2017 (11) TMI 230 - AT - Central Excise

Valuation - captive consumption - clearance of goods to sister units - the transfer price so adopted was much less than the price adopted for clearances of identical goods to other customers, case of Department is that when the sale price of component for dealers is available, the same should have been adopted for captive consumption also - Held that - in the case of USV Ltd. Vs. CCE, Pune-II 2001 (8) TMI 833 - CEGAT, MUMBAI , the Division Bench of this Tribunal has held that the selling price for outside customer to be adopted for valuation of identical goods captively consumed as per Rule 6 of Central Excise (Valuation) Rules, 1975 - appeal dismissed - decided against appellant.

Issues:
1. Duty confirmation and penalty imposition.
2. Demand of interest under Section 11AB.
3. Valuation of goods for captive consumption.
4. Applicability of Ministry's instruction on valuation.
5. Tribunal's decisions on valuation rules.

Analysis:
1. The appeal challenged an order confirming duty but dropping the penalty due to the appellant being a PSU with no intention to evade. The Commissioner upheld duty confirmation, dropped penalty, and demanded interest under Section 11AB, a statutory levy. The case involved the manufacture and clearance of watch dials to sister units at a lower price than to other customers, leading to a differential duty payment and allegations of duty evasion. The original authority confirmed the demand and imposed a penalty under Section 11AC, which was dropped by the Commissioner, leading to the present appeal.

2. The appellant argued that the price difference for components sold to dealers and for captive consumption was justified as per the Finance Ministry's stand, which clarified the concept of "ordinarily sold" goods. The Ministry's instruction highlighted that parts sold as spares cannot constitute a normal price for components used in watch assembly, challenging the audit view on valuation. The appellant relied on this clarification to support their pricing strategy for captive consumption.

3. The Revenue defended the impugned order based on a Tribunal decision in the appellant's previous case, where a similar issue was addressed. The Tribunal held that the valuation rules apply when the normal price of goods is unascertainable, and goods sold in the open market at a specific price should be adopted for assessment. Citing previous judgments, the Revenue argued that even if a small percentage of goods are sold at a particular price, that price should be considered for all goods cleared from the factory, supporting the duty confirmation in the present case.

4. The Tribunal referred to the decision in HMT Ltd. and USV Ltd. cases, where the selling price for outside customers was deemed applicable for valuing identical goods consumed internally. Following these precedents, the Tribunal found the decisions relevant to the present case and upheld the Commissioner's order, dismissing the appellant's appeal. The judgment emphasized the consistent application of valuation rules in cases of captive consumption, aligning with previous legal interpretations.

In conclusion, the judgment addressed issues of duty confirmation, penalty imposition, interest demand, valuation for captive consumption, and the applicability of legal precedents and Ministry's instructions in determining the appropriate pricing strategy for goods cleared internally. The decision highlighted the importance of consistent application of valuation rules and legal interpretations in resolving disputes related to duty evasion and pricing discrepancies.

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