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TMI Blog2013 (3) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... these goods meant for trial and demonstration adopted value at 110% of the cost of production in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, for short Valuation Rules , and in terms of the clarification in the Board s Circular No. 643/34/2002-CX, dated 1-7-2002 - Annex. A; (iv) that the said excisable goods cleared for trial and demonstration by the assessee are not consumed by them or on their behalf in the production or manufacture of other excisable goods as required under Rule 8 of the Valuation Rules , for adopting the value as prescribed under the said Rule; (v) the valuation of the said excisable goods cleared for trial and demonstration is to be determined under Rule 4 of the Valuation Rules ; (vi) that petitioner had occasioned short payment of Cenvat duty for the period from May, 2006 to September, 2010 totalling to ₹ 41,35,113/-; (vii) that petitioner on clearing excisable goods for trial and demonstration did not show them separately in Form E.R.-1 under Rule 12 of the Central Excise Rules, 2002 r/w Rule 9(7) of the Cenvat Credit Rules, 2004; (viii) the clearance of such excisable goods for trial and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annex. B, as also the show cause notice - Annex. C, nevertheless without awaiting the outcome, passed the order dated 28-6-2012 - Annex. D determining the assessable value of the excisable goods cleared by the assessee for trial and demonstration, during the period from May, 2006 to September, 2010, in terms of Rule 4 of the Valuation Rules made a demand for (i) ₹ 41,35,113/- towards differential Cenvat duty on differential assessable value of ₹ 3,62,75,929/- for the period from May, 2006 to September, 2010 under Sec. 11A(i) of the Central Excise Act, 1944; (ii) interest on Cenvat duty of ₹ 41,35,113/- to be recovered under Sec. 11AB; and (iii) penalty of ₹ 41,35,113/- under Sec. 11AC. 6. Petitioner states that leave to withdraw W.P. 25765 35911-35965/11, was permitted by order dated 19-7-2012 dismissing the petitions with liberty to file a fresh petition challenging the circular, show cause notice and the order - Annex. D. Hence this petition. 7. Petition is opposed by filing statement of objections, inter alia, not denying the facts narrated supra. However at Paragraph 4, it is stated that on a consideration of various aspects of compliance and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In addition it is stated that the clarification in Annex. B against Item No. 13, does neither transgress nor override Sec. 4 of the Central Excise Act, 1944, but is in furtherance of the earlier circular - Annex. A and that clarification by the Board is in the interest of ensuring compliance with the provisions of law in right earnest. 11. The main argument of the learned Counsel for the petitioner is that Tungsten Carbide Tools, Tips and Inserts for trial and demonstration cleared from the petitioner s factory to its engineers, on request, at different locations, since not sold, its valuation is arrived at by the method applicable to tools that are not sold. It is further submitted that this is the practice in vogue for many decades and accepted by the Revenue as a valid method of valuation, as applicable to goods used for captive consumption. According to the learned Counsel, the circular - Annex. B seeks to value the trial and demonstration of Carbide Tools, Tips and Inserts cleared for trial and demonstration, by applying Rule 4 as applicable to goods sold, while Rule 8 is applicable to goods that are not sold, and therefore, clarification over Item No. 13 in Annex. B, call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used or consumed by him or on his behalf in the production or manufacture of other articles, the value shall be based - (i) On the value of the comparable goods produced or manufactured by the assessee or by any other assessee : Provided that in determining the value under this sub-clause, the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relavant factors and, in particular, the difference, if any, in the material characteristics of the goods to be assessed and of the comparable goods; (ii) if the value cannot be determined under sub-clause (i), on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods; (c) Where the assessee so arranges that the excisable goods are generally not sold by him in the course of wholesale trade except to or through a related person and the value cannot be determined under clause (iii) of the proviso to clause (a) of sub-section (1) of Section 4 of the Act, the value of the goods so sold shall be determined - (i) in a case where the assessee sells the goods to a related person who sells s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. 16. The absence of specificity in the Valuation Rules over samples issued under the nomenclature trial and demonstration, the Board by circular - Annex. A, directed valuation of such goods in terms of Rule 11 r/w Rule 8 of the Valuation Rules which reads thus : Point of doubt : How will valuation of samples be done which are distributed free, as part of marketing strategy, or as gifts or donations : Clarification : Since the goods are not sold section 4(1)(a) will not apply and recourse will have to be taken to the Valuation Rules . No specific rule covers such a contingency. Except rule 8 all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Act provides that where excise duty is chargeable on any excisable goods with reference to the value, then, instead of goods sold and delivered by the assessee at the time and place of removal, the transaction value at each such removal shall be the value for computing the excise duty, subject to the price consideration and, the buyer is not related to the assessee. In all other cases, the valuation of excisable goods is to be determined under Sec. 4(1)(b) of the Amendment Act r/w Valuation Rules . 20. The Carbide tools, tips and inserts cleared for trial and demonstration, admittedly, are not sold and delivered at the time and place of removal or at any time thereafterwards and therefore, its valuation has to be determined under Sec. 4(1)(b) of the Amended Act r/w the Valuation Rules . Under Rule 4 of the Valuation Rules , the value of excisable goods under Rule 4 of the Valuation Rules is on the value of such goods sold by the assessee for delivery at any other time nearest to the time of removal of goods under assessment. Rules 5, 6, 7, 9 and 10 prescribe the methodology of valuation of goods sold and delivered at a place other than the place of removal, or where pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time and place of removal and such goods are goods similar or identical to goods cleared for trial and demonstration, as are sold and delivered at the time and place of removal. It is needless to state that goods cleared for trial and demonstration have to be strictly identical to the goods that are cleared for sale, since the edifice of trial and demonstration goods having the same physical properties, is in the direction of establishing them to be identical to those sold. Therefore, goods cleared for trial and demonstration are liable to be valued under Rule 4 on the basis of the value of such goods sold and delivered at any other time nearest to the time and place of removal of such goods . 23. One cannot lose sight of the words if necessary in Rule 4 which implies on adjustments in the matter of valuation, due to difference in the dates of delivery of such goods . 24. The submission of the learned counsel for the petitioner that Rule 4 of the Valuation Rules has no application and the clarification in Annex. B is wholly inconsistent with the Valuation Rules , more appropriately Rule 8, in the circumstances is but a specious plea. 25. In almost similar thou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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