2009 (3) TMI 188 - AT - Central Excise

Valuation - After perusing the case records and hearing both sides, we find that the respondents have calculated the value in respect of semi-finished batteries transferred to their other unit by applying the cost computation method under Rule 8 of the Central Excise Valuation Rules, 2000. - It also transpired that while calculating the cost, the respondents have applied de-escalated price of lead, which is the main raw materials for manufacture of batteries - We find that the Rule provides for cost computation method and it is obvious that while computing cost, the escalation or de-escalation charges for the raw materials has to be taken into account as has been done in this case. - Hence, we find no merit in the department s appeal and the same is dismissed.

Summary

Issues:
1. Calculation of value in respect of semi-finished batteries
2. Application of cost computation method under Rule 8 of the Central Excise Valuation Rules, 2000
3. Addition of 15% to the cost for arriving at the assessable value
4. Consideration of de-escalated price of lead as the main raw material
5. Review Order challenging the application of de-escalation charges under Rule 8

Issue 1: Calculation of value in respect of semi-finished batteries

The judgment revolves around the calculation of value concerning semi-finished batteries transferred to another unit. The respondents employed the cost computation method under Rule 8 of the Central Excise Valuation Rules, 2000. Initially, a show-cause notice was issued questioning the addition of 15% to the cost for determining the assessable value. However, during adjudication, it was confirmed that the 15% had indeed been included in the cost calculation. The adjudicating Commissioner accepted the application of de-escalated price of lead, a primary raw material for battery manufacture, by the respondents.

Issue 2: Application of cost computation method under Rule 8

The appeal before the Tribunal challenged the Review Order by the Committee of Chief Commissioners, arguing that Rule 8 does not allow for considering de-escalation charges. The Tribunal observed that Rule 8 mandates the cost computation method, indicating that escalation or de-escalation charges for raw materials must be factored in, as done in this case. Notably, the show-cause notice did not mention de-escalation charges, rendering the Review Order beyond the notice's scope. Consequently, the Tribunal found no merit in the department's appeal and dismissed it.

This judgment clarifies the application of the cost computation method under Rule 8 of the Central Excise Valuation Rules, 2000, in determining the assessable value of goods. It highlights the importance of considering all relevant factors, including escalation or de-escalation charges for raw materials, as part of the cost calculation process. The Tribunal's decision emphasizes adherence to the scope of show-cause notices in adjudicating matters and upholding the principles of natural justice in legal proceedings.