2008 (11) TMI 261 - HC - Central Excise

Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, notified under Notification No. 45/2000-C.E. (N.T.), dated 30-6-2000 and Section 4(1)(b) and Section 37(2)(i) of the Central Excise Act, 1944 - whether ultra vires as Articles 14 and 19(1)(g) and Articles 265 and 300-A of the Constitution of India? Held that - The Central Government, by virtue of Section 37 of the Central Excise Act, 1944, has made the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, and notified the same under Central Excise Notification No. 45/2000-C.E. (N.T.), dated 30-6-2000, effective from 1st July, 2000. Therefore, the value of goods captively consumed has to be determined, when the price is not the sole consideration for sale, in accordance with Rule 8 of the Central Excise (Valuation) Rules, 2000, with effect from 1-7-2000. In such circumstances, the writ petitions preferred by the petitioners are unsustainable, as they are devoid of merits. In view of the limited prayer made on behalf of the petitioners it is observed that it goes without saying that the authorities concerned would take note of the Circular and the decision of the Larger Bench cited supra before deciding the issues arising for consideration, if they are found to be applicable at the relevant point of time. Therefore, no further orders are required to be passed. Hence, the writ petition stands closed with the above observations.

Summary

Issues:
Challenge to Rule 8 of Central Excise Valuation Rules, 2000 as ultra vires Sections 4(1)(b) and 37(2)(i) of the Central Excise Act, 1944, and unconstitutional under Articles 14, 19(1)(g), 265, and 300-A of the Constitution of India.

Analysis:
1. The writ petition challenges Rule 8 of the Central Excise Valuation Rules, 2000, arguing it is ultra vires Sections 4(1)(b) and 37(2)(i) of the Central Excise Act, 1944. The petitioners contend that the duty of excise is now imposed on the yarn not sold based on the cost of production plus a notional 15% gross profit, leading to economic challenges in marketing the product. This change deviates from the previous assessment based on the actual selling price, creating a significant disparity.

2. The petition further argues that the impugned Rule 8 is arbitrary and violates Article 14 of the Constitution of India by introducing a fixed profit margin without considering industry specifics or market conditions. It is claimed that this arbitrary valuation method discriminates against manufacturers, infringing on their rights under Article 19(1)(g) and causing substantial business losses. The rule fails to differentiate between unequal situations and disregards the distinction between manufacturing profit and notional profit.

3. The respondents defend Rule 8 as a simplification measure to value goods used for captive consumption consistently. They argue that the rule aims to avoid disputes over comparable goods' values and streamline the valuation process. By setting a fixed profit margin of 15%, the rule intends to eliminate ambiguity and simplify the valuation rules, ensuring uniformity in assessments.

4. Section 37 of the Central Excise Act empowers the Central Government to make rules for determining values under Section 4. The Central Excise Valuation Rules, 2000, including Rule 8, were introduced to provide a method for valuing goods not sold based on cost of production. The respondents assert that the rule's implementation from July 1, 2000, aligns with the Act's provisions, and challenges to its validity lack merit.

5. During the hearing, the petitioners request permission to address valuation issues related to goods consumed internally before the concerned authorities, citing a Central Excise Circular and a relevant decision. The Court acknowledges this request and emphasizes that the authorities should consider the Circular and the decision while resolving valuation disputes. Consequently, the writ petition is closed with these observations, requiring no further orders or costs.