2018 (5) TMI 391 - AT - Central Excise

Valuation - goods sold to other customers on principal to principal basis for arriving at the value of these goods, cleared to their own unit for repacking - case of department is that since the goods are not cleared for sale from the factory, the valuation should be done under Rule 8 of the Central Excise Valuation Rules, 2000 - Held that - in respect of the same goods since part of the said goods was sold independently to unrelated buyer, the transaction value of the said goods is available - Therefore, the said transaction value will prevail over the value in terms of Rule 8 of Central Excise Valuation Rules, 2000. The valuation adopted by the respondent i.e. the transaction value of the same goods sold to independent buyer is a correct value. Hence, the valuation under Rule 8 of Central Excise Valuation Rules, 2000 is not applicable in the facts of the present case Appeal dismissed - decided against Revenue.

Summary

Issues:
Valuation of goods for excise duty - Application of Rule 8 of Central Excise Valuation Rules, 2000 - Comparison between transaction value and cost of final product.

Analysis:
The case involved the valuation of goods for excise duty by comparing the transaction value with the cost of the final product under Rule 8 of the Central Excise Valuation Rules, 2000. The respondents manufactured intermediate products for repacking to toll packers and adopted the comparable sale price for valuation. The department argued that since the goods were not cleared for sale from the factory, valuation should be done under Rule 8, which mandates the value to be 115% of the cost of the final product. The dispute arose as there was a discrepancy between the value adopted by the respondent and the cost-based valuation, resulting in a duty shortfall confirmed by the adjudicating authority.

The Revenue challenged the Commissioner (Appeals) decision that set aside the Order-in-Original and allowed the appeal. The Revenue contended that for clearances not involving sale, valuation must be done under Rule 8 exclusively, without any exceptions. On the other hand, the respondent argued that when goods are cleared for both sale and job-work like repacking, the sale price of identical goods should prevail over Rule 8 valuation. The respondent cited various judgments and relied on specific notifications and circulars to support their argument.

After considering both parties' submissions, the Tribunal found that since part of the goods was sold independently to unrelated buyers, the transaction value was ascertainable, making it the preferred valuation method over Rule 8. The Tribunal referred to a previous Larger Bench decision, which highlighted that Rule 4 of the Valuation Rules should be preferred over Rule 8 when both are applicable. The application of Rule 4 ensures consistency with the statutory provisions of the Central Excise Act, leading to a more accurate determination of value. Consequently, the Tribunal upheld the respondent's valuation based on the transaction value and dismissed the Revenue's appeal, emphasizing the correctness of the valuation method applied.

In conclusion, the judgment clarified the valuation methodology for excisable goods, emphasizing the precedence of transaction value over cost-based valuation under Rule 8 in cases where goods are cleared for both sale and job-work. The decision provided a clear interpretation of the relevant provisions and established a consistent approach to valuation in line with statutory requirements and judicial precedents.