2006 (4) TMI 31 - AT - Central Excise

Central Excise Valuation Detergent Powder The goods in bulk packet and retail packet cannot be treated as the or comparable goods for the purpose of assessable value Valuation based on cost of production - Limitation - Demand

Summary

Issues: Valuation of Ariel brand detergent powder, Assessment based on cost of production vs. sale price of retail packs, Challenge on merits and limitation

In this case, the appellant manufactured Ariel brand detergent powder and cleared it in bulk packing to another entity for repackaging into smaller retail packs. The dispute arose when the Central Excise authorities alleged that the valuation should be based on the sale price of the retail packs rather than the cost of production of the bulk packing. The authorities issued a show-cause notice invoking the extended period under Section 11A of the Central Excise Act for the period December 1992 to December 1993. The Commissioner held that there was a short levy of duty due to incorrect valuation based on the sale price of retail packs, relying on Rule 6 (b) (ii) of Central Excise Valuation Rules. The appellant challenged this valuation and the differential duty demand on both merits and limitation grounds.

On the merits, the appellant argued that goods should be assessed based on their condition at the time of removal from the factory, emphasizing that bulk and retail packing are not comparable goods. They cited previous tribunal decisions and a Supreme Court judgment to support their position. The appellant contended that post-clearance processes should not influence the valuation of goods cleared in bulk packing. The Tribunal agreed with the appellant, stating that goods should be assessed based on their price at the time and place of removal, disregarding subsequent price variations due to repackaging.

Regarding limitation, the appellant asserted that their valuation method based on the cost of production had been consistently accepted by the authorities before the disputed period. They argued that there was no intent to evade duty, as the same facts were disclosed over time. The Tribunal accepted this argument, noting that the valuation method remained undisputed for earlier and subsequent periods, indicating a difference in opinion rather than intentional suppression of facts by the appellant.

Ultimately, the Tribunal ruled in favor of the appellant, upholding their valuation based on the cost of production for the bulk packing of detergent powder. The decision highlighted the importance of assessing goods at the time of removal from the factory and rejected the notion of treating bulk and retail packs as comparable goods. The Tribunal also acknowledged the appellant's consistent valuation practice and rejected the claim of suppression of facts with intent to evade duty. The appeal was allowed with consequential relief granted to the appellant.