2013 (3) TMI 402 - AT - Central Excise

Tribunal clarifies valuation rules for goods used in production, not sold

COMMISSIONER OF CENTRAL EXCISE, AURANGABAD Versus PSC POLE FACTORY

The Tribunal determined that Rule 8 of the Central Excise Valuation Rules, 2000 applied to goods used for consumption in production, not sold. It ... Valuation - captive consumption, though not for production or manufacture of other articles - Rule 11 of the Central Excise Valuation Rules, 2000 - Held that:- the original authority adopting the principles of Rule 8 and applying the method of valuation on the basis of 115% of the cost of production of the impugned goods, is reasonable, since the said goods have been captively used by the respondents even though not for production or manufacture of other articles. Rule 11 of the Central Excise Valuation Rules, 2000 which is a residuary rule which provided that the value shall be determined using reasonable means consistent with the principles and general provisions of the rules and sub-section (1) of Section 4 of the Act. Further we find that the Tribunal in appellant’s own case (CCE, Nagpur v. P.C. Pole Factory - (COMMISSIONER OF C. EX., NAGPUR versus P. C. POLE FACTORY) after taking into consideration Rule 11 of the Central Excise Rules, 2000 which are applicable to the facts and circumstances of the present case held in favour of the Revenue. Issues:1. Interpretation of Rule 8 of the Central Excise Valuation Rules, 2000.2. Application of Rule 11 as a residuary rule for valuation.3. Captive consumption of goods for determining assessable value.Detailed Analysis:1. The main issue in this case was the interpretation of Rule 8 of the Central Excise Valuation Rules, 2000. The dispute arose from the Revenue's appeal against the Commissioner (Appeals) order regarding the final assessment of PSC Poles. The Revenue contended that the assessable value should be 115% of the cost of production as per Rule 8. The Respondents, however, relied on previous court decisions and argued against the addition of profit in the valuation. The Tribunal noted that the relevant period was 2000-01 when the new valuation rules were in force, emphasizing that Rule 8 applied to goods not sold but used for consumption in production. The Tribunal differentiated between the old and new rules, concluding that the Supreme Court's decision on profit addition was not applicable to the present case.2. Another crucial aspect addressed was the application of Rule 11 as a residuary rule for valuation purposes. Rule 11 provided a mechanism for determining the value of excisable goods when other rules were not applicable. The Tribunal highlighted that Rule 11 required valuation using reasonable means consistent with statutory provisions. In this case, since Rule 8 did not directly apply to the situation where goods were used for electricity transmission instead of manufacturing other articles, the Tribunal invoked Rule 11 as the appropriate method for valuation. By considering the principles of Rule 8 and applying 115% of the cost of production for captively consumed goods, the Tribunal found the original valuation method reasonable and set aside the impugned order-in-appeal.3. The issue of captive consumption of goods for determining the assessable value was crucial in this judgment. The Tribunal emphasized that the impugned goods were used for electricity transmission, not for manufacturing other articles. Despite this distinction, the Tribunal found that the original authority's valuation based on 115% of the cost of production for captively consumed goods was reasonable under Rule 11. By applying the residuary rule and considering the specific circumstances of the case, the Tribunal set aside the impugned order and allowed the appeal, restoring the original valuation method. The decision highlighted the importance of correctly interpreting and applying valuation rules in cases of captive consumption to ensure fair and consistent assessments.