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2007 (10) TMI 177 - AT - Central ExciseSpare parts cleared by assessee to EFL (main co.) who use them in repairs and maintenance of water purifiers in Annual Maintenance Contract - assessee cleared certain spares to EFL who sell them - respondents pay duty on the basis of the sale value of EFL - but in respect of spares cleared to EFL who use them in their AMC the value adopted for payment of duty is u/r 8 (cost construction method) No error in assessee valuation Revenue seeking duty to be paid on sale value of EFL is wrong
Issues: Valuation of spare parts under Central Excise Valuation Rules, 2000
In this case, the issue at hand was the valuation of spare parts cleared by the respondents to a company for use in repairs and maintenance of water purifiers under an Annual Maintenance Contract. The original authority held that duty should be paid based on the sale price of the company, while the Commissioner (Appeals) held that valuation should be done under Rule 11 read with Rule 8 of the Central Excise Valuation Rules, 2000. The Revenue appealed against the Commissioner's order. The Revenue argued that Rule 8 could not be applied as the company was not engaged in production or manufacture of any articles, and instead Rule 10A read with Rule 9 should be applied based on the sale price of the company. On the other hand, the respondents contended that the sale price was not applicable as the goods were used only for Annual Maintenance, and Rule 11 should be followed, leading to Rule 8 for valuation in the absence of a sale. Reference was made to a CBEC Circular for clarification on valuation rules. The Tribunal referred to the CBEC Circular, which clarified that in cases where goods are not sold, Rule 8 should be adopted along with the spirit of Rule 11, resulting in the assessable value being 115% of the cost of production or manufacture of the goods. The Tribunal found the case to be similar to the clarified scenario and upheld the Commissioner's order adopting the Cost Construction Method of Valuation under Rule 8 for the spare parts supplied for the Annual Maintenance Contract Work. Consequently, the Revenue's appeal was rejected.
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