2006 (3) TMI 10 - AT - Central Excise

Central Excise Valuation The respondent captively used impugned goods valuation based on 115% of the cost of production and reasonable margin of profit

Summary

Issues involved: Valuation of P.C. poles for captive consumption

In this case, the issue revolves around the valuation of P.C. poles manufactured by the respondents for captive consumption in the transmission of electricity by themselves. The lower appellate authority had set aside the original order, which assessed the goods at 115% of the cost of production, directing instead that the assessment should be based on the cost of production plus a reasonable profit margin.

The department argued that as per the Central Excise (Valuation) Rules, 2000, goods used for captive consumption should be assessed at 115% of the cost of production. Reference was made to Rule 8 of the Valuation Rules and Board's Circular No. 643/34/2002-CX dated 1-7-2002 to support this argument.

Upon examination of the case records, including the relevant Rules and Circular, it was found that Rule 8 of the Valuation Rules applies to goods used in the production or manufacture of other articles, not in the case of goods used for transmission of electricity. Since no other rule applied, recourse was taken to Rule 11 of the Valuation Rules, which allows for valuation using reasonable means consistent with the rules and the Act.

Applying Rule 11 as the residuary rule, it was determined that the original authority's valuation method based on 115% of the cost of production for the captively used goods was reasonable. Therefore, the impugned order-in-appeal was set aside, and the appeal was allowed by reinstating the original order.

In conclusion, the appeal was allowed in favor of the respondents based on the application of Rule 11 for valuation of goods used for captive consumption in the transmission of electricity.