2024 (11) TMI 1606 - AT - Central Excise

Retrospective valuation rule for captive consumption applies to partly sold clinker, requiring Rule 8 valuation instead of Rule 4.

A substituted valuation rule that removed the anomaly between wholly captive clearances and partly sold, partly captively consumed clearances was treated ... Transaction Value - Captive consumption valuation - concept of “deemed value” - determination of assessable value by taking re-course to the provisions of Rule 8 of the Rules of 2000 - Scope of the substituted Rule 8 ibid vis-à-vis the old Rule 8 ibid. Rule 8 valuation - Clearances of clinkers to the assessee's own grinding units were liable to be valued under Rule 8, notwithstanding that part of the production was sold to independent buyers, and the substituted Rule 8 was applicable retrospectively. - HELD THAT:- The Tribunal held that, though the unamended Rule 8 literally covered cases where the goods were not sold and were entirely captively consumed, a holistic reading of Section 4 and Rules 4 and 8 disclosed an anomaly in applying one method of valuation where all goods were captively consumed and another where part of the same goods was sold and part transferred to own units. The substitution of Rule 8 with effect from 01.12.2013 was treated as intended to remove that anomaly and to bring about uniformity in valuation of captively consumed goods even where part quantities were sold to independent buyers. Proceeding on the settled principle that substitution ordinarily replaces the earlier provision and may operate retrospectively where it rectifies an anomaly, the Tribunal held that the amended Rule 8 would govern the past period as well. The contemporaneous CBEC circular explaining that captively consumed goods would continue to be valued under Rule 8 even where part of the goods was sold was also noticed in support. The Larger Bench decision in Ispat Industries Ltd. [2007 (2) TMI 5 - CESTAT, MUMBAI-LB] was distinguished, since the effect of the subsequent substitution and the clarificatory circular had not been considered there. [Paras 7, 8, 9, 10, 12] The demand, interest and penalty founded on valuation under Rule 4 read with Rule 11 were unsustainable; the impugned order was set aside and the appeal was allowed. Final Conclusion: The Tribunal held that the substituted Rule 8 applied retrospectively to captive transfers of clinkers to the assessee's own grinding units even where part of the production was sold to independent buyers. On that basis, the valuation adopted by the department was rejected and the appeal was allowed. Issues: Whether the substituted Rule 8 of the Central Excise Valuation Rules, 2000 applied retrospectively to clinker cleared partly to independent buyers and partly to captive grinding units, so that the captively consumed quantity had to be valued under Rule 8 and not under Rule 4.Analysis: The relevant pre-substitution Rule 8 applied where excisable goods were not sold and were used for captive consumption, whereas the substituted text, effective from 01.12.2013, expressly covered goods that were not sold in whole or in part and were used for manufacture of other articles. The substitution was held to be curative of the earlier anomaly that treated wholly captive clearances differently from partially sold and partially captively consumed goods. The meaning of 'substitution' was treated as replacement of the old provision, and the contemporaneous circular was read as confirming that even partial sales did not take the captively consumed clearances outside Rule 8. The contrary view based on the earlier unamended rule was treated as inapplicable in light of the substituted provision and the legislative intent behind it.Conclusion: The substituted Rule 8 was held applicable retrospectively, and valuation of the captively consumed clinker had to be made under Rule 8.Final Conclusion: The duty demand, interest, and penalty could not be sustained on the department's valuation basis, and the assessee succeeded in the appeal.Ratio Decidendi: A substituted valuation provision that replaces an earlier rule to remove an anomaly in captive-consumption valuation operates retrospectively as a curative amendment, and must govern even where part of the goods are sold and part are captively consumed.