1999 (8) TMI 505 - AT - Central Excise

Summary

Issues involved:
Valuation of bottles utilized by a company for captively consumed goods, differential duty demand based on cost of manufacture, valuation of bottles consumed by the company and sold to franchisees, assessment of jars based on sale prices to an independent trader, inclusion of bill discounting cost and selling expenses in assessable value, applicability of extended period for duty demand, and denial of exemption under Notification No. 217/86.

Analysis:

1. Valuation of Captively Consumed Bottles:
The appellant argued that the valuation of bottles utilized by the company for captively consumed goods should be based on the value of comparable goods. The impugned order demanded differential duty based on the cost of manufacture, contrary to the appellant's contention. The Tribunal held that under Rule 6(b)(i) of the valuation rules, the value should be based on comparable goods produced by the assessee or others. The Commissioner's rejection of comparable values was deemed incorrect, and the assessable value should have been determined after necessary adjustments.

2. Valuation of Bottles Sold to Franchisees:
Regarding bottles sold to franchisees and captively consumed, the Commissioner's finding of no sale of bottles was challenged. The Tribunal noted that comparable goods were available as per the agreement with the franchisees, and their value should have been adopted for assessment. The fixation of assessable value based on cost of production for these bottles was deemed unnecessary.

3. Assessment of Jars Sold to Independent Trader:
The appellant claimed that the sale prices to an independent trader should have been accepted for assessing jars. They also argued for exemption under Notification No. 217/86 or Modvat credit. The Tribunal found the denial of exemption on the grounds of usage in a different unit of the manufacturer to be incorrect. Since Modvat credit would be available, the demand for this category of goods was deemed unsustainable.

4. Inclusion of Costs in Assessable Value:
The appellant objected to the inclusion of bill discounting cost and selling expenses in the assessable value. They argued that these costs should not be considered part of the cost of production. The Tribunal agreed with the appellant's submission and held that only costs and profits related to the manufacture of captively consumed goods should be included in the assessable value.

5. Applicability of Extended Period for Duty Demand:
The appellant contended that the demand was time-barred and that the extended period under Section 11A was not applicable due to the full disclosure of facts. The Tribunal found no deliberate attempt to suppress facts and ruled that invoking the extended period for duty demand and penalty imposition was unjustified.

6. Final Decision:
After considering all submissions and records, the Tribunal allowed the appeal in full and set aside the impugned order, emphasizing the correct application of valuation rules and the incorrect denial of exemptions and inclusion of certain costs in the assessable value.