2011 (7) TMI 676 - AT - Central Excise

Tribunal rules in favor of manufacturer in tax dispute, allowing use of specific valuation method

The Tribunal ruled in favor of the appellant, a manufacturer of polyester metallised/plastic film, in a case involving the applicability of Rule 6(3)(b) ... Application for stay - appellant are manufacturers of polyester metallised/plastic film chargeable to Central Excise Duty - Notification No. 214/86-C.E - stock transfer - Tribunal in the case of Ispat Industries Ltd. v. CCE, Raigad reported in (2007 -TMI - 1078 - CESTAT, MUMBAI), wherein it was held that the provisions of Rule 8 of the Central Excise Valuation Rules, 2000 would not apply in a case where part of the production is cleared to independent buyers and part is cleared for captive consumption or to another unit of the manufacturer for its captive consumption, and in such cases, the assessable value of the goods cleared for captive consumption would be the price at which such goods are sold to independent buyers Regarding Notification 214/86-C.E - department does not dispute that the appellant have not taken Cenvat credit in respect of the aluminium wire used for manufacture of metallised film on job work basis as the proportionate credit in respect of the quantity of aluminium wire used for manufacture of metallised film manufactured on job work cleared under Notification No. 214/86-C.E. was reversed - Held that: there is no justification for invoking the provisions of Rule 6(2) read with Rule 6(3)(b) of Cenvat Credit Rules and demand an amount equal to 8%/10% of the value of the goods cleared under Notification No. 214/86-C.E - Decided in favor of the assessee - stay granted. Issues Involved:1. Applicability of Rule 6(3)(b) of Cenvat Credit Rules regarding common inputs used for dutiable and exempted final products.2. Valuation of goods cleared on stock transfer basis for captive consumption.Detailed Analysis:Issue 1: Applicability of Rule 6(3)(b) of Cenvat Credit RulesThe appellant, a manufacturer of polyester metallised/plastic film, faced objections from the department regarding the use of common Cenvat credit availed inputs (aluminium wire) for both dutiable and exempted final products. The department argued that since the appellant did not maintain separate inventory and accounts for inputs used in dutiable and exempted products, Rule 6(3)(b) of Cenvat Credit Rules applied, necessitating the payment of 8%/10% of the value of exempted final products. The appellant contended that they reversed the proportionate Cenvat credit for the aluminium wire used in the manufacture of metallised film on job work basis, thus maintaining separate accounts in spirit.The Tribunal found merit in the appellant's argument, noting that the department did not dispute the reversal of proportionate credit. The Tribunal cited multiple judgments, including Escorts Ltd. v. Collector and Sterlite Industries (I) Ltd. v. CCE, Pune, which supported the appellant's stance that a job worker is not required to reverse credit on inputs used for goods cleared under Notification No. 214/86-C.E. Given this, the Tribunal held that invoking Rule 6(3)(b) was unjustified.Issue 2: Valuation of Goods Cleared on Stock Transfer Basis for Captive ConsumptionThe department objected to the appellant's valuation method for goods cleared on stock transfer basis for captive consumption, arguing that duty should be paid based on 115%/110% of the cost of production under Rule 8 of the Central Excise Valuation Rules, 2000. The appellant, however, used the price at which the same goods were sold to independent buyers.The Tribunal referred to the Larger Bench judgment in Ispat Industries Ltd. v. CCE, Raigad, which held that Rule 8 does not apply when part of the production is sold to independent buyers and part is used for captive consumption. The assessable value in such cases should be the price at which goods are sold to independent buyers. This judgment was binding on the Tribunal, and no contrary judgment from any High Court or the Supreme Court was cited. Therefore, the Tribunal found the department's demand for duty based on Rule 8 unsustainable.Conclusion:The Tribunal concluded that the appellant had a strong prima facie case on both issues. It waived the requirement for pre-deposit of the duty demand, interest, and penalty, and stayed the recovery until the disposal of the appeals. The stay applications were allowed, providing relief to the appellant from the immediate financial burden.