounts were received for the pipes, and the contracted amount was for the entire project. They cited a similar case where the Tribunal had applied the best judgment method under Rule 11 of the Central Excise Valuation Rules for valuation. The Department acknowledged that in some cases, transport charges had not been excluded. The Tribunal noted that the situation was akin to captive consumption, and Rule 8 of the Valuation Rules could not be directly applied. Therefore, the valuation had to be done under Rule 11 adopting the cost construction method prescribed under Rule 8.

The Tribunal emphasized that since no comparable prices were available, the Department's adoption of indicative prices from the tender invitation document was not based on comparable values and could not be approved. As the alternative rules provided in the Valuation Rules were not applicable, the duty paid by the appellants based on the cost calculated as per CAS-4 with 15%/10% added could not be faulted. Consequently, all the impugned orders were set aside, and the appeals were allowed. The authorities were directed to cross-check the computation of duty done by the appellants earlier.

In conclusion, the Tribunal allowed all 15 appeals, emphasizing the application of Rule 11 for valuation under the Central Excise Valuation Rules in the absence of comparable prices, and rejecting the Department's valuation based on indicative prices from the tender invitation document.