1999 (11) TMI 331 - AT - Central Excise

Summary

Issues:
1. Valuation of captively consumed goods with comparable sale prices.
2. Valuation of captively consumed goods without comparable sale prices.

Analysis:

Issue 1: Valuation of captively consumed goods with comparable sale prices
The judgment addressed the dispute regarding the valuation of captively consumed glass bottles by manufacturers. The impugned order considered comparable sale prices as the basis for assessment when available. It referred to a previous Order-in-Original that confirmed this approach. The order quashed the demand related to captively consumed goods with comparable sale prices. The Revenue contended that using comparable sale prices was incorrect due to negligible quantities, prices below production costs, and buyer relationships. However, the respondents cited legal precedent stating that genuine commercial prices should be the basis for assessment, regardless of the quantum of sales. The court agreed with the respondents, emphasizing that the sale price's genuineness is crucial for valuation. It rejected the Revenue's appeal, stating that the sale price for wholesale goods should be accepted for assessing captively consumed goods.

Issue 2: Valuation of captively consumed goods without comparable sale prices
Regarding captively consumed goods without comparable sale prices, both parties agreed on assessing based on production costs and manufacturing profit. However, disputes arose over the cost computation method. The Revenue argued that the Commissioner's cost computation criteria were flawed, leading to potential revenue loss. They requested an open remand without restrictive cost computation guidelines. The respondents countered, stating that the original cost computation method was also erroneous, adding profit even during loss years. The court found faults in both methods, emphasizing the need to consider all costs in production and ascertain actual profits from accounts. They concluded that cost of production should be recalculated based on correct accounting principles, without following the flawed guidelines from the impugned order. Consequently, the order of remand was modified to allow an open remand without restrictive cost computation observations.

In conclusion, the appeal was disposed of based on the above findings and orders, providing clarity on the valuation of captively consumed goods with and without comparable sale prices while emphasizing the importance of using genuine commercial prices and correct cost accounting principles for assessment purposes.