2015 (4) TMI 351 - SC - Central Excise

Valuation of goods - Applicability of Rule 8 on Job work - Whether Rule 8 of the Central Excise (Valuation) Rules, 2000 or Rule 11 thereof would apply in arriving at the valuation of the goods at the end of the respondent/assessee - Held that - Rule 8 will have no application to the facts of the present case. It is rightly pointed out by the CEGAT that for the applicability of this Rule two requirements are to be fulfilled. The first is that the excisable goods that the assessee manufactures are not sold by him and the second requirement is that these goods must be used for consumption either by him or on his behalf in the production or manufacture of other articles. In the present case, first condition is undoubtedly satisfied as the goods are not sold by the respondent. However, second condition is not at all met or fulfilled inasmuch as the goods are not used by the assessee for consumption either by him or on his behalf in the production or manufacture of other articles. As stated, these goods are supplied to the manufacturer of the motor vehicles. Rule would be applicable only in those cases that assessee is related in the manner specified in either of sub-clause (ii), (iii) or (iv) of clause (b) of sub-section (3) of Section 4 of the Act and not in those cases where the person is related in the manner as stated in clause (i) thereof. In those cases where Rule 9 is applicable, for the purpose of valuation, normal transaction value at which such goods are sold by the related person, is to be taken as the value of the goods. Proviso becomes applicable only when goods are not sold by the related person at all and used or consumed for home production. As there is no sale transaction by the related person, question of value thereof will not be available and therefore, to arrive at the value in such a situation one has to fall back on Rule 8. - Once Rule 8 is not applicable in the case of the respondent, it is Rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule - Dcided against Revenue.

Summary

Issues:
Valuation of excisable goods under Central Excise (Valuation) Rules, 2000 - Applicability of Rule 8 or Rule 11 - Interpretation of Rule 9 - Relationship criteria under Section 4(3)(b) of the Act.

Valuation of Goods - Rule 8 vs. Rule 11:
The appellant challenged the Customs, Excise and Gold (Control) Appellate Tribunal's order quashing the excise duty demand. The respondent undertakes job work by manufacturing motor vehicle parts supplied by customers. The appellant contended that Rule 8 should apply, valuing goods at 115% of production cost. However, Rule 8 requires goods to be used for consumption in production, which does not apply as the parts are supplied to vehicle manufacturers. The Tribunal correctly noted Rule 8's inapplicability due to non-fulfillment of consumption criteria.

Interpretation of Rule 9 - Relationship Criteria:
The appellant argued Rule 9's proviso applies due to the respondent's relationship with a customer. Rule 9 applies when goods are sold to a related person under specified relationships in Section 4(3)(b). The rule excludes relationships under sub-clause (i), which includes inter-connected undertakings. The proviso triggers Rule 8 if goods are not sold but used in production by the related person. However, the respondent's relationship with a customer falls under sub-clause (i), not covered by Rule 9, thus Rule 8 does not apply.

Applicability of Rule 11 as Residuary Provision:
With Rule 8 deemed inapplicable, Rule 11 becomes relevant as the residual provision for valuing excisable goods not covered by other rules. The Tribunal's conclusion aligns with this interpretation, finding no error in applying Rule 11. The appeals challenging the Tribunal's decision were dismissed for lack of merit.

In conclusion, the Supreme Court upheld the Tribunal's decision, emphasizing the correct application of valuation rules. The judgment clarified the specific criteria for Rule 8 and Rule 9 application, ensuring proper valuation of excisable goods under the Central Excise (Valuation) Rules, 2000.