2006 (2) TMI 516 - AT - Central Excise

Tribunal emphasizes profit on sales for valuation of captively consumed items

The Tribunal ruled in favor of the appellant, emphasizing the importance of adhering to the correct valuation basis for captively consumed items as per ... Valuation - Captively consumed goods - Demand - Limitation Issues:1. Time limitation for raising demand.2. Correct valuation basis for captively consumed item.3. Interpretation of Central Excise Valuation Rules, 1975.Analysis:1. Time Limitation for Raising Demand:The appellant contended that the demand was raised beyond the prescribed time limit, arguing that no suppression of facts had occurred, hence the extended period should not apply. The appellant also highlighted that the sale price of the paper was close to the value based on the cost of production. The appellant's declaration of 1-4-2000 included both costs of production and sale price, allowing the Revenue to choose the correct basis. As the values declared were not challenged as false, the Tribunal concluded that there was no suppression of material facts, supporting the appellant's argument on limitation.2. Correct Valuation Basis for Captively Consumed Item:The appellant argued that the overall profit of a manufacturer should not be the basis for valuing a captively consumed item, citing Rule 6(b)(2) of the Central Excise Valuation Rules, 1975. The rule refers to the profit normally earned on the sale of such goods, emphasizing that the profit earned on the sale of the specific goods is relevant, not the overall profitability of the manufacturer. The Tribunal referenced the decision of the Larger Bench in Raymonds Limited v. Commissioner of C. Ex., Aurangabad, confirming that the profit earned on the sale of the goods is the key factor for valuation, not the manufacturer's overall profit.3. Interpretation of Central Excise Valuation Rules, 1975:The Tribunal's analysis focused on the interpretation of Rule 6(b)(2) of the Central Excise Valuation Rules, 1975, which emphasizes the profit earned on the sale of the goods for valuation purposes. By aligning with the decision in Raymonds Limited case, the Tribunal concluded that the inclusion of the overall profit of a manufacturer for valuing a captively consumed item is incorrect. Therefore, the appeal succeeded, and the impugned order was set aside based on the correct interpretation of the valuation rules.In conclusion, the Tribunal ruled in favor of the appellant, highlighting the importance of adhering to the correct valuation basis for captively consumed items as per the Central Excise Valuation Rules, 1975, and relevant judicial precedents.