2007 (2) TMI 5 - AT - Central Excise

Rule 8 inapplicable for transfers between separately registered factory units; accept assessee's valuation under Rule 4

CESTAT, MUMBAI-LB (AT) held that Rule 8 of the Central Excise Valuation Rules is inapplicable where goods were transferred to other units of the same ... Valuation (Central Excise) - determination of the assessable value in respect of goods which are transferred to another plant of the same assessee - as per Rule 4 Or per Rule 8 - where the same goods are also sold to independent buyers - HELD THAT:- In this case, it is not the case of the revenue that the goods were transferred to other units for manufacture of other articles on behalf of the assessee/appellant, i.e. the Dolvi Unit. We agree with the assessee's contention that the expression 'assessee', wherever it appears in the Central Excise Rules, applies to a particular factory, which is why different units belonging to one company are separately registered and separately assessed to duty. Since the assessee in the present case is the Dolvi plant and it is not the revenue's case that the other three units of the company to whom HR coils were transferred were undertaking further manufacturing operations on behalf of the Dolvi Unit, the provisions of Rule 8 will not apply. We, therefore, hold that Rule 8 is inapplicable in the instant case. We also note that in the present case the application of Rule 4 is being disputed by the Revenue not on the ground that the said rule is inapplicable to the present case but on the ground that a more specific provision in Rule 8 is available to enable determination of the assessable value. As discussed above, the provisions of Rule 8, in our view, are not applicable to the present case and therefore the value determined by the assessee under Rule 4 deserves acceptance. Though the Central Excise Valuation Rules, 2000 do not specifically prescribe such sequential application of various rules, the same, in our view, is the only reasonable way to read these rules. Any other interpretation would only lead to confusion and chaos. Since the applicability of Rule 4 is not really in dispute, there was no need to look further and regardless of the applicability or otherwise of Rule 8, the assessable value should have been determined in terms of Rule 4 of the Valuation Rules. Issues:Determining assessable value of goods transferred to another plant of the same assessee as per Rule 4 or Rule 8 of Central Excise Valuation Rules, 2000 when the same goods are also sold to independent buyers.Analysis:The issue involved in this judgment was whether the assessable value of goods transferred to another plant of the same assessee should be determined as per Rule 4 or Rule 8 of the Central Excise Valuation Rules, 2000, especially when the same goods are also sold to independent buyers. The appellant claimed that Rule 4 should apply, while the Revenue argued for the application of Rule 8.The appellant contended that Rule 8 should apply only when the entire production of a commodity is captively consumed. They argued that the expression 'assessee' in the Central Excise Rules refers to a particular factory, and since the goods were not transferred for further manufacturing on behalf of the original manufacturer, Rule 8 should not apply. The appellant also cited previous Tribunal decisions and the judgment of the jurisdictional High Court to support their argument.The Revenue, on the other hand, relied on a Board Circular and contended that Rule 8 should apply as the goods were transferred to another unit of the same company. They argued that Rule 8 would apply even if the goods were not consumed by the assessee himself but were transferred to another unit within the same company.The Tribunal analyzed the provisions of Rule 4 and Rule 8 in detail. They concluded that Rule 8 would apply only when the goods are not sold but used for consumption in the production of other articles. Since the goods were transferred to other units without further manufacturing on behalf of the original manufacturer, Rule 8 was deemed inapplicable. The Tribunal also emphasized the sequential application of valuation rules and held that Rule 4 should be preferred over Rule 8 in this case for a more consistent determination of value in accordance with the Central Excise Act.In light of the above analysis, the Tribunal ruled that Rule 8 does not apply when part of the production is sold to independent buyers. They further stated that Rule 4 should be preferred over Rule 8 for determining the assessable value, as it aligns better with the statutory provisions of the Central Excise Act. The case was then referred back to the original Bench for further proceedings.