2013 (3) TMI 550 - AT - Central Excise

Valuation - Captive Consumption - Supply of acid slurry to their sister unit for its captive consumption - Duty demanded on the value determined under Rule 8 of Central Excise (Valuation) Rules, 2000 i.e. on 115% of the cost of production as appellant did not furnish the cost data or cost of production - Held that - On bare reading of the Rule 8 it is evident that if the clearance of the excisable goods is only for captive consumption the excise duty has to be worked out on the valuation based upon the 115% of the cost of manufacture. Thus it is evident that cost of manufacture is the most relevant aspect of this adjudication. Neither in the show cause notices nor in the order-in-original nor in the order-in-appeal there is even suggestion that the officers tried to work out the cost of manufacture. The only reason to justify this valuation as given in the impugned order is that the appellant was non-cooperative and despite request he did not furnish any information regarding his manufacturing cost. That by itself does not vest the adjudicating authority or the Appellate Authority with powers to arbitrarily fix the cost of manufacture without making any efforts to scrutinize the relevant record of the assessee. - Matter remanded back for reconsideration.

Summary

Issues:
- Valuation of excisable goods for captive consumption
- Invocation of Rule 8 of Central Excise (Valuation) Rules, 2000
- Non-cooperation of the appellant during adjudication proceedings

Valuation of excisable goods for captive consumption:
The appellant manufactured acid slurry and supplied it to their sister unit for captive consumption. The Department contended that duty should have been paid based on the cost of production under Rule 8 of Central Excise (Valuation) Rules, 2000. The Department issued show cause notices for duty demand, interest, and penalty. The Assistant Commissioner confirmed duty demands and imposed penalties. The Commissioner of Central Excise upheld these orders. The appellant argued that Rule 8 was wrongly invoked as they also supplied acid slurry to independent buyers, and it was not captive consumption. They contended that the authorities incorrectly considered the price paid to the sister unit as the cost of production for calculating excise duty.

Invocation of Rule 8 of Central Excise (Valuation) Rules, 2000:
The appellant challenged the invocation of Rule 8, stating that they also sold acid slurry to independent buyers, not just for captive consumption. They argued that the valuation under Rule 8 was not applicable as it was not solely for captive consumption. The Revenue supported the duty demands, asserting that since the appellant supplied their entire production to the sister unit, Rule 8's valuation was appropriate. The appellant's non-cooperation during adjudication was highlighted, as they did not provide necessary information on manufacturing costs, leading the authorities to use the price paid to the sister unit as the cost of manufacture.

Non-cooperation of the appellant during adjudication proceedings:
The appellant's lack of cooperation during the adjudication process was a significant point of contention. The appellant failed to furnish cost data or production details despite requests, leading the authorities to base the cost of manufacture on the price paid to the sister unit. The Tribunal observed that the authorities did not make efforts to determine the actual cost of manufacture and relied on arbitrary figures due to the appellant's non-cooperation. The Tribunal set aside the impugned orders, emphasizing the need for a proper assessment of manufacturing costs and highlighting the appellant's communication regarding the higher valuation of acid slurry transferred to the sister unit from independent manufacturers, which the authorities failed to consider.

This detailed analysis of the judgment highlights the issues surrounding the valuation of excisable goods for captive consumption, the application of Rule 8 of Central Excise (Valuation) Rules, 2000, and the impact of the appellant's non-cooperation during the adjudication process. The Tribunal emphasized the importance of accurately determining the cost of manufacture and set aside the orders due to the arbitrary valuation based on inadequate information and lack of scrutiny by the authorities.