2003 (9) TMI 252 - AT - Central Excise

Tribunal Sets Aside Unreasonable Duty Demand; Emphasizes Fair Valuation in Line with Commercial Realities.

The Tribunal allowed the appeal, setting aside the differential duty demand imposed by the Commissioner on M/s. Steel Complex Ltd., a Government of Kerala ... Valuation of steel billets sent for job work to converters - duty based on value - Captive consumption - Government of Kerala Undertaking - HELD THAT:- There is no dispute that sale price in these transactions is the sole consideration. It also transferred part of the goods for conversion i.e. other than through sale. The present order has determined that the assessable value (would be sale price) of the goods so transferred is much higher than the price at which the appellants were selling goods in course of ordinary sale and commerce. This finding has been reached by adopting 115% of the cost of production of the goods. That the value so determined bears no resemblance to the sale price or would be sale price of the goods is evident. Such a determination of value is clearly contrary to the principle of valuation and guidelines contained in Section 4(1) and Valuation Rules, 2000. The appellant's submission that valuation carried out is arbitrary, unreasonable and contrary to law has to be accepted. Adopting 115% of cost of production may be a reliable method where the manufacturer in question is operating at a profit. The same norm would be wholly unreliable where manufacturer is incurring huge losses. Rules lay down reasonable means consistent with principles and general provisions of the Rules and sub-section (1) of Section 4 of the Central Excise Act for ascertaining the value of the goods. In the present case, the determining the assessable value at 115% of the cost of production was clearly unreasonable and inconsistent with the principles and general provisions of the Rules and sub-section (1) of Section 4 of the Central Excise Act. The principle laid down in the Section 4(1) of the Act is to adopt the sale price, where price is the sole consideration as the assessable value of the goods. The original valuation of the goods in question was according to this principle. The sale price to other buyers was adopted as the value for goods transferred to job worker also. Duty was also paid on that basis. There was no requirement to alter that basis for valuation and to make the demand for additional payment of duty. In the view we have taken above, the appeal is allowed and the valuation and differential duty demand made in the impugned orders are set aside. The appellants shall be entitled to consequential relief, if any. Issues involved: Valuation of steel billets sent for job work to converters u/s 4 of Central Excise Act post 1-7-2000.Summary:The case involved M/s. Steel Complex Ltd., a Government of Kerala Undertaking, manufacturing steel billets subject to central excise duty based on value. The dispute arose regarding the valuation of billets sent for job work post 1-7-2000 under new provisions. The appellant valued billets based on ex-factory sale price, but Central Excise Authorities disagreed, citing the need for valuation per transaction and Rule 8 of Central Excise Valuation Rules, 2000. The Commissioner upheld this view, emphasizing the need for individual valuation for each removal of goods.The appellant challenged this decision, arguing that duty should be levied on the commercial value of the goods, as per Section 4(1)(2) which defines value as 'transaction value.' They contended that the valuation principle for goods produced on job work basis should apply, citing relevant legal precedents. The appellant criticized the valuation at 115% of the cost of production as unreasonable for a loss-making unit, emphasizing the need for valuation based on sale price to independent buyers.The Tribunal considered the core principle of Central Excise Valuation under Section 4(1) and the Valuation Rules, emphasizing the need to determine value as if the goods were sold in ordinary trade. They found the valuation at 115% of the cost of production to be unreasonable and inconsistent with valuation principles. The Tribunal allowed the appeal, setting aside the differential duty demand and granting consequential relief to the appellants.