2002 (2) TMI 181 - AT - Central Excise

Summary

Issues:
- Valuation of captively consumed grey yarn for excise duty purposes based on cost of production versus sale price to independent wholesale buyers.

Analysis:

The appellants, as grey yarn manufacturers, sold part of the manufactured yarn and captively consumed the rest for producing dyed yarn. The impugned order demanded short levied duty for the period 1995-1998, arguing that the assessable value of the captively consumed yarn should be based on its cost of production, not the sale price. The appellants contended that the original assessments and duty paid were correct, as they sold goods to independent wholesale buyers at normal prices, which should constitute the assessable value for all goods produced. They argued that valuation based on cost of production is not necessary when the normal price is available, citing relevant legal precedents. The appellants also highlighted that even if captively consumed goods were to be valued per Valuation Rules, the valuation should be based on the price of comparable goods, not cost of production.

The Tribunal examined the records and found that a significant portion of the goods produced by the appellants were sold to independent purchasers at normal prices, which were assessed without any doubts. It was established that normal prices existed for the grey yarn manufactured by the appellants, as required by Section 4(1)(a) of the Central Excise Act. The Tribunal reiterated that when goods are sold at normal prices to wholesale buyers, including captively consumed goods, all goods should be assessed at normal prices to wholesale dealers. Separate valuation of captively consumed goods through Valuation Rules is unnecessary in such cases. Even if Valuation Rules were applied, the duty payable would have been the same as originally paid, as per the Tribunal's analysis.

Based on the above findings, the Tribunal concluded that the original valuation of the goods was correct. The valuation in the impugned order, along with the demand for short levied duty, was deemed unjustified. Consequently, the appeal was allowed, providing relief to the appellant, and the impugned order was quashed.