2019 (10) TMI 492 - AT - Central Excise

Valuation - goods sold at Factory Gate - Finalization of their provisional assessment in respect of captive consumption - application of Rule 6(b) of the Valuation Rules 1988 - normal price for the purpose of determination of value under Section 4 of the Central Excise Act, 1944 - HELD THAT - The fact of undervaluation as determined by the Assistant Commissioner is based on the documents and records of the Appellant and their own submissions. Appellants have not disputed the said findings but have challenged the order merely on the ground with regards to the applicability of certain decisions wherein it has been held that value in case of captively consumed goods should be determined on the basis of factory gate sale price. For the re-determination of the value in respect of the goods consumed captively the matter needs to be remitted back to the original authority for deciding the issue after taking into consideration. In respect of the stock transfers to the depot for the sale from depot the value in terms will have to be finally determined in terms of Section 4(2) of the Central Excise Act, 1944. Thus it will be the sale price of the said goods stocked transferred to the depot, when sold to independent buyers and the sale price being the consideration for sale. Thus appellants have to satisfy the adjudicating authority with reference to the actual sale price from the depot for finalization of the value as per Section 4(2) - Hence in this respect also the matter needs to be remitted back to original authority for reconsideration. Matter remanded back to original authority for redetermination of the issues - appeal allowed by way of remand.

Issues Involved:
1. Non-speaking order and lack of application of mind by the Commissioner (Appeal).
2. Failure to consider Tribunal directions and relevant Supreme Court and Tribunal decisions.
3. Incorrect valuation method for captive consumption and stock transfer to depots.
4. Inclusion of certain costs and profits in the assessable value.

Detailed Analysis:

1. Non-speaking order and lack of application of mind by the Commissioner (Appeal):
The appellants argued that the Commissioner (Appeal) failed to provide a reasoned order, merely reiterating the findings of the adjudicating authority without considering the documentary evidence provided. The Tribunal noted that the Commissioner (Appeal) did not properly address the appellants' contentions or the directions given by the Tribunal in the remand order. This failure to provide a detailed and reasoned decision constituted a violation of principles of natural justice.

2. Failure to consider Tribunal directions and relevant Supreme Court and Tribunal decisions:
The appellants contended that the adjudicating authority and Commissioner (Appeal) did not follow the Tribunal's directions to determine the assessable value in light of relevant Supreme Court and Tribunal decisions, including Scan Synthetics, Ashok Leyland, and Guru Nanak Refrigeration. The Tribunal had directed the adjudicating authority to consider these decisions when finalizing the assessment. However, the adjudicating authority found these decisions distinguishable on facts, as there were no sales at the factory gate or from the depot for certain counts of yarn. The Tribunal upheld this finding, noting that the adjudicating authority had considered the decisions but found them inapplicable to the specific facts of the case.

3. Incorrect valuation method for captive consumption and stock transfer to depots:
The appellants argued that the valuation of yarn for captive consumption and stock transfer to depots should be based on the factory gate price, as per the Supreme Court decisions in Scan Synthetics and Ashok Leyland. The adjudicating authority, however, used the cost of production method under Rule 6(b)(ii) of the Valuation Rules, as there were no comparable prices available for certain counts of yarn. The Tribunal agreed with the adjudicating authority, citing the Supreme Court's decision in Fiat India, which held that the factory gate price below the cost of production cannot be considered the "normal price" for valuation purposes. The Tribunal directed the adjudicating authority to reassess the value using the cost of production method, considering the principles laid down in relevant Supreme Court decisions.

4. Inclusion of certain costs and profits in the assessable value:
The appellants challenged the inclusion of certain costs and profits in the assessable value, arguing that the cost of production should be determined as per CAS-4 standards. The Tribunal agreed that the cost of production should be calculated in accordance with CAS-4, as established by the Supreme Court in Cadbury India and Raymond Synthetics. The adjudicating authority was directed to exclude certain costs, such as packing costs for yarn captively consumed, and to use net profit instead of gross profit for determining the assessable value.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter back to the adjudicating authority for reconsideration, directing that the valuation should be done in accordance with the principles laid down in the relevant Supreme Court decisions and CAS-4 standards. The adjudicating authority was instructed to provide a reasoned order, following principles of natural justice, and to complete the reassessment within six months. The appellants were also directed to cooperate fully in the remand proceedings.

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