2004 (6) TMI 108 - AT - Central Excise

Summary

Issues: Valuation of samples of fabrics for supply to traders.

In this judgment by the Appellate Tribunal CESTAT, Mumbai, the issue at hand is the valuation of samples of fabrics removed for supply to traders by a manufacturer of fabrics. The samples in question are cut pieces not exceeding 50 cms in length, cleared at a value applicable to Fents. The Revenue argues for the declared assessable values to be rejected, proposing the application of a proportionate value of good textile. The lower authorities had confirmed the demands based on the premise that the samples were cut from good cloth, with known comparable prices. However, the Tribunal found the rational behind the calculation of value based on the average rate of rags/fents unacceptable, as the cloth in the sample pieces would not change in class or category. The value should be determined as per good cloth capable of being sold in ordinary commercial transactions. The Commissioner (Appeals) upheld the valuation based on the same reasoning as in an earlier order.

The Tribunal further noted that rags/fents are not equated value-wise or quality-wise with prime quality textile. Once the valuation of rags and fents at a rate less than that of good quality fabric is accepted, there is no basis for arriving at the valuation as per the rule on captive consumption. The sample pieces, being more akin to rags/fents than good quality cloth, should be valued based on comparable goods valuation under Rule 4. Therefore, the Tribunal found no merit in upholding the orders of the lower authorities. Additionally, the Tribunal observed that sample cut pieces of fabrics may be classifiable as new rags under a specific heading of the Tariff, indicating that the entire basis of working out the demands may not be appropriate. However, the issue of classification was not before the Tribunal, and the appeal was allowed based on the valuation issue alone.

In conclusion, the Tribunal set aside the lower authorities' orders and allowed the appeal, determining that the valuation of the samples of fabrics for supply to traders should be based on the comparable goods valuation under Rule 4, considering the nature of the samples as akin to rags/fents rather than prime quality textile.