2014 (8) TMI 884 - AT - Central Excise

Valuation of the Poly Propylene Multi Filament Yarn, consumed captively in the manufacture of Narrow Woven Fabrics - Held that - Revenue entertained a view that the said yarn should be assessed to duty in terms of provisions of Rule 8 of the Central Excise (Valuation) Rules, which provided the 110% of the cost of manufacture. The appellants stand is that in as much as they are also selling the yarn to the other independent buyers, and there is no dispute about the value adopted for payment of duty in such cases, the same assessable value should be adopted for the purpose of captively consumed yarn. - provisions of Rule 8 of Central Excise (Valuation) Rules, 2000 would be applicable only when the entire production of a particular commodity is captively consumed. Where a part of the goods are also being sold to independent buyers, the value at which the same are being sold has to be adopted as the assessable value for payment of duty on the captively consumed items - Following decision of Ispat Industries Ltd. vs. CCE, Raigad reported in 2007 (2) TMI 5 - CESTAT, MUMBAI - Decided in favour of assessee.

Summary

Issues: Valuation of captively consumed Poly Propylene Multi Filament Yarn for excise duty.

In this judgment by the Appellate Tribunal CESTAT New Delhi, the appellant, engaged in manufacturing Poly Propylene Multi Filament Yarn and Narrow Woven Fabric, faced a dispute regarding the valuation of the captively consumed yarn for excise duty. Initially, the Narrow Woven Fabrics were classified under 5806.39, exempting the yarn from duty payment. However, a subsequent reclassification under 5806.32 made the captively consumed yarn liable for duty. The Revenue contended that Rule 8 of the Central Excise (Valuation) Rules, which mandates 110% of the cost of manufacture, should apply to assess the duty on the captively consumed yarn. The appellant argued that the value adopted for selling yarn to independent buyers should be used for captively consumed yarn as well, citing consistency in duty payment valuation. The lower authorities disagreed, leading to a confirmed duty differential and penalty.

The Tribunal referred to the precedent set by the Larger Bench decision in the case of Ispat Industries Ltd. vs. CCE, Raigad, where it was established that Rule 8 of the Central Excise (Valuation) Rules applies only when the entire production of a commodity is captively consumed. When goods are also sold to independent buyers, the value at which they are sold should be used as the assessable value for duty on captively consumed items. Relying on this decision, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. The judgment clarified the valuation method for captively consumed goods in the context of excise duty, ensuring consistency with the sale value to independent buyers.