2001 (5) TMI 95 - AT - Central Excise

Summary

Issues Involved:
1. Application of sale price to captive consumption.
2. Legality of price determination for captive consumption.
3. Impact of solitary sales on valuation.
4. Comparison of different qualities of goods for valuation.

Detailed Analysis:

1. Application of Sale Price to Captive Consumption:
The appellants, M/s. Essel Packaging Limited, manufactured Multilayer Plastic Laminated Tubes and the input, Multilayer Plastic Laminated Web, was cleared for captive consumption on a cost construction basis as per Rule 6(b)(2) of the Central Excise (Valuation) Rules, 1975. A Show Cause Notice was issued seeking to apply the price of Rs. 233/- per kg, which was charged to an outside buyer, to all clearances made for captive consumption. The appellants argued that the high price charged to the outside buyer was an exception and should not be considered the normal price.

2. Legality of Price Determination for Captive Consumption:
The Assistant Commissioner confirmed the demand relying on previous judgments, and the Commissioner of Central Excise (Appeals) upheld this decision for clearances within three months but voided the application of this price to future clearances. The appellants contended that the price determined on 30-6-1997 should not be applied to subsequent clearances for captive consumption, arguing that the cost construction method was the only alternative in the absence of a comparable price.

3. Impact of Solitary Sales on Valuation:
The Tribunal examined whether a solitary sale to an outside buyer could determine the valuation for captive consumption. It was held that even a solitary sale is sufficient to establish the valuation. The Tribunal noted that Section 4 of the Central Excise Act, 1973, defines value as the price at which goods are ordinarily sold in the course of wholesale trade. The Tribunal found that the revenue was correct in adopting the solitary price available for captive consumption, as long as the sale was at arm's length and the relationship was on a principal-to-principal basis.

4. Comparison of Different Qualities of Goods for Valuation:
The appellants argued that different qualities of webs were involved, and the price of one quality should not be applied to another. The Tribunal observed that the price declaration showed different varieties of webs with varying prices. The proceedings were remanded to the Jurisdictional Officer to verify which variety was used for captive consumption and to adopt the corresponding price if the same variety was sold in the outside market. If the variety was not sold outside, the officer was directed to determine the value based on Rule 6(b)(1) after assessing whether the prices enumerated in the price list were comparable.

Conclusion:
The Tribunal concluded that while the jurisdictional officers' action in adopting the value of sales made to an outside person for calculating the duty for captive consumption was legal, the proceedings were remanded for determination of the value in terms of the discussions. The appeal was allowed by remand, directing the assessees to cooperate with the jurisdictional officers for the determination of the correct value based on the specific variety of goods used for captive consumption.