2010 (8) TMI 779 - AT - Central Excise

Revenue-neutral valuation under Rule 6(b)(i) treated as academic where sister units can fully claim CENVAT credit

CESTAT-Mumbai dismissed the Revenue's valuation dispute concerning goods transferred by the assessee to its sister units under Rule 6(b)(i) of the Central ... Valuation Dispute and Rule 6(b)(i) Application - demand of duty - determination of the assessable value of the goods transferred to the sister units in the same period, an exercise done in terms of rule 6(b)(i) of the Central Excise Valuation Rules, 1975 - principles of natural justice - HELD THAT:- It is not in dispute that, the valuation of the goods is governed by the provisions of rule 6(b)(i) ibid. It is, again, not in dispute that clause (ii) of Rule 6(b) is not applicable inasmuch as, in this case, there was no exclusive clearance to sister units during any part of the period of dispute. During the period of dispute, the goods were partly cleared to sister units and partly to independent buyers, and the rates at which the goods were transferred to sister units were, by and large, higher than those at which goods were sold to independent buyers. In this scenario, the adjudicating authority applied, and rightly so, Rule 6(b)(i). The dispute before that authority was in relation to application of the proviso to Rule 6(b)(i). Though we have found factual errors in the impugned order, we are inclined to dispose of this case, for the ends of justice, by taking into account, the revenue neutral situation pointed out by the Counsel. The valuation dispute involved in this case is prima facie not relevant to the period from 01.07.2000. Nobody has claimed that a similar dispute between the assessee and Revenue for any other period prior to 01.07.2000 is upcoming. Apparently, the issue has no recurring effect and is only of academic interest. It is not in dispute that any amount of duty paid by the assessee will be available as CENVAT credit, without abatement, to their sister units, in which event a revenue neutral situation would emerge it. In the case of Coca Cola India Pvt. Ltd. [2007 (4) TMI 17 - SUPREME COURT], the Hon'ble Supreme Court considered a similar situation and disposed of the case, leaving a question of law open. In the case of India Pistons Ltd.[2007 (9) TMI 108 - CESTAT, CHENNAI], similar course of action was taken by the Tribunal. In the instant case, questions of facts do arise and, of course, a question of law is also in sight. Neither the questions of facts nor any anticipated question of law would have any bearing on Revenue inasmuch as any outcome of this case will not detract from the revenue neutral situation. Whatever duty paid by the assessee must be available as CENVAT credit to their sister units. The appellant neither stands to gain nor stands to loose. Thus, we dispose of this appeal without expressing any view on the questions of fact/law involved in this case. Issues:Valuation dispute involving differential duty on goods transferred to sister units at lower rates compared to independent buyers, application of Central Excise Valuation Rules, 1975, interpretation of Rule 6(b)(i) proviso, consideration of material characteristics, abatement of discounts, loyalty discount, averaging method, revenue neutrality, CENVAT credit availability.Analysis:1. Valuation Dispute and Rule 6(b)(i) Application:- The dispute involved differential duty on goods transferred to sister units at lower rates compared to independent buyers during the period from October 1994 to June 2000.- The Central Excise Valuation Rules, 1975, specifically Rule 6(b)(i), governed the valuation of goods in this case.- The adjudicating authority applied Rule 6(b)(i) as there was no exclusive clearance to sister units during the period of dispute.2. Proviso to Rule 6(b)(i) and Consideration of Factors:- The proviso to Rule 6(b)(i) required the proper officer to make adjustments considering all relevant factors, including the difference in material characteristics of the goods.- The Commissioner(Appeals) found that the lower authority did not consider all relevant factors, particularly the difference in material characteristics, while determining the assessable value of goods cleared to sister units.- The failure to abate appropriate discounts like quantity discount, sales tax, loyalty discount, and octroi from the prices charged to independent buyers was also noted.3. Averaging Method and Precedent Reference:- The original authority adopted an averaging method based on the rates charged to independent buyers to determine the assessable value of goods cleared to sister units.- The appellant challenged the averaging method, citing a Tribunal decision in a similar case (Crompton Greaves Ltd. vs. CCE, Aurangabad).- The Tribunal upheld the method of valuation under Rule 6(b)(i) and the adoption of the maximum price charged to independent buyers as the basis for assessing goods sold to the sister unit.4. Revenue Neutrality and CENVAT Credit:- The respondent argued for revenue neutrality, highlighting that any differential duty paid would be available as CENVAT credit to their sister units, creating a revenue-neutral situation.- Precedents like CCE, Pune vs. Coca Cola India Pvt. Ltd. and India Pistons Ltd. vs. CCE supported the concept of revenue neutrality in similar cases.- The Tribunal, considering the revenue-neutral situation and lack of recurring effect, disposed of the appeal without expressing a view on the factual or legal questions involved.In conclusion, the judgment addressed the valuation dispute under Rule 6(b)(i), the application of the proviso, consideration of material characteristics, abatement of discounts, the averaging method, and the concept of revenue neutrality with CENVAT credit availability. The decision emphasized the revenue-neutral nature of the case and disposed of the appeal without delving into the factual or legal intricacies, given the lack of recurring effect and academic interest of the issue.