2025 (12) TMI 93 - AT - Central Excise

Captive cement in 50 kg bags not retail packs; valuation under section 4(1)(b) and rule 8, not 4A.

Ultratech Cement Ltd. Versus Commissioner, CGST & Central Excise, Jaipur

The Tribunal allowed the appeal, setting aside the impugned order of the Commissioner (Appeals). It held that cement cleared in 50 kg bags for captive ... Method of valuation - cement cleared for captive consumption in 50 kg bags - to be covered by section 4A of the Central Excise Act as contented by the department or under section 4(1)(b) of the Central Excise Act read with rule 8 of the 2000 Valuation Rules as contended by the appellant? - HELD THAT:- This issue was decided in the Previous Proceedings by the Commissioner (Appeals) in the order dated 20.07.2018 in favour of the appellant. The Commissioner (Appeals) relied upon the decision of the Tribunal in Grasim Industries Ltd. (Unit-I) vs. Commissioner of C. Ex., Trichy [2008 (10) TMI 462 - CESTAT, CHENNAI] where it was held that 'Further, regarding issue of affixing RSP on the packages cleared for self-consumption, I find that such self consumption of cement does not involve sale. Chapter II of PC Rules, prescribing affixation of RSP, applies only to packages “intended for” retail sale. Appellant has indicated cement packages with special declarations like “Not for retail sale, for industrial consumer or institutional consumer” and therefore PC Rules are not applicable. No valuation of goods under section 4A of the Central Excise Act is applicable in the present case.' In view of the decision of the Tribunal in the own case of the appellant [2017 (12) TMI 1299 - CESTAT MUMBAI] for the Previous Proceedings relating to the period October, 2010 to June, 2015 and July, 2015 to April, 2016, holding that section 4(1)(b) of the Central Excise Act would be applicable, it has to be held that the Commissioner (Appeals) in the present proceedings relating to the period May, 2016 to June, 2017, committed an error in dismissing the appeal filed by the appellant. In fact, the appellant had pointed out before the Commissioner (Appeals) the earlier order dated 27.02.2018 passed by the Commissioner (Appeals) but this has not been considered by the Commissioner (Appeals). Thus, the valuation of cement cleared for captive consumption in 50kg bags would be covered by section 4(1)(b) of the Central Excise Act. The impugned order dated 30.03.2021 passed by the Commissioner (Appeals) is, accordingly, set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether cement cleared in 50 kg bags for captive consumption/self-consumption is to be valued under section 4A of the Central Excise Act or under section 4(1)(b) read with rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. 1.2 Whether the Legal Metrology (Packaged Commodities) Rules, 2011 / Standards of Weights and Measures (Packaged Commodities) Rules, 1977 requiring affixation of RSP apply to cement packages cleared for captive consumption/self-consumption and to contractors for construction/maintenance within factory premises. 1.3 Whether the Commissioner (Appeals) was justified in ignoring the binding precedent of the Tribunal and earlier appellate order on the identical issue and same assessee for the previous period. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Valuation method for cement cleared in 50 kg bags for captive consumption/self-consumption Legal framework (as discussed): 2.1 The Tribunal examined section 4 and section 4A of the Central Excise Act, 1944 and rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. 2.2 The earlier appellate order (in previous proceedings) had applied section 4(1)(b) read with rule 8 to clearances of cement in 50 kg bags for captive/self-consumption and had rejected valuation under section 4A, holding that provisions relating to RSP were inapplicable where there was no 'sale'. Interpretation and reasoning: 2.3 The Tribunal noted that for the period October 2010 to April 2016, the identical issue regarding valuation of cement cleared in 50 kg bags for captive consumption/self-consumption had already been decided in favour of the assessee by the Commissioner (Appeals), whose order was upheld by the Tribunal. 2.4 In those previous proceedings, it was held that: * Self-consumption of cement does not involve 'sale'; * Chapter II of the Packaged Commodities Rules, prescribing affixation of RSP, applies only to packages 'intended for' retail sale; * Where packages are marked 'Not for retail sale, for industrial consumer or institutional consumer', Packaged Commodities Rules are not applicable; and * Consequently, valuation under section 4A of the Central Excise Act is not attracted. 