2019 (3) TMI 605 - AT - Central Excise

Valuation - inclusion of value of the durable containers supplied by customers in assessable value - rule 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - period from 1st April 2008 to 30th June 2011 - Held that - The provisions of the valuation rules are, under section 4(1)(b) of Central Excise Act, 1944, to be resorted to when the framework articulated in section 4(1)(a) is not applicable for one or the other reason. In assessment, if all circumstances specified in section 4(1)(a) are complied with except that of price being the sole consideration for sale, recourse is to be had to rule 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 for addition to the transaction value. The rules for valuation are intended to provide the guiderails for determination of value when the transaction value is not acceptable for having deviated from some or all the circumstances that together sanctify such value. The necessary implication, in the context of present dispute, is that it must be established that the value of clearances effected by the appellant in containers procured by them differs from the value of clearances of goods in containers supplied by their customers. Only then can there be any disquiet about the non-inclusion of the value of the durable containers so supplied by the customers and for inclusion thereof of the difference in price if attributable to the value of durable containers supplied by the customer free of cost. Moreover, rule 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 implies that the ownership, whether in physical form or monetised form, should vest with the appellant for it to be construed as additional consideration. No such case has been made out in the records. As the provisions of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 are not to be applied sequentially but as separate with mutually exclusive application, in the absence of any other rule being invoked, and owing to the inappropriateness of rule 6, the demand does not sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Valuation of goods supplied in durable containers for levy of central excise duty.

Analysis:
The dispute in this case revolves around the duty liability confirmed by the original authority for the appellant's clearances of liquid glucose from March 2006 to February 2012. The central excise authorities contended that the value of durable containers supplied by customers should be included in the assessable value for levy of central excise duty. The Commissioner of Central Excise (Appeals) upheld this demand based on the determination of value under Rule 6 of the Central Excise Valuation Rules.

The Tribunal analyzed the provisions of the valuation rules under the Central Excise Act, stating that when the circumstances specified in section 4(1)(a) are complied with except for price being the sole consideration for sale, Rule 6 can be used for addition to the transaction value. The Explanation under Rule 6 clarifies that the value of goods and services supplied by the buyer for use in connection with the production and sale of goods should be treated as additional consideration. The Tribunal noted that this Explanation is intended to cover receipts from customers for the manufacture of goods.

The appellant argued that durable containers did not go into the production of goods and, therefore, should be excluded from the additional consideration. However, the Authorized Representative contended that every activity up to the time and place of removal should be considered in the manufacture, including the utilization of durable containers for such removal. The Tribunal emphasized that the rules for valuation aim to determine value when the transaction value is not acceptable due to deviations from circumstances justifying such value.

The Tribunal concluded that for the demand to be sustained, it must be established that the value of clearances in containers procured by the appellant differs from those in containers supplied by customers. Since no case was made for ownership of durable containers by the appellant as additional consideration, and in the absence of invoking any other rule, the demand was set aside, and the appeals were allowed.