2005 (3) TMI 186 - AT - Central Excise

Valuation (Central Excise) - Period of removal of the goods for captive consumption - Departmental Clarifications - Whether Board's valuation Circular No. 692/8/2003 dated 13-2-2003 on valuation of captively consumed goods is applicable to all pending cases or is applicable only to goods removed for captive consumption from the date of issue of that Circular - HELD THAT - The revenue seeks to finalise pending valuations applying different costing principles on the plea that different criteria had been circulated from time to time. The assessees are contesting the correctness of that approach by contending that the instructions contained in the earlier circulars were not in conformity with the general principles of cost accounting, and that the latest circular which incorporated correct principles should be followed in all pending cases. It is also to be noticed that the latest circular of 2003 specifically states that the earlier instructions have to be deemed to be modified by the later circular. Thus, Revenue had no independently sustainable claim. Its claim is based entirely on circulars issued from to time. That too, on incorrect costing principles. It would be wholly incorrect to apply old circulars without considering the modifications brought about by the latest circular, particularly when, as noted already, it is well settled that assessees are not bound by any circular, though at liberty to seek the benefit of circulars and a Court has to allow such a claim while Revenue is bound by its own circulars. Thus, all the appeals are allowed by way of remand with the direction to the original authorities to decide valuation in terms of the Circular No. 692/8/2003, dated 13-2-2003.

Summary

Issues:
Interpretation of Circular on valuation of captively consumed goods and its applicability to pending cases.

Analysis:
The main issue in the appeals was whether Circular No. 692/8/2003 on valuation of captively consumed goods applied to all pending cases or only to goods removed for captive consumption after the circular's issuance. The Revenue argued that valuation should be based on the circular in force during the relevant period, citing previous circulars and the principle that circulars are prospective. However, the assessees contended that the latest circular provided the correct costing method and should govern all pending cases, emphasizing the modification of earlier circulars and the application of CAS-4 standards developed by ICWAI.

The assessees argued that they could benefit from a beneficial circular even in pending disputes, while oppressive circulars should be applied prospectively. They highlighted that the Revenue cannot go against its own circulars and that assessees can contest the validity of instructions. The judgment of the Apex Court was cited to support the right of an assessee to claim and compel compliance with beneficial instructions. The Circular dated 13-2-2003 emphasized following general costing principles and the adoption of CAS-4 standards for captively consumed goods, modifying previous instructions.

The Tribunal noted that the Revenue's contention that assessments should be decided based on circulars of the relevant period without considering subsequent modifications was not supported by the Apex Court judgment. The judgment clarified that a sustainable claim raised by the Revenue independently of a circular could not be extinguished by a subsequently issued circular. The assessees argued that the correct costing principles in the latest circular should be followed in all pending cases, as the circular specifically stated that earlier instructions must be deemed modified. The Tribunal held in favor of the assessees, allowing the appeals by remanding the cases for valuation in line with Circular No. 692/8/2003.

In conclusion, the Tribunal's decision emphasized the importance of applying correct costing principles outlined in the latest circular to pending cases, ensuring that assessees can benefit from beneficial circulars and that Revenue is bound by its own circulars. The judgment highlighted the need to consider modifications brought about by subsequent circulars and the authority of assessees to contest incorrect instructions in valuation disputes.