2.5 The Tribunal observed that its earlier decision had relied on Grasim Industries Ltd. (Unit-I) and the assessee's own earlier case, and that this position had been subsequently affirmed when the Supreme Court dismissed the department's appeal against Grasim Industries, holding that the appeal was devoid of merit. 2.6 Applying the same reasoning for the present period (May 2016 to June 2017), the Tribunal held that the nature of clearances (cement in 50 kg bags for captive consumption to contractors for construction and maintenance work within factory premises, invoiced as 'Self Consumption') remained the same and therefore attracted valuation under section 4(1)(b) read with rule 8, and not section 4A. Conclusions: 2.7 Cement cleared in 50 kg bags for captive consumption/self-consumption to contractors within the factory premises is not liable to valuation under section 4A of the Central Excise Act. 2.8 Such clearances are to be valued under section 4(1)(b) of the Central Excise Act read with rule 8 of the Central Excise Valuation Rules, 2000. 2.9 The demand of differential duty on the basis of section 4A valuation is unsustainable. Issue 2: Applicability of Packaged Commodities Rules and requirement of RSP on cement cleared for captive consumption/self-consumption Legal framework (as discussed): 2.10 The Tribunal considered rule 2A of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and rule 3 of the Legal Metrology (Packaged Commodities) Rules, 2011, in the context of when affixation of RSP is required and when such Rules apply. Interpretation and reasoning: 2.11 It was previously held by the Commissioner (Appeals), and affirmed by the Tribunal in earlier proceedings, that: * Chapter II of the Packaged Commodities Rules, which mandates affixation of RSP, applies only to 'retail packages' or packages 'intended for retail sale'; * Cement packages clearly marked with special declarations such as 'Not for retail sale, for industrial consumer or institutional consumer' and used for self-consumption are not intended for retail sale; * Self-consumption does not involve any 'sale'; and * Consequently, there is no statutory requirement to affix RSP on such packages and provisions triggering valuation under section 4A cannot apply. 2.12 The Tribunal adopted and applied the same reasoning to the current period. Since the cement in 50 kg bags was cleared for captive/self-consumption to contractors within the factory premises for construction/maintenance work, the clearances were not in the nature of retail sale and did not attract the Packaged Commodities regime requiring RSP. Conclusions: 2.13 The Legal Metrology (Packaged Commodities) Rules, 2011 / Standards of Weights and Measures (Packaged Commodities) Rules, 1977 do not apply to cement packages cleared for captive consumption or self-consumption, where there is no sale and the packages are not intended for retail sale. 2.14 There is no requirement to affix RSP on such cement packages, and the mechanism of valuation under section 4A of the Central Excise Act is inapplicable. Issue 3: Effect of earlier Tribunal decision and appellate order; propriety of the Commissioner (Appeals) ignoring binding precedent Interpretation and reasoning: 2.15 The Tribunal observed that for the immediately preceding period, the Commissioner (Appeals) had, by order dated 27.02.2018/20.07.2018, decided the identical issue in favour of the assessee. This appellate order had been affirmed by the Tribunal by order dated 02.01.2019, explicitly ruling that valuation was under section 4(1)(b) read with rule 8 and not under section 4A. 2.16 The Tribunal noted that the assessee had specifically brought the earlier appellate order to the notice of the Commissioner (Appeals) in the present proceedings, but the Commissioner (Appeals) failed to consider or follow it and instead confirmed the demand under section 4A. 2.17 The Tribunal held that, in view of the binding nature of the earlier Tribunal decision in the same assessee's case on identical facts and issue, the Commissioner (Appeals) erred in disregarding that precedent and in dismissing the appeal. 2.18 The Tribunal further took note that the Supreme Court had dismissed the department's appeal against the Tribunal's decision in Grasim Industries, reinforcing the correctness of the legal position already applied in the assessee's previous case. Conclusions: 2.19 The Commissioner (Appeals) acted incorrectly in ignoring the binding earlier order of the Tribunal and the earlier appellate order in the same assessee's case on the same issue. 2.20 The impugned appellate order upholding valuation under section 4A and denying the applicability of section 4(1)(b) read with rule 8 is unsustainable and liable to be set aside. 2.21 The appeal is allowed and the impugned order is set aside, with the valuation of cement cleared for captive consumption in 50 kg bags to be governed by section 4(1)(b) read with rule 8 of the 2000 Valuation Rules.