2017 (6) TMI 1233 - HC - Central Excise

Valuation - P.C. Poles manufactured by the appellant-assessee and used by State Electricity Board in transmission of electricity - Rule 8 or Rule 11 of Valuation Rules - Held that - The issuing arising herein stands concluded by the decision of the Apex Court in Commissioner of C. Ex. Pune v. Mahindra Ugine Steel Co. Ltd. 2015 (4) TMI 351 - SUPREME COURT wherein the Court held that Rule 8 of the Valuation Rules 2000 would not be applicable as the goods are not used for production or manufacture of other articles either by the assessee or by any other person on its behalf. Rule 8 would not be applicable and the assessment would have to be a best judgment assessment in terms of Rule 11 of Valuation Rules 2000. Appeal dismissed - decided against assessee.

Summary

Issues: Valuation of P.C. Poles under Central Excise Act, 1944

Issue 1: Interpretation of Valuation Rules
The appeal challenges the Customs, Excise and Service Tax Appellate Tribunal's order regarding the valuation of P.C. Poles under the Central Excise Act, 1944. The substantial question of law revolves around whether the appellant should add a margin of profit to the cost of production of P.C. Poles as per Valuation Rules, particularly considering the appellant's non-profit making status. The Tribunal's order focused on the Valuation Rules, 2000, not the Valuation Rules, 1975, leading to a reformulation of the substantial question of law.

Issue 2: Application of Valuation Rules
The crux of the issue lies in the valuation of P.C. Poles manufactured by the appellant and utilized by the State Electricity Board for electricity transmission. The Tribunal found that the P.C. Poles were neither sold by the appellant nor used for further manufacturing, excluding the application of Rule 8 of the Valuation Rules, 2000 meant for captive consumption. Consequently, the Tribunal resorted to Rule 11 for a best judgment assessment, aligning with the decision in Commissioner of C. Ex. Pune v. Mahindra Ugine Steel Co. Ltd. The Apex Court's ruling clarified that Rule 8 does not apply when goods are not used for production by the assessee or any other party, necessitating a best judgment assessment under Rule 11.

Judgment
The High Court upheld the Tribunal's decision based on the precedent set by the Apex Court in Mahindra Ugine Steel Co. Ltd., affirming the correctness of invoking Rule 11 for valuation. Consequently, the appeal was dismissed in favor of the respondent-revenue and against the appellant-assessee, with no costs awarded. This judgment clarifies the application of Valuation Rules in cases where goods are not sold or used for further manufacturing, emphasizing the necessity of a best judgment assessment under Rule 11 in such scenarios.