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TMI Blog2015 (8) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration, subject, of course, to the condition that the buyer is not a related person and the price is the sole consideration for the sale. Rule 4 would be applicable only in those cases where value of “such goods” which are sold by the assessee for delivery at any other time nearest to the time of the removal of the goods under the assessment, appears to be reasonable to the concerned officer. Goods cannot be treated as same or would fall within the description “such goods” as sold to the other buyers in loose form when they are used captively by the appellant in the turnkey projects. We find that the only mistake which is committed by the Commissioner is to refer to Rule 6(b) inasmuch as in the present case, the goods are not consumed by the appellant/ assessee itself but used in the turnkey projects/contracts meant for the third party. Thus, it was Rule 7 which should have been referred to by the Commissioner (Appeals) as none of the preceding rules would apply. To put it otherwise, it is the case of ‘best judgment assessment’. However, we find that, that is the exercise otherwise undertaken by the Commissioner (Appeals) in accepting the costing of the goods which was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of these Show Cause Notices further demonstrates that in order to apply the aforesaid principle, the assessing officer mentioned that this was as per Section 4(1)(a) of the Central Excise Tariff Act (hereinafter referred to as Act for short). 5. The appellant submitted his reply. At that stage, the appellant even filed his written submissions before the assessing officer. The case pleaded by the appellant was that the matter would not be covered under Section 4(1)(a) and was covered under Section 4(1)(b). He further submitted that in view thereof, it is the Central Excise (Valuation) Rules, 1975 (hereinafter referred to as Valuation Rules, 1975 ) which were to be applied in the given case. According to him, none other Rule than Rule 7 which deals with best judgment assessment , should be made applicable. 6. After hearing the appellant, the Assessing Officer passed the orders and applied Rule 4 of the aforesaid Valuation Rules, 1975. On the application of this Rule, he took the value of the goods in question at the same rate at which the appellant has been supplying smoke detectors and parts thereof in loose condition. 7. The appellant preferred the appeal against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4(1)(b) of the Act. While it can be accepted that the subject goods supplied to individual buyer under an invoice, and those sent for commissioning of turnkey projects without any support invoice for this parts, are comparable goods, this fact would only have been utilised for determination of assessable value in requirement of Rule 6(b)(1) of the Valuation Rules. However, there is no liberty to the authorities under this Rule to charge duties on the highest value as supplied to individual buyers, but the law required that necessary adjustment in prices shall be made taking into the facts for adjustment for price in under relevant existing factors. In the present case, the requirement for adjustment would be difficult as these are two different class of buyers, and therefore two different consideration shall prevail in establishment of the prices. Therefore, a better and more acceptable method would be to resort to the costing method under Rule 6(b) (ii) of the Central Excise Rules. In the present case, the appellants have also earlier informed to the Department the costing in respect of the subject disputed items in their letter dated 11-3-1994, supported by certificate from Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (Appeals) : Accordingly, it is claimed that the Assistant Commissioner has erred in seeking to apply the price for loose sales of items to individual buyers, and the highest this respect the only method by each of the assessable value in respect of the limited dutiable items, supplied along with a large number of other bought-out items, can be the costing method. The costing in respect of each of these individual items have been already determined by the appellants and informed to the Department in their letter dated 11-3-1994. It is their claim that the same costing is also considered by the appellants while determining the total costing of the turnkey project. Shri P.R. Sahoy, Director of the appellants firm, stated that the normal margin of profit for turnkey projects is around 4 to 5%, after taxation. However, in several contracts, because of subsequent need to supply a larger number of items then usually required in the commissioning of the project effectively, the appellants some time also do not earn any profit at all. In any case, the margin of profit reflected for each of the individual dutiable items on the basis of costing stated to the Department in their letter d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case, as mentioned above, even the Assistant Commissioner in his final order, accepted that the case was covered by Section 4(1)(b) of the Act meaning thereby, he accepted the position that normal price of the goods in question was not ascertainable. It is only in such a situation that Section 4(1)(b) of the Act gets attracted. This provision further mentions that in such an eventuality, where the normal price of the goods is not ascertainable for the reasons given in the said provision, the criteria to ascertain the price mentioned is the nearest ascertainable equivalent thereof . This is to be determined in such manner as may be prescribed. Manner is prescribed in the Valuation Rules, 1975. Therefore, we have to consider as to which Rules of the Central Excise (Valuation) Rules, 1975 is applicable. Since there is a dispute between the applicability of Rule 4 and Rule 6, we will like to reproduce these two Rules along with Rule 3 and Rule 7 as well in order to present the complete picture. RULE 3. The value of any excisable goods shall, for the purposes of clause (b) of sub-section (1) of Section 4 of the Act, be determined by the proper officer in accordance with these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (a) of this rule; (ii) in a case where a related person does not sell the goods but uses or consumes such goods in the production or manufacture of other articles, in the manner specified in clause (b) of this rule; (iii) in a case where a related person sells the goods in the course of wholesale trade to buyers, other than dealers and related persons, and the class to which such buyers belong is known at the time of removal, on the basis of the price at which the goods are ordinarily sold by the related person to such class of buyers. RULE 7. If the value of excisable goods cannot be determined under the foregoing rules, the proper officer shall determine the value of such goods according to the best of his judgment, and for this purpose he may have regard, among other things, to any one or more of the methods provided for in the foregoing rules. 13. Rule 4 would be applicable only in those cases where value of such goods which are sold by the assessee for delivery at any other time nearest to the time of the removal of the goods under the assessment, appears to be reasonable to the concerned officer. Here, as already noted above from the detailed disc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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