2014 (8) TMI 137 - AT - Central Excise

Demand of differential duty - Determination of correct assessable value - excisable goods cleared by M/s. RIL to their own units situated elsewhere in the country - clearances made to assessee s own unit by determining value based on the assessable value of the same products cleared to independent buyers - Held that - application of Rule 4 is being disputed by the Revenue not on the ground that the said rule is inapplicable to the present case but on the ground that a more specific provision in Rule 8 is available to enable determination of the assessable value. As discussed above, the provisions of Rule 8, in our view, are not applicable to the present case and therefore the value determined by the assessee under Rule 4 deserves acceptance. Even if both the rules, i.e. Rule 4 and Rule 8, were applicable, it would only be logical to read and apply the various rules in the Central Excise Valuation Rules in a sequential manner. Though the Central Excise Valuation Rules, 2000 do not specifically prescribe such sequential application of various rules, the same, in our view, is the only reasonable way to read these rules. Any other interpretation would only lead to confusion and chaos. Since the applicability of Rule 4 is not really in dispute, there was no need to look further and regardless of the applicability or otherwise of Rule 8, the assessable value should have been determined in terms of Rule 4 of the Valuation Rules. Since the issue of valuation of the goods which are cleared for captive consumption to assessee s own units is now settled by the Gangotri Electrocastings Ltd. Vs. CCE & ST, Patna (2012 (7) TMI 321 - CESTAT, KOLKATA) and Ferro Alloys Corporation Ltd. Vs. CCE & ST, Bhubaneshwar-I (2011 (12) TMI 438 - CESTAT KOLKATA); therefore, impugned order is unsustainable and is liable to be set aside - On perusal of the said judgment / order, we find that their Lordships was disposing a writ petition filed by the petitioner therein, for declaring Rule 8 of the Central Excise Valuation (Determination of price of excisable goods) Rules, 2000 as ultra vires of Section 4, Section 37 of the Central Excise Act, 1944 and also ultra vires of Article 14 and 19(1)(g) and Articles 265 and 300-A of the Constitution of India. The said writ petition was dismissed by their Lordships stating the obvious that the said rules were as per the provisions of the Central Excise Act, 1944 and value needs to be determined in the case of captive consumption in accordance with those rules - Decided in favour of assessee.

Summary

Issues Involved:
1. Determination of correct assessable value for excisable goods cleared by the assessee to its own units.
2. Applicability of Rule 8 of the Central Excise Valuation Rules, 2000.
3. Imposition of penalties on the assessee.

Detailed Analysis:

1. Determination of Correct Assessable Value:
The core issue pertains to the correct assessable value for excisable goods cleared by the assessee to its own units. The assessee, M/s. RIL, determined the value based on the assessable value of the same products cleared to independent buyers, which was accepted by the department as based on transaction value. The revenue, however, sought to demand differential duty, arguing that the assessee should have followed the provisions of Rule 8 of the Central Excise Valuation Rules, 2000.

2. Applicability of Rule 8 of the Central Excise Valuation Rules, 2000:
The adjudicating authority confirmed the demands based on Rule 8, which states that where excisable goods are not sold but used for consumption by the assessee in the production of other articles, the value shall be 110% of the cost of production. The assessee contested this, relying on the Larger Bench decision in the case of M/s. Ispat Industries Ltd., which held that Rule 8 applies only when the entire production of a commodity is captively consumed. The Tribunal agreed with the assessee, noting that Rule 8 would not apply if some part of the production is sold to independent buyers. The Tribunal emphasized that Rule 4 should be preferred over Rule 8 in such cases, as it leads to a value determination more consistent with Section 4 of the Central Excise Act, 1944.

3. Imposition of Penalties on the Assessee:
The revenue also appealed against the adjudicating authority's decision not to impose penalties on the assessee. The Tribunal found no merit in this appeal, given that the primary issue of valuation was resolved in favor of the assessee. The Tribunal concluded that since the appeals filed by M/s. RIL were allowed, the revenue's appeals for imposition of penalties were to be rejected.

Conclusion:
The Tribunal allowed the appeals filed by M/s. RIL, setting aside the impugned orders, and rejected the appeals filed by the revenue. The Tribunal's decision was based on the interpretation that Rule 8 of the Central Excise Valuation Rules, 2000, does not apply when part of the production is sold to independent buyers, and that Rule 4 should be applied for determining the assessable value. The Tribunal also found no grounds for imposing penalties on the assessee.