2006 (6) TMI 47 - AT - Central Excise

Central Excise Assessable value In the assessable value of captively consumed goods by sole distributor, service charges collected from their customers not to be added

Summary

Issues:
1. Addition of 2% service charges in the assessable value for captive consumption.
2. Interpretation of Valuation Rules, 1975 regarding related persons and additional charges.

Analysis:
1. The appeal addressed the issue of adding 2% service charges by M/s. Larsen & Toubro Ltd., the sole distributor, in the assessable value for captive consumption. The Commissioner (Appeals) found that the appellants were not related persons with M/s. Larsen & Toubro Ltd. during the period of dispute, as confirmed by a Chartered Accountants certificate. The department did not claim that the sales to M/s. Larsen & Toubro Ltd. were to a related person. Relying on a tribunal decision, the appeal was allowed, setting aside the lower authority's order.

2. The Revenue contested the findings of the Commissioner (Appeals) regarding the absence of flow back in transactions between M/s. Larsen & Toubro Ltd. and the assessee, and the lack of recovery of additional consideration. The Revenue argued that the Tribunal's decision on related persons was not relevant, as comparable prices for the same goods were available at the factory gate. The Revenue contended that the Electrodes were captively consumed by both the assessee and M/s. Larsen & Toubro Ltd., and thus, the 2% service charge should be added according to Rule 6(b) (i) of Valuation Rules, 1975.

3. The tribunal noted that if no 2% charge was collected for the Electrodes captively consumed by M/s. Larsen & Toubro Ltd. and the assessee, it could not be added. Additionally, the tribunal recognized that the class of buyers for electrodes consumed by M/s. Larsen & Toubro Ltd. and those sold by the assessee as a distributor/dealer could differ, affecting prices under the Valuation Rules. Consequently, the tribunal found no merit in the Revenue's appeal to overturn the Commissioner's order.

4. The tribunal ultimately rejected the appeal, affirming the decision of the Commissioner (Appeals) in favor of the assessee.