Deemed removal and duty-inclusive valuation under Central Excise Rules, with manufacture issue left open for fresh adjudication.

Cold-rolled pattis used within the factory to manufacture circles were treated as deemed removed under the Central Excise Rules for duty purposes, although the separate question whether cold rolling itself amounted to manufacture under Section 2(f) was left open for fresh adjudication. In valuation, the assessable value had to be taken on a net basis, and the excise duty element embedded in the market price was required to be deducted. The matter was remitted for reconsideration, with the valuation principle settled and the manufacture issue reserved for decision after notice and hearing.

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Issues: (i) whether cold-rolled pattis/pattis used in the manufacture of circles within the factory are to be treated as removed for the purpose of levy of excise duty under the Central Excise Rules; (ii) whether, in computing assessable value, the element of excise duty embedded in the market price is to be deducted.

Issue (i): whether cold-rolled pattis/pattis used in the manufacture of circles within the factory are to be treated as removed for the purpose of levy of excise duty under the Central Excise Rules.

Analysis: Goods used within the place of manufacture for producing another commodity are treated as removed for duty purposes by virtue of the deeming provisions in the Central Excise Rules. The Tribunal did not finally decide the separate question whether the process of cold rolling itself amounted to manufacture under Section 2(f) of the Central Excise Act, but held that the duty issue required fresh adjudication on that vital aspect.

Conclusion: The goods were liable to be examined on the footing of deemed removal, and the question of manufacture was left for reconsideration by the adjudicating authority.

Issue (ii): whether, in computing assessable value, the element of excise duty embedded in the market price is to be deducted.

Analysis: For valuation, the assessable value has to be arrived at on a net basis and the excise duty element included in the market price cannot be retained as part of the assessable value. The Tribunal applied the Larger Bench principle that the duty component must be excluded while determining value.

Conclusion: Deduction of the excise duty component from the market price was required while determining assessable value.

Final Conclusion: The matters were sent back for fresh adjudication, with the valuation principle settled and the substantive manufacture question left open for decision after notice and hearing.

Ratio Decidendi: Where excisable goods are used within the factory in the manufacture of another commodity, the deeming provisions treat them as removed for duty purposes, and the assessable value must exclude the excise duty element embedded in the market price.

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