2016 (3) TMI 344 - AT - Central Excise

Intermediate goods - captive consumption - Valuation adopted in terms of Rules and CAS-4 standards - eligibility for exemption under Notification NO.67/95-CE dated 16.03.1995 - capital goods - Held that - Hard copy shim is an excisable product manufactured and fully put to captive use by the appellant. For arriving at the value for Central Excise purpose, the appellant followed provisions of Rule 8 and general principles of costings as per CAS-4 standards. This is also in terms of Board s Circular dated 13.02.2003. Now, we find that the value adopted by the appellant was sought to be rejected by the Revenue without any valid legal grounds. Revenue adopted highly arbitrary and imaginative methodology to arrive at the value of these impugned goods. The value of shim is arrived at from the value of final product - hologram - by deductive method. This is not supported by any provisions of law or approved standards of accounting/costing. The best judgement under Rule 11 of Valuation Rules does not permit such arbitrariness and imaginative valuation. The impugned goods are admittedly capital goods falling under Chapter 84 of CETA. The provisions of exemption Notification NO.67/95-CE dated 16.03.1995 is clearly applicable to the impugned goods as they are used captively within the factory of production. The exclusion provided in the proviso of the said notification shall apply only to inputs not capital goods. We find the reasoning given by the original authority to deny the said exemption as totally misconceived. Rule 6 (4) of Cenvat Credit Rules, 2004, has no application to decide the eligibility of above said exemption. The said Rule is for non-eligibility of credit on capital goods used exclusively in the manufacture of exempted goods. In the present case, the appellant is not claiming any credit on capital goods. In fact, the appellant is manufacturing the capital goods and is claiming exemption under Notification NO.67/95-CE dated 16.03.1995. Here, we find that the ld.Commissioner s finding is absolutely without basis and is erroneous. This we hold that the appellant will succeed on both the grounds viz. valuation adopted in terms of Rules and CAS-4 standards and eligibility for exemption under Notification NO.67/95-CE dated 16.03.1995. - Decided in favour of assessee

Summary

Issues:
1. Valuation of captively consumed "hard copy shim" for Central Excise duty.
2. Eligibility of the appellant for exemption under Notification No.67/95-CE dated 16.03.1995 for captively consumed hard copy shim as capital goods.

Valuation of Captively Consumed "Hard Copy Shim" for Central Excise Duty:
The appellant, engaged in manufacturing polyester film, shim, BOPP, and plastics, faced demands for differential duty on captively consumed "hard copy shim" used in exempted hologram production. The Revenue challenged the valuation under Rule 8 of Central Excise Valuation Rules, 2000, arguing that the technical expertise in the product was not adequately considered under CAS-4. The Revenue proposed a formula to determine the value of the shim. The original authority confirmed the demands and penalties, leading to the appeal. The appellant contended that the valuation was as per CAS-4 standards and Rule 8, with no extra costs alleged by Revenue. The Tribunal found the Revenue's methodology arbitrary, rejecting the deductive method used and emphasizing the lack of evidence supporting additional costs. The Tribunal cited the Cadbury India Ltd. case and upheld the appellant's valuation method under Rule 8 and CAS-4 standards.

Eligibility for Exemption under Notification No.67/95-CE:
Regarding the exemption under Notification No.67/95-CE dated 16.03.1995 for captively consumed hard copy shim as capital goods, the Tribunal found the impugned goods fell under Chapter 84 and qualified as capital goods. The original authority's denial of exemption was deemed misconceived, with Rule 6 (4) of Cenvat Credit Rules, 2004, found inapplicable. The appellant's claim for exemption under the notification was supported by the Tribunal, citing precedents like Hero Cycles Ltd. and Siemens Ltd. The Tribunal emphasized interpreting the notification based on its language and plain terms. Ultimately, the Tribunal ruled in favor of the appellant on both valuation and exemption grounds, allowing the appeals and disposing of the Miscellaneous Applications.

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