2018 (11) TMI 816 - AT - Central Excise

Valuation - captive consumption - clearances affected within the factory premises - applicability of Rule 8 of Central Excise Valuation Rules, 2000 - extended period of limitation - Held that - Larger Bench of the Tribunal in the case of Ispat Industries Limited 2007 (2) TMI 5 - CESTAT, MUMBAI has specifically ruled that the provisions of Rule 8 of the Valuation Rules will not apply in case where some part of a production is cleared to independent buyers - In the case in hand, it is seen that most of the goods which were manufactured by the appellant are cleared to independent buyers and the value of such clearances is higher than the value on which duty liability has been discharged by the appellant on the captively consumed goods. Rule 8 come into play when captively consumed goods are used for production or manufacture of other articles - In the case in hand, the factual matrix is that appellant has not consumed the goods for production or manufacture of other articles but has consumed the same for Civil construction from the expansion of the projects, hence the claim of applicability of the Rule 8 is ruled out. Extended period of limitation - Held that - Since, there was litigation on the issue at various forums, the plea of Learned Counsel that there was no malafide in valuing the captively consumed goods based upon the cost of production formulae consumed goods needs to be accepted - the demands raised in these appeals by invoking the extended period of time are unsustainable and liable to be set aside. The demands raised and confirmed within the limitation period are upheld along with interest and penalties imposed for such an amount is also upheld - appeal allowed in part.

Summary

Issues:
Valuation of captively consumed Iron and Steel products under Central Excise Valuation Rules - Applicability of Rule 8 - Demand of differential duty - Extended period invocation - Interpretation of Rule 8 in the context of captively consumed goods - Application of best judgment method of valuation - Comparison with transaction value to independent buyers - Relevant case laws and notifications.

Analysis:

Issue 1: Valuation of captively consumed Iron and Steel products under Central Excise Valuation Rules

The case involved a dispute regarding the valuation of Iron and Steel products captively consumed within the factory premises. The appellant, a manufacturer of such products, had discharged Central Excise duty on these captively consumed goods based on the cost of production plus profit as per Rule 8 of Central Excise Valuation Rules, 2000. The Revenue contended that the goods should be assessed under Rule 4 after following Rule 11 of Central Excise Rules, 2002, instead of Rule 8. The appellant argued that Rule 8 was applicable, supported by Board Circulars and notifications mandating valuation based on cost of production. The Tribunal analyzed the facts and legal provisions to determine the correct valuation method for captively consumed goods.

Issue 2: Applicability of Rule 8 and Demand of Differential Duty

The Tribunal considered the applicability of Rule 8, which states that when goods are not sold but consumed in production, the value shall be 110% of the cost of production. The appellant contended that Rule 8 applied to captively consumed goods, while the Revenue argued for a transaction value approach based on sales to independent buyers. The Tribunal referred to relevant case laws and notifications, emphasizing that Rule 8 does not apply when goods are not used in the production of other articles. The decision hinged on whether the goods were consumed for manufacturing other articles or for civil construction, leading to a ruling against the appellant's interpretation of Rule 8.

Issue 3: Extended Period Invocation and Best Judgment Method

The Tribunal addressed the Revenue's demand for differential duty by invoking the extended period, considering the appellant's compliance with duty payments based on self-assessment under Rule 8. The appellant's argument that there was no intent to evade duty due to confusion surrounding the valuation of captively consumed goods was accepted. The Tribunal highlighted the importance of consistent monthly returns and the lack of malafide intent in the appellant's valuation method. Consequently, the demands raised during the extended period were deemed unsustainable, leading to the setting aside of interest and penalties.

Conclusion:

The Tribunal upheld the demands confirmed within the limitation period, emphasizing the correct interpretation of Rule 8 in the context of captively consumed goods. The decision clarified the valuation method for such goods, highlighting the distinction between production for other articles and civil construction. The judgment provided clarity on the application of Rule 8, extended period invocation, and the best judgment method, ensuring compliance with Central Excise Valuation Rules in similar cases.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision on the valuation of captively consumed Iron and Steel products under Central Excise Valuation Rules.