2002 (2) TMI 198 - AT - Central Excise

Summary

Issues:
1. Challenge to Order-in-Original by the Commissioner of Central Excise.
2. Differential duty demand on Ethyl Alcohol-Denatured (SDS) transferred between manufacturing units.
3. Allegation of incorrect assessable value calculation under Central Excise Valuation Rules.
4. Discrepancy in assessable value determination based on selling prices of other manufacturers.
5. Non-application of mind by the Commissioner regarding differential duty demand for a specific period.
6. Application of Rule 6 of Central Excise Valuation Rules for determining assessable value.

Analysis:
1. The judgment concerns the challenge to an Order-in-Original by the Commissioner of Central Excise, focusing on the differential duty demand on Ethyl Alcohol-Denatured (SDS) transferred between manufacturing units. The appellant, M/s. Somaiya Organics (India) Ltd., contested the demand of Rs. 14,89,61,104.00 confirmed by the Commissioner, leading to the present appeal.

2. The dispute revolves around the calculation of the assessable value of SDS under the Central Excise Valuation Rules. The appellants argued that they determined the value on a costing basis, while the show cause notice proposed fixing the value based on selling prices of other manufacturers. The Commissioner upheld the demand and imposed a penalty under Section 11AC.

3. The judgment delves into the discrepancy in determining the assessable value based on the selling prices of comparable goods manufactured by other entities. The appellants argued that the highest price methodology adopted by the department was illegal and did not reflect the actual cost of production. The Commissioner's reliance on contractual prices without examining the terms of the contract was also criticized.

4. Notably, the judgment highlights the non-application of mind by the Commissioner regarding the differential duty demand for a specific period. The appellants provided evidence of debiting the differential amount of Central Excise duty based on revised costing, which the Commissioner failed to consider, leading to serious consequences for the assessee.

5. The Tribunal found that the demand confirmed by the Commissioner did not align with the provisions of law, particularly Rule 6 of the Central Excise Valuation Rules. The highest price methodology for determining the assessable value was deemed unsustainable, as it did not meet the requirement of establishing the nearest ascertainable equivalent.

6. Consequently, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the necessity of adhering to legal provisions in determining the assessable value for excisable goods. The judgment serves as a significant precedent in clarifying the correct application of valuation rules in excise duty matters.