By TIOL News Service

MUMBAI, JUNE 15, 2015: AMMONIA is manufactured by the appellant, which is partly sold to dealers outside and partly consumed captively for the manufacture of fertilizers (which are exempted) and other chemicals. The point for consideration is the determination of value of ammonia used for the manufacture of other chemicals.

The adjudicating authority did not consider Rule 6(b)(i) of the Valuation Rules, 1975 as relevant to determine the value of the ammonia so used captively. He determined the price based on the price at which ammonia was sold outside the factory to DGS & D and dealers and applied the highest price out of the prices of such sales.

In appeal proceedings, the Commissioner (Appeals) vide order dated 26/11/2004 upheld the order-in-original relying on various judgments, namely, Ashok Leyland Ltd. 2002-TIOL-224-SC-CX; Government of India vs. Madras Rubber Factory 2002-TIOL-49-SC-CX; IDL Chemicals vs. Collector 2002-TIOL-621-SC-IT.

The appellant is before the CESTAT.

The Bench observed -

"4. We find that this dispute dates back to the period 1975 to 1981. In the earlier round of litigation, the Tribunal vide order No. 3381-3382/96-A dated 19/12/1996 had remanded the case to the Commissioner (Appeals) with the directions, inter alia, to consider the applicability of the Tribunal decision in the case of National Rayon Corporation Ltd. vs. Collector 1984 (15)ELT 201 (Trib.). In appeal proceedings the Commissioner (Appeals) did not consider the judgment of the Tribunal in the case of National Rayon Corporation Ltd. (supra), which has a direct bearing on the facts of the present case. Instead he referred to various judgments which do not have a direct bearing to the facts of the present case. As shown by the learned counsel, it was held by the hon'ble apex Court in the case of Escorts Ltd. vs. Commissioner of Central Excise - 2004-TIOL-86-SC-CX, that courts should not place reliance on decisions without discussing as to how the factual situation fits in with the facts of the decision on which reliance is placed. We find that, in the present case, this is exactly what has happened. The facts are not being considered in relation to the law. The law provides that where the goods are not sold but are captively consumed, the valuation shall be determined in accordance with the Valuation Rules, 1975. On reading the Rules, it is seen that Rule 6(b)(i) clearly applies to the present situation. Rule 6(b)(i) reads as under:

xxx

The appellant, no doubt, had cleared ammonia to the dealers and, therefore, the value of comparable goods manufactured by them is available. But, in accordance with the proviso to Rule 6(b)(i), while determining the assessable value in respect of captively consumed goods, the proper officer has to make reasonable adjustments taking into consideration all relevant factors. To our mind, the relevant factors to be considered would be factors such as quantity of sales, transportation, packing etc. Therefore, it is necessary that the adjudicating authority consider all relevant factors for arriving at the value of captively consumed goods. With these directions we remand the matter to the adjudicating authority. All issues are kept open."

Nonetheless, the Bench observed that the matter is 40 years old and it would be in the interest of justice if the matter is decided within three months.

The appeal was allowed by way of remand.

(See 2015-TIOL-1129-CESTAT-MUM)