2000 (8) TMI 322 - AT - Central Excise

Summary

Issues:
1. Valuation of goods for Central Excise Duty.
2. Relationship between two companies for duty assessment.
3. Application of Rule 6(b)(i) of Central Excise Valuation Rules.
4. Consideration of additional factors in valuation.
5. Captive consumption of goods.

Analysis:

Valuation of goods for Central Excise Duty:
The case involved two appeals against the same Order-in-Adjudication regarding the valuation of goods for Central Excise Duty. The Commissioner had determined the assessable value of ice cream based on the sale price of one of the appellants, which was contested by the appellants. The Tribunal noted that the valuation should be based on the cost of materials supplied to the job worker and the manufacturing profit of the job worker, as per the Supreme Court's decision in Ujagar Prints case. The Tribunal found the Commissioner's valuation method erroneous and set aside the order.

Relationship between two companies for duty assessment:
The Commissioner had treated the relationship between the two companies as that of agent and principal, leading to the demand for duty from both appellants. However, the appellants argued that the agreement between them was on a principal-to-principal basis, and there was no justification for treating one as the agent of the other. The Tribunal agreed with the appellants, emphasizing the principal-to-principal nature of their agreement and rejected the Commissioner's assessment.

Application of Rule 6(b)(i) of Central Excise Valuation Rules:
The Commissioner had relied on Rule 6(b)(i) of Central Excise Valuation Rules for determining the assessable value of the goods. However, the Tribunal pointed out that this rule pertains to the valuation of goods produced and captively consumed, which was not the case in this situation. Therefore, the Tribunal concluded that the rule was not applicable in this scenario.

Consideration of additional factors in valuation:
The Departmental Representative argued that certain factors, such as employees' salaries and lease amounts, should be considered as additional considerations in the valuation of the goods. However, the Tribunal did not find merit in this argument and focused on the cost of materials and manufacturing profit as the basis for valuation.

Captive consumption of goods:
The Tribunal observed that the goods were not being captively consumed but were being transferred to the company on a job work basis. This distinction was crucial in determining the correct valuation method, as per the Supreme Court's decision in Ujagar Prints case. The Tribunal emphasized that the sales cost and profit of the buyer should not be included in the assessable value of the goods produced on job work basis.

In conclusion, the Tribunal set aside the entire impugned order and allowed the appeals in favor of the appellants, emphasizing the correct valuation principles and the principal-to-principal relationship between the companies involved.