1999 (10) TMI 315 - AT - Central Excise

Tribunal Upholds Valuation Rule for Automotive Engines Stock Transfer

COMMISSIONER OF CENTRAL EXCISE, CHENNAI Versus ASHOK LEYLAND LTD.

COMMISSIONER OF CENTRAL EXCISE, CHENNAI Versus ASHOK LEYLAND LTD. - 2000 (116) E.L.T. 630 (Tribunal) Issues:Determining assessable value of Automotive Engines manufactured by respondents for sale in spare parts market and stock transfer basis to other manufacturing units.Analysis:The case involved four appeals by Revenue against an order-in-appeal setting aside the original order and allowing appeals based on a Supreme Court decision. The issue revolved around the assessable value of Automotive Engines manufactured by respondents. The engines were removed for sale in the spare parts market through wholesale dealers and on a stock transfer basis to other manufacturing units for further use in the manufacture of automotive vehicles. The department issued show cause notices covering a specific period, and the Asst. Commissioner determined the assessable value based on the value of goods cleared for sale in the spare parts market. The Revenue disputed the setting aside of this order.The arguments presented by both parties focused on whether the engines cleared for stock transfer were complete engines or semi-finished due to missing components. The Revenue contended that the engines should be valued based on Central Excise Valuation Rules, specifically Rule 6(b)(i), as comparable goods' value was available from sales in the spare parts market. On the other hand, the respondents argued that the engines were semi-finished and should be valued using the cost construction method under Rule 6(b)(ii). They emphasized that the engines were exclusively used as original equipment and not sold in the market, supporting their valuation method.After careful consideration, the Tribunal concluded that the engines cleared as original equipment to manufacturing units should be considered removals to a separate class of buyers, distinct from wholesale market sales. As such, the assessable value had to be determined under Central Excise Valuation Rules, specifically Rule 6(b)(ii). The Tribunal rejected the Revenue's argument that Rule 6(b)(i) should apply, citing differences in the engines cleared for stock transfer and those sold in the spare parts market. The Tribunal agreed with the Commissioner (Appeals) and upheld the application of Rule 6(b)(ii) for valuation.In light of the detailed analysis and legal precedents cited, the Tribunal found no merit in the Revenue's appeals and rejected them. The judgment emphasized the distinction between removals for wholesale market sales and stock transfers for original equipment manufacturing, highlighting the application of specific valuation rules based on the nature of the transactions and the class of buyers involved.