Excise valuation excludes only duty on the goods assessed; pending proceedings survive omission of the enabling rule.

Compounded excise duty on cotton yarn under the special yarn scheme was held not to form part of the assessable value of fabrics, because valuation under Section 4(4)(d)(ii) excludes only duty attributable to the goods under assessment, not duty relating to raw materials used in manufacture. The argument that excise duty could be confined to manufacturing cost and profit was rejected. Proceedings validly commenced under Rule 10 were also held to continue despite later omission of that rule, since repeal or omission does not abate pending proceedings unless the statute so provides. The valuation addition was therefore upheld and the challenge to continuation of proceedings failed.

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Issues: (i) Whether the compounded excise duty on cotton yarn, payable at the time of clearance of fabrics under the relevant excise rules, formed part of the assessable value of the fabrics; (ii) Whether proceedings validly initiated under Rule 10 of the Central Excise Rules could continue after that rule was omitted.

Issue (i): Whether the compounded excise duty on cotton yarn, payable at the time of clearance of fabrics under the relevant excise rules, formed part of the assessable value of the fabrics.

Analysis: The duty payable under the special yarn scheme remained duty on yarn, though its payment was deferred till clearance of fabrics and the amount was expressed by reference to the fabric. For valuation under Section 4(4)(d)(ii), what must be excluded is the duty attributable to the excisable goods under assessment, namely the fabrics, and not duties relatable to the raw material or constituents used in their manufacture. The contention that the deferred yarn duty was part of the assessable value was therefore untenable. The argument that duty could be levied only on manufacturing cost and profit was also rejected in light of the settled valuation principle governing excise duty.

Conclusion: The compounded yarn duty was not deductible from the assessable value of the fabrics and the exclusion was confined to duty payable on the fabrics themselves.

Issue (ii): Whether proceedings validly initiated under Rule 10 of the Central Excise Rules could continue after that rule was omitted.

Analysis: Proceedings instituted under a provision that was validly in force at the time of initiation do not abate merely because the provision is later repealed or omitted, unless the statute indicates otherwise. The Tribunal applied the settled rule that repeal or substitution does not destroy pending proceedings commenced under the earlier regime.

Conclusion: The proceedings were not vitiated by the omission of Rule 10.

Final Conclusion: The valuation addition was upheld and the challenge to the continuation of proceedings failed, leaving the impugned order undisturbed.

Ratio Decidendi: For excise valuation, only the duty attributable to the goods under assessment is excluded from assessable value, and proceedings lawfully initiated under a subsisting provision may continue despite its later omission or repeal.

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