2011 (5) TMI 628 - AT - Central Excise

Value of goods captively consumed - captive consumption of aluminum circles used in the manufacture of utensils was exempt from duty and the Appellant could not have paid duty on such circles - Held that - Methods prescribed in Rules 4 and 5 of the Valuation Rules were not applicable in this case, thus correct rule to be applied in this case was Rule 6(b)(ii) of the Valuation Rule then in force. The Appellant had given the cost sheet for arriving at the value declared by him with no infirmity in the cost sheet has been pointed out by Revenue. Values declared by the Appellant based on costing accepted - Decided in favor of assessee.

Summary

Issues:
Valuation of stainless steel pattas/pattis captively consumed in the factory during a specific period under Central Excise Rules.

Analysis:
The Appellant, engaged in manufacturing stainless steel products, faced a dispute regarding the duty payment on pattas/pattis used in the production of non-dutiable aluminum circles. The Revenue contended that duty should have been paid on pattas/pattis or a percentage of utensil value should have been reversed in the Modvat account. A show cause notice was issued demanding duty, which was confirmed along with penalties. The Appellant challenged the valuation method before the Commissioner (Appeal) and subsequently before the Tribunal. The Tribunal set aside the initial order for de-novo consideration based on additional documents to be produced.

In the second round of adjudication, the Appellant submitted that the pattas/pattis sold in specific invoices were of superior quality for a particular customer, while the raw material used for utensils was of lower quality. The Appellant provided additional invoices to support their argument. The adjudicating authority, however, rejected these invoices as they were issued to self and not for sale to unrelated buyers. The duty demand was confirmed based on the value of pattas/pattis sold under the specific invoices.

The Appellant appealed the decision, arguing that the goods covered by the specific invoices related to raw material purchased for a particular customer, and the value of captively consumed goods was not determined based on the same quality. The Appellant also produced invoices for sale of aluminum circles to unrelated buyers to support their valuation. The legal provisions under Central Excise Act were examined, emphasizing the need to determine value based on comparable goods produced or manufactured by the assessee or others. The Tribunal noted the lack of clarity on the Rule applied for valuation in previous orders and identified a case of excess demand for duty.

The Tribunal concluded that Rule 6 (b) (ii) of the Valuation Rule should have been applied in this case. The Appellant's cost sheet for valuation was accepted, and the values declared based on costing were upheld. The Tribunal allowed the appeal, providing consequential relief to the Appellant.

In summary, the Tribunal's decision focused on the correct application of valuation rules under the Central Excise Act, emphasizing the need to consider comparable goods and cost-based valuation for captively consumed products. The Appellant succeeded in their submissions regarding the valuation issue, leading to the appeal being allowed with consequential relief.