2014 (10) TMI 121 - AT - Central Excise

Tribunal clarifies Valuation Rules in duty liability case, sets aside unsustainable demands

The Tribunal held that Rule 6(b)(i) of the Valuation Rules should be applied over Rule 6(b)(ii) in determining the value of polyamide chips used in ... Extended period of limitation - Valuation - what should be the value of polyamide chips manufactured by them which have been used captively in the manufacture of final product i.e. polyester filament yarn when they have also purchased polyamide chips from the open market - Held that:- Valuation Rules clearly state that if the comparable price is available, in that situation the valuation is to be opted by invoking Rule 6(b)(i) of the Valuation Rules, not as per Rule 6 (b)(ii). As the issue is that whether Rule 6 (b)(i) is applicable to the facts of this case or Rule 6(b) (ii) of the Valuation Rules is applicable to this case, therefore we hold that the extended period of limitation is not invokable - whole of the demand has been confirmed against the appellant by invoking the extended period of limitation. In these circumstances, we hold that the issue or interpreting particular provisions of the Rules. Therefore, the extended period of limitation is not invokable. As extended period is not invokable, therefore the impugned demands are not sustainable. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief if any - Decided in favour of assessee. Issues:1. Determination of the value of polyamide chips used captively in the manufacture of polyester filament yarn.2. Applicability of Rule 6(b)(i) versus Rule 6(b)(ii) of the Valuation Rules.3. Invocation of the extended period of limitation for demand confirmation.Analysis:1. The appellant appealed against the demand for the period January 1995 to March 1998, concerning the manufacture of Polyester Filament Yarn using Polyamide Chips. The Revenue argued that duty is payable on captively used Polyamide Chips under Rule 6(b)(ii) of the Valuation Rules. Initially, a duty of Rs. 1,02,08,091/- was proposed, later reduced to Rs. 24,24,401/-. After remand proceedings, the Ld. Commissioner confirmed a demand of Rs. 1,02,08,891/- along with interest and penalty. The primary issue was determining the value of the polyamide chips and whether Rule 6(b)(i) or Rule 6(b)(ii) of the Valuation Rules applied.2. The crux of the matter was the interpretation of the Valuation Rules to ascertain the appropriate valuation method for the polyamide chips. The Valuation Rules specify that if a comparable price is available, Rule 6(b)(i) should be invoked. The Tribunal held that in this case, where polyamide chips were both manufactured and purchased, Rule 6(b)(i) should be applied over Rule 6(b)(ii). The key consideration was whether the extended period of limitation was justifiable in this context.3. The Tribunal concluded that since the issue revolved around interpreting specific provisions of the Valuation Rules, the extended period of limitation was not applicable. Consequently, the demands made under the extended period were deemed unsustainable. As a result, the impugned order was set aside, and the appeal was allowed with any consequential relief. The decision highlighted the importance of correctly applying the Valuation Rules to determine duty liability and emphasized the significance of the appropriate valuation method in such cases.This detailed analysis encapsulates the key aspects of the judgment, focusing on the valuation of captively used goods, the application of relevant Valuation Rules, and the implications of invoking the extended period of limitation in demand confirmation.