2014 (4) TMI 1080 - AT - Central Excise

Valuation of goods - Whether the value considered by the appellant for discharging duty on the goods cleared to their sister concern; which is based on the value charged by them to independent buyers is correct or any other alternate valuation mode needs to be adopted - Held that - Admittedly, the clearance made to their sister concern would fall under the provisions of Section 4(i)(b) of the Central Excise Act, 1944, as the clearance to their sister concern is not a sale. We find that for determining the correct value under Section 4(i)(b) of the Central Excise Act, 1944, provisions of Central Excise Valuation Rules, 2000 needs to be followed. In the said provisions, Rule 4 of the Valuation Rules clearly indicates that the value of excisable goods shall be based on such goods sold by the assessee. Value need to be adopted by the appellant on the goods which were cleared to their sister concern should be done under Rule 4 of the Valuation Rules, 2000 which is the correct position of law, inasmuch as the Central Excise Valuation Rules were framed, to determine the correct value of the goods cleared, which fall under the provisions of Section 4(i)(b) of the Central Excise Act, 1944. In the case in hand, since there is no dispute that the goods which were cleared by the appellant to their sister concern are the same which are cleared by them to the independent buyers, we do not see anything wrong in applying the assessable value of goods cleared by the appellant to the independent buyers for discharge of duty on the goods cleared to their sister concern. - impugned orders are liable to set aside - assessable value on which duty is discharged in case of independent buyers, will be the value for discharge of duty on clearances made to sister concerns. - Decided in favour of assessee.

Summary

Issues:
1. Applicability of Central Excise Valuation Rules in determining excise duty.
2. Correct valuation method for goods cleared to sister concerns.
3. Interpretation of Rule 4 and Rule 8 of the Valuation Rules.
4. Consideration of CAS-4 certificate for valuation.

Analysis:

1. Applicability of Central Excise Valuation Rules: The judgment addresses the issue of determining the correct value of excisable goods cleared by the appellant to related parties. The Department contended that proper valuation methods under Rule 8 and/or 9 of the Valuation Rules should be applied. The appellant had paid duty based on the normal transaction value, without providing the required CAS-4 certificate for valuation. The Tribunal emphasized the need to follow the Valuation Rules to determine the correct value under Section 4(i)(b) of the Central Excise Act, 1944.

2. Correct Valuation for Goods Cleared to Sister Concerns: The key issue was whether the appellant's method of valuing goods cleared to sister concerns based on the value charged to independent buyers was correct. The Tribunal found that since the goods cleared to sister concerns were the same as those cleared to independent buyers, applying the assessable value of goods cleared to independent buyers for duty discharge on goods cleared to sister concerns was appropriate.

3. Interpretation of Rule 4 and Rule 8: The Tribunal referred to the judgment of a Larger Bench in the case of Ispat Industries Ltd. which highlighted the sequential application of the Valuation Rules. It was concluded that Rule 4 should be preferred over Rule 8 for determining the value of goods cleared to related parties, as it aligns with the provisions of the Central Excise Act, ensuring consistency and reasonableness in valuation.

4. Consideration of CAS-4 Certificate: The appellant's argument regarding the CAS-4 certificate indicating a lower cost of production compared to the value charged to independent buyers was addressed. The Tribunal upheld that the assessable value for duty discharge on clearances to sister concerns should be based on the value charged to independent buyers, in line with the Larger Bench judgment and the principles of the Central Excise Act.

In conclusion, the impugned orders were set aside, and the appeal was allowed, establishing that the assessable value for duty discharge on clearances to sister concerns should be the same as the value charged to independent buyers.