2018 (3) TMI 1279 - AT - Central Excise

Interpretation of Valuation Rules: Specificity Key in Excise Appeals

M/s Uflex Ltd. Versus Commissioner of Central Excise & Customs, Noida-I

The appeal focused on interpreting Rule 11 of the Central Excise Valuation Rules, 2000 for captively consumed goods. The Tribunal held that Rule 8, ... Method of valuation - captive consumption - when the manufactured goods are captively consumed whether Revenue can resort to Rule 11 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 for determination of value of captively consumed goods? Held that: - it is seen that wording of said Rule 11 of Valuation Rules, 2000 indicates that if the value of any excisable goods cannot be determined under Rules up to Rule 10A then the value is to be determined using reasonable means consistent with the principles and general provisions of Section 4 - for the circumstances covered in the present case there is provision under Rule 8 of said Valuation Rules, 2000, which reads “Rule 8, where the whole part of the goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value of said goods i.e. consumed shall be 110% of the cost of production or manufacture of said goods”. Since express provision covering the circumstances being available under said Rule 8 of Valuation Rules, 2000, there was no case to resort the provisions of said Rule 11 of Valuation Rules, 2000 - appeal allowed - decided in favor of appellant. Issues:1. Interpretation of Rule 11 of Central Excise Valuation Rules, 2000 for determining the value of captively consumed goods.2. Applicability of Rule 8 of Valuation Rules for assessment of goods used for consumption in production.Analysis:Issue 1: The main issue in this appeal was the interpretation of Rule 11 of the Central Excise Valuation Rules, 2000 for determining the value of captively consumed goods. The appellant, a manufacturer of Holograms, had a by-product called Shim which was used in the manufacturing process but did not enjoy the nil rate of duty applicable to the final product. The Revenue relied on Rule 11 for assessment, while the appellant argued for assessment under Rule 8. The Tribunal examined the wording of Rule 11, which provides for determining the value of excisable goods using reasonable means if not covered by Rules up to Rule 10A. However, the Tribunal found that Rule 8 specifically addressed the circumstances of goods consumed in production, stating that the value of consumed goods shall be 110% of the cost of production. As Rule 8 covered the situation in this case, the Tribunal held that Rule 11 was not applicable, leading to the appeal being allowed.Issue 2: The second issue involved the applicability of Rule 8 of the Valuation Rules for the assessment of goods used for consumption in production. The Tribunal noted that Rule 8 specifically addressed situations where goods are not sold but consumed in the production of other articles. In this case, since the Shim was used within the factory for manufacturing Holograms, Rule 8 was deemed applicable as it provided a clear provision for determining the value of consumed goods. As Rule 8 covered the circumstances at hand, the Tribunal concluded that resorting to Rule 11 was unnecessary, leading to the impugned Order-in-Original being deemed unsustainable and the appeal being allowed with consequential relief granted to the appellant as per law.This judgment clarifies the importance of interpreting and applying the relevant valuation rules accurately to determine the value of captively consumed goods in excise matters, ensuring adherence to the specific provisions governing such situations to avoid unnecessary resort to general provisions.