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2013 (12) TMI 809 - AT - Central ExciseValuation of goods used in rebuilding/re-conditioning work of old/used/defective Grinding Rollers, Liners, etc - Determination of value under Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 read with Section 4(1)(d) of the Central Excise Act, 1944 held that - The expression used is production or manufacture of other articles - The rule nowhere Envisages that the production or manufacture should be of excisable goods - the appellant has utilised the goods in its factory in the repair of certain other articles Thus, the question of invoking Rule 5 of the Valuation Rules would not arise at all - Even if for a moment it is assumed that Rule 8 will not apply and in the absence of any specific provision under any other rules, resort will have to be made to Rule 11 which provides for using reasonable means consistent with the principles and general provisions of the Rules and sub-section (1) of Section 4 of the Act - Even if the provisions of Rule 11 are applied, the most appropriate rule will be Rule 8 - even if it is held that Rule 8 will not apply, then even under Rule 11, the principles envisaged in Rule 8 should be followed Decided against Revenue.
Issues:
1. Interpretation of Rule 8 of the Central Excise Valuation Rules, 2000 regarding determination of value for excisable goods. 2. Application of Rule 5 of the Valuation Rules for payment of excise duty. 3. Captive consumption of goods and its impact on valuation under Rule 8. Analysis: Issue 1: Interpretation of Rule 8 of the Central Excise Valuation Rules, 2000 The appeal concerned the correct determination of value by the respondent-assessee, M/s. Diffusion Engineers Ltd., under Rule 8 of the Central Excise Valuation Rules, 2000. The appellate authority held that the determination of value by the respondent under Rule 8, in conjunction with Section 4(1)(d) of the Central Excise Act, 1944, was legally sound. The duty demands imposed on the respondent by the adjudicating authority were deemed unsustainable in law. The rule states that if excisable goods are not sold but used for consumption in the production or manufacture of other articles, the value shall be 110% of the cost of production or manufacture of such goods. The rule does not specify that the production or manufacture should be of excisable goods, thereby rejecting the Revenue's argument that the goods should be used in the manufacture of other excisable goods. Issue 2: Application of Rule 5 of the Valuation Rules The Revenue contended that the respondent should have determined the value under Rule 5, which requires payment of duty based on the sale price of similar goods sold by the assessee. However, the respondent argued that Rule 8 does not envisage captive consumption for the manufacture of excisable goods. The Circular issued by the CBEC clarified that when excisable goods are captively consumed, Rule 8 applies. Since the respondent had not sold the goods but used them in repairing other articles, Rule 5 was deemed inapplicable. Even if Rule 8 did not apply, resorting to Rule 11 would still lead to the application of the principles of Rule 8, thus upholding the lower appellate authority's decision. Issue 3: Captive Consumption of Goods The case involved the captive consumption of flux cored wire and welding electrodes by the respondent in the repair of certain articles. The Tribunal concluded that the respondent's discharge of excise duty liability under Rule 8 was correct in law. The absence of any sale of goods by the respondent negated the application of Rule 5 for valuation. The Tribunal dismissed the appeal by the Revenue, affirming the lower appellate authority's decision as legally sound and devoid of merits. The cross-objection filed by the respondent was also disposed of in the same vein. In conclusion, the Tribunal upheld the respondent's valuation method under Rule 8, emphasizing the lack of necessity for the goods to be used in the manufacture of excisable goods and rejecting the Revenue's arguments in favor of Rule 5.
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