2006 (2) TMI 424 - AT - Central Excise

Tribunal waives pre-deposit in bulk drugs valuation dispute, ruling in favor of applicant

The Tribunal granted the applicant's request for waiver of pre-deposit of duty and penalty in a case concerning the assessable value of bulk drugs cleared ... Stay/Dispensation of pre-deposit - Valuation Issues:1. Application for waiver of pre-deposit and penalty.2. Dispute over assessable value of bulk drugs cleared to another unit.3. Rejection of cost of production declared by the applicant.4. Interpretation of Rule 11 of Central Excise (Valuation) Rules, 2000.5. Reliability of cost data provided by the applicant.6. Consideration of price of final product in determining the value of goods.7. Value addition percentage in the manufacturing process.8. Decision on pre-deposit of duty and penalty.Analysis:1. The applicant filed an application seeking waiver of pre-deposit of a substantial amount along with the penalty. The demand in question pertained to two bulk drugs, PACLITAXEL and DOCETAXEL, manufactured by the applicant at one location and cleared to another unit for further processing.2. The core issue revolved around the assessable value of the bulk drugs cleared to the second unit. The revenue disputed the cost of production declared by the applicant, citing discrepancies and record manipulation. The adjudicating authority, under Rule 11 of the Valuation Rules, determined the cost of production based on the selling price of the injections manufactured from the bulk drugs at the receiving unit.3. The applicant contended that the cost of the bulk drug should be determined independently, not based on the selling price of the final product. They argued that the revenue's method of considering 75% of the injection's cost as the bulk drug's cost was not justifiable, especially when the actual value addition was significantly higher at 172%.4. The Revenue, on the other hand, maintained that the cost data provided by the applicant were unreliable and manipulated. They relied on Rule 9 to support their stance that the final product's cost could be considered in determining the value of the goods, especially when cleared to related parties.5. The Tribunal, after hearing both sides, found merit in the applicant's argument regarding the value addition percentage and the method of determining the cost of the bulk drug. They agreed that the revenue's calculation was not in line with the Valuation Rules, leading to the waiver of the pre-deposit of duty and penalty. The case was directed to be listed for further proceedings.This detailed analysis highlights the key legal and factual aspects of the judgment, addressing each issue comprehensively while maintaining the essence and legal nuances of the original text.