2017 (3) TMI 847 - AT - Central Excise

Valuation - Captively consumed goods - wire - blends flux - appellant claims that the goods are not intermediate goods for the purpose of valuation u/r 8 of Central Excise (Valuation) Rules, 2000. To invoke the Rule, the goods should be first excisable. If that is not excisable, there shall be no application of that Rule. In addition to this condition, there should be marketability of the goods - Held that - the goods manufactured by the appellant having consumed captively failing the test of excisability and marketability by Revenue, invoking of Rule 8 is inconceivable - having noticed the non-excisability character of the goods, it is considered redundant to make further exercise on the valuation of the non-exicisable goods - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Valuation of captively consumed goods under Rule 8 of Central Excise (Valuation) Rules, 2000.
2. Determination of excisability and marketability of goods used in manufacturing.

Analysis:

Issue 1: Valuation of captively consumed goods under Rule 8 of Central Excise (Valuation) Rules, 2000
The appellant, a manufacturer of welding rods, faced allegations of undervaluing wire/coils and blended flux, which were captively consumed in the manufacturing process. The appellant produced a costing certificate from a Chartered Accountant, complying with CAS-4 norms. The Revenue contended that these goods were undervalued, impacting the finished products. However, the Tribunal noted that the assessable value of goods should be determinable for excisable goods, meeting the twin test laid down by the apex court. The show-cause notice failed to establish that the goods were excisable and marketable, shifting the burden of proof to the Revenue. As the Revenue did not prove marketability, the Tribunal found it impracticable to invoke Rule 8 for the valuation of captively consumed goods, ultimately allowing the appeal.

Issue 2: Determination of excisability and marketability of goods used in manufacturing
The appellant argued that the wire and blended flux were not intermediate goods for valuation under Rule 8, emphasizing that for a Rule to apply, the goods must first be excisable and marketable. The appellant relied on a Supreme Court decision emphasizing the twin requirements of excisability: manufacture and marketability. In contrast, the Revenue claimed that the appellant undervalued the intermediates, affecting the finished goods. The Tribunal highlighted that the goods used in manufacturing should satisfy the conditions of being excisable and marketable, which the Revenue failed to establish. As the goods did not meet the excisability and marketability tests, the Tribunal deemed it inappropriate to apply Rule 8 for valuation, leading to the allowance of the appeal.

In conclusion, the judgment by the Appellate Tribunal CESTAT CHENNAI emphasized the importance of proving excisability and marketability for goods used in manufacturing before invoking Rule 8 for valuation. The Tribunal held that the Revenue failed to demonstrate these essential criteria, leading to the appeal being allowed in favor of the appellant.