2004 (6) TMI 184 - AT - Central Excise

Summary

Issues Involved:
1. Valuation of goods under Rule 4 and Rule 6 of the CE (Valuation) Rules.
2. Determination of value for goods sold on consignment basis versus factory gate sales.
3. Application of cost construction method for goods manufactured on job work basis.
4. Legitimacy of the remand order by the Commissioner (Appeals) expanding the scope beyond the show cause notice.
5. Comparison of goods for valuation purposes.
6. Adoption of the highest price for valuation in the show cause notice.

Issue-wise Detailed Analysis:

1. Valuation of Goods under Rule 4 and Rule 6 of the CE (Valuation) Rules:
The Commissioner (Appeals) remanded the matter to the original authority to re-determine the valuation by applying Rule 4, based on the selling price at a point subsequent to the clearance from the factory. He also considered Rule 6, noting that it provided little room for deriving prices from different specifications of 'Tor steel'. The Commissioner preferred the cost construction method, referencing the Apex Court's judgment in Ujagar Prints, as it provided a more accurate valuation for job-worked goods.

2. Determination of Value for Goods Sold on Consignment Basis versus Factory Gate Sales:
The Commissioner (Appeals) suggested that for goods sold on consignment where factory gate sales existed, the factory gate price should also apply to consignment sales. The Assistant Commissioner, however, noted that goods sold at the factory gate and those cleared on consignment basis should not be valued identically due to differences in buyer classes and sale conditions.

3. Application of Cost Construction Method for Goods Manufactured on Job Work Basis:
The Assistant Commissioner applied the cost construction method for valuing goods manufactured on a job work basis, citing Section 4(1)(b) of the Act and Rule 7 of the CE Valuation Rules. He referenced the Ujagar Prints judgment but clarified that the cost construction method should only be used when the normal price under Section 4(1)(a) is not ascertainable. The Commissioner (Appeals) disagreed, suggesting the cost construction method should be preferred.

4. Legitimacy of the Remand Order by the Commissioner (Appeals) Expanding the Scope Beyond the Show Cause Notice:
The appellants contended that the Commissioner (Appeals) exceeded his authority by setting aside the Order-in-Original and introducing new norms not included in the show cause notice. The Tribunal agreed, stating that the scope of inquiry should remain within the parameters of the show cause notice, and the Commissioner (Appeals) could not introduce new directions for re-adjudication.

5. Comparison of Goods for Valuation Purposes:
The Assistant Commissioner rejected the proposal to determine the value of goods manufactured on job work basis using the price of 6mm/6.5mm M.S. Coils sold at the factory gate, noting that these goods were not comparable to 8mm to 28mm Tor steel/CTD bars due to differences in specifications and market recognition. He emphasized that different specifications and diameters in rolled steel products affect pricing and comparability.

6. Adoption of the Highest Price for Valuation in the Show Cause Notice:
The Assistant Commissioner found that the proposal to adopt the highest price of 6mm/6.5mm M.S. Coils for valuation was inconsistent with legal provisions. He noted that multiple prices for the same goods within a short period are normal, and the lowest price should be adopted for valuation. The Tribunal upheld this view, referencing the Madras High Court's judgment in Lucas TVS Ltd. and Board Circular No. 8/76.

Conclusion:
The Tribunal found merit in the appellants' submissions, noting that the Assistant Commissioner had correctly applied legal provisions and judgments in the original order. The Commissioner (Appeals) overstepped by introducing new parameters not included in the show cause notice, leading to an unsustainable remand order. Consequently, the Tribunal set aside the impugned orders and allowed the appeals with consequential relief.