2017 (9) TMI 1056 - AT - Central Excise

Valuation - goods supplied in bulk packing to the appellant s processor for re-packing into retail packs - to be classified under the provisions of Section 4 (i)(a) or under section 4 (i)(b) of the Central Excise Act, 1944? - applicability of Rule 6 (b)(i) of the Central Excise (Valuation) Rules, 1975 - Held that - the product manufactured by the appellant is derived by chemical process of raw materials and further precise processing. The manufacturing process and technology adopted by the appellant, may be different from that adopted by M/s Laxman. The valuation cannot be adopted on the basis of the price at which M/s Laxman has sold the goods to the appellant. It would be more appropriate to determine the value on the basis of the cost of production including profits, if any - the valuation has been determined only by adopting a notional profit of 10% on the cost of production which is reasonable. Time limitation - Held that - the adjudicating authority has recorded categorical finding in Para 5.10 for price declaration for the year 1997 and the subsequent years that the price is based on comparable goods purchased from other manufacturers - this case is to be one of willful mis-statement - time limitation not applicable. Appeal dismissed - decided against appellant.

Issues: Valuation of goods under Central Excise Act, 1944 read with Central Excise (Valuation) Rules, 1975; Applicability of Rule 6 (b)(i) and Rule 6 (b)(ii) for determining duty; Challenge on time bar grounds.

Valuation of Goods: The case involved a dispute regarding the valuation of goods supplied in bulk packing to the appellant's processor for re-packing into retail packs. The Tribunal determined that since the goods were not sold by the appellant to their processor but consumed in the manufacture of retail packs, the provisions of Section 4 (i)(a) were not applicable. Instead, the value had to be determined in accordance with Section 4 (i)(b) of the Central Excise Act, 1944 read with Central Excise (Valuation) Rules, 1975. The relevant rule in question was Rule 6 (b) of the Valuation Rules, which required consideration of comparable goods produced or manufactured by the assessee or the cost of production including profits if the value could not be determined based on comparable goods.

Rule 6 (b)(i) vs. Rule 6 (b)(ii): The appellant contended that Rule 6 (b)(i) should apply as they had purchased ultramarine blue in bulk from a manufacturer according to their specifications. However, the Department argued for valuation under Rule 6 (b)(ii), which considered the cost of production including profits that the appellant would have normally earned on the sale of such goods. The Tribunal upheld the Department's view, stating that the goods produced by the appellant and the manufacturer were not identical, and thus, Rule 6 (b)(i) could not be applied. The valuation was to be based on the cost of production including profits, with a notional profit of 10% deemed reasonable.

Time Bar Challenge: The appellant also challenged the demand on the grounds of time bar, claiming that they had filed a price declaration based on comparable goods. However, the adjudicating authority found that the price declaration was based on goods purchased from other manufacturers, leading to a conclusion of willful misstatement. The Tribunal upheld the authority's decision, finding no reason to interfere with the impugned order.

In conclusion, the Tribunal dismissed the appeal filed by the appellant, upholding the impugned order on the valuation of goods and the time bar challenge.

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