1988 (2) TMI 180 - AT - Central Excise

Assessable value of Dry Chlorine not comparable to Liquid Chlorine. Tribunal directs revaluation under Rule 6(b)(ii).

The Tribunal concluded that Liquid Chlorine and Dry Chlorine are not comparable goods for determining assessable value. It held that the assessable value ... Valuation of goods used within factory of production Issues Involved:1. Comparability of Liquid Chlorine and Dry Chlorine2. Determination of Assessable Value for Dry Chlorine3. Applicability of Rule 6(B)(ii) vs. Rule 6(b)(i) of the Central Excise (Valuation) Rules, 19754. Use of Highest Price Charged from a Class of Buyers for Valuation5. Relevance of Average Sale Price for ValuationDetailed Analysis:1. Comparability of Liquid Chlorine and Dry Chlorine:The main issue was whether Liquid Chlorine and Dry Chlorine are comparable goods for the purpose of determining the assessable value under Section 4(1)(a) of the Central Excises and Salt Act, 1944. The Tribunal concluded that Liquid Chlorine and Dry Chlorine are not comparable goods. This conclusion was based on the fact that prior to 1.5.1980, different tariff values were fixed for Liquid Chlorine and Dry Chlorine, indicating a recognized distinction between the two forms. The Tribunal disagreed with the Collector (Appeals), who held that there was no distinction for excise duty purposes between Chlorine Gas in liquid form and Chlorine in Dry Gas form.2. Determination of Assessable Value for Dry Chlorine:The appellants argued that the assessable value of Dry Chlorine should be determined under Rule 6(B)(ii) of the Central Excise (Valuation) Rules, 1975, which bases the value on the cost of production plus manufacturing profit. The Tribunal agreed with the appellants, stating that since Liquid Chlorine and Dry Chlorine are not comparable goods, the assessable value of Dry Chlorine should be determined under Rule 6(b)(ii) and not Rule 6(b)(i). The Tribunal emphasized that the value should be based on the cost of production or manufacture, including profits which the assessee would have normally earned on the sale of such goods.3. Applicability of Rule 6(B)(ii) vs. Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975:The Tribunal held that Rule 6(b)(ii) was applicable in this case because Liquid Chlorine and Dry Chlorine are not comparable goods. Rule 6(b)(i) could not be applied as it requires the value to be based on comparable goods, which was not possible in this scenario. Therefore, the assessable value should be determined under Rule 6(b)(ii) based on the cost of production and profits.4. Use of Highest Price Charged from a Class of Buyers for Valuation:The appellants contended that it was incorrect to determine the assessable value of Dry Chlorine at Rs. 710 per M.T. based on the highest price charged from a particular class of buyers, as this transaction was not representative. The Tribunal found this argument to be valid, noting that the valuation should not be based on a single, non-representative transaction. The Tribunal emphasized that the value should be determined under Rule 6(b)(ii), which considers the cost of production and normal profits.5. Relevance of Average Sale Price for Valuation:The appellants argued that the assessable value should be based on the average sale price or the price at which a major portion of the sales were effected, rather than the highest price. The Tribunal did not specifically address this argument in detail, as it concluded that the assessable value should be determined under Rule 6(b)(ii), rendering the discussion on average sale price less relevant.Conclusion:The Tribunal set aside the orders of the lower authorities that fixed the value of Dry Chlorine at Rs. 710 per M.T. It directed the Assistant Collector of Central Excise to re-determine the assessable value of Dry Chlorine captively consumed under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975, read with Section 4(1)(b) of the Central Excises and Salt Act, 1944. The Assistant Collector was instructed to afford the appellants an opportunity to produce materials and to provide a personal hearing for this purpose.