1997 (3) TMI 242 - AT - Central Excise

Summary

Issues Involved:
1. Valuation of captively consumed molasses under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975.
2. Application of the deemed normal price under proviso (ii) to Section 4(1)(a) of the Central Excises Act, 1944.
3. Determination of the appropriate value of comparable goods for excise duty purposes.

Issue-wise Detailed Analysis:

1. Valuation of Captively Consumed Molasses under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975:

The respondent, engaged in the manufacture of sugar, used 35% of the molasses captively for the manufacture of other products, declaring the value at Rs. 32.00 per quintal as per Rule 6(b)(i). The Department issued a notice proposing a higher value based on another producer's sale at Rs. 245.00 per quintal. The respondent contended that under Rule 6(b)(i), the value should be the price at which they sold comparable goods, i.e., Rs. 32.00 per quintal. Alternatively, they suggested Rs. 165.00 per quintal based on their purchase price from another manufacturer. Both lower authorities confirmed the higher demand.

2. Application of the Deemed Normal Price under Proviso (ii) to Section 4(1)(a) of the Central Excises Act, 1944:

The respondent argued that under proviso (ii) to Section 4(1)(a), the controlled price of Rs. 32.00 per quintal should be deemed the normal price for valuation. The Department rebutted, stating that the deemed price is only for goods sold at fixed prices and not for captively consumed goods. The legal fiction created by the proviso should not be extended beyond its purpose, which is to determine the assessable value for goods sold at the controlled price.

3. Determination of the Appropriate Value of Comparable Goods for Excise Duty Purposes:

The Tribunal noted that Rule 6(b)(i) requires the value to be based on comparable goods produced by the assessee or any other assessee. The respondent's sale of molasses at Rs. 32.00 per quintal was deemed normal price only for goods sold at that price, not for captively consumed goods. Evidence showed other assessees sold molasses at varying prices, from Rs. 150.00 to Rs. 245.00 per quintal. The Tribunal emphasized that the legal fiction of deemed normal price should not be extended to captively consumed goods, which must be valued based on comparable sales by other assessees.

Conclusion:

The Tribunal set aside the impugned order and remanded the case to the adjudicating authority to determine the value and duty payable afresh, considering the average price of comparable goods sold by other assessees at or around the relevant time. The adjudicating authority must grant a personal hearing to the respondent and decide in accordance with law and the Tribunal's observations. The appeal was allowed.