CE Valuation Rules, 2000 – Clearance of flux cored wire/welding electrodes to Unit no. 2 for reconditioning work - Revenue alleges valuation should be u/r 5 and not u/r 8 as no excisable goods have been manufactured – rule 8 uses the expression production or manufacture of other articles – Revenue Appeal dismissed: CESTAT
By TIOL News Service
MUMBAI, DEC 13, 2013 : THIS is a Revenue appeal. The respondent-assesseehas two units named as Unit No.1 & Unit No. 2 and they are engaged in the manufacture of wear plates and sleeves of iron and steel. The respondent also manufactures flux cored wire and welding electrodes at Unit No.1 and removes the same to Unit No.2 for undertaking manufacturing activities at Unit No.2 and discharges excise duty liability on such flux cored wire and welding electrodes at 115% of the cost of production as provided in Rule 8 of the Valuation Rules, 2000.
Since the respondent, apart from manufacturing excisable goods, were also undertaking rebuilding/re-conditioning work of old/used/defective Grinding Rollers, Liners, etc. and flux cored wire and welding electrodes were used in undertaking such reconditioning work, the department was of the view that duty liability in respect of these goods should have been discharged not on the basis of cost-construction method under Rule 8 but under Rule 5 of the said Valuation Rules, which provided for payment of duty on the sale price of similar goods sold by the assessee.
The adjudicating authority confirmed the demand of Rs.5.75 lakhs along with interest and equivalent penalty and also imposed another penalty of Rs.3 lakhs u/r 25 of CER, 2002.
As the Commissioner(A) set aside this order, the Revenue is in appeal before the CESTAT.
The Revenue representative submitted that since the respondent had not used the flux cored wire and welding electrodes in the manufacture of excisable goods in Unit No.2, they could not have determined the value under Rule 8 but should have determined the value under Rule 5 i.e., on the basis of like goods sold. It is further submitted that if one wants to avail the benefit under Rule 8, then the goods has to be used in the production/manufacture of "excisable goods" in Unit No.2.
The assessee referred to the CBEC Circular 643/34/2002-CX dated 01/07/2002 and submitted that it was abundantly clear that when the goods are not sold but captively consumed, whether in the manufacture of ‘excisable goods' or otherwise, the provisions of Rule 8 would prevail and, therefore, discharge of excise duty liability is correct in law and the Revenue appeal needs to be dismissed.
The CESTAT observed -
"5.1 Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods), Rules 2000 reads as follows:
"(8) Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten per cent of the cost of production or manufacture of such goods."
The expression used is ‘production or manufacture of other articles'. The said rule nowhere envisages that the production or manufacture should be of excisable goods. Therefore, the argument of the Revenue that the goods should be used in the manufacture of ‘other excisable goods' has no basis whatsoever.
5.2 It is not the case of the Revenue that the appellant has sold the goods. It is an admitted position that the appellant has utilised the goods in its factory in the repair of certain other articles. Therefore, the question of invoking Rule 5 of the Valuation Rules would not arise at all, as Rule 5 envisages sale of goods, which is not the case herein. Even if for a moment it is assumed that Rule 8 will not apply and in the absence of any specific provision under any other rules, resort will have to be made to Rule 11 which provides for using reasonable means consistent with the principles and general provisions of the Rules and sub-section (1) of Section 4 of the Act. Even if the provisions of Rule 11 are applied, the most appropriate rule will be Rule 8 and, therefore, even if it is held that Rule 8 will not apply then, even under Rule 11, the principles envisaged in Rule 8 should be followed…."
Holding that there was no infirmity in the order of the Commissioner(A), the Revenue appeal was dismissed as being devoid of merits.
In passing : How the rule 5 value was obtained for raising the demand is another story. By the way, the new rule 8 has come into force recently. Kindly refer Notification 14/2013 - CX (N.T.), Dated: November 22, 2013.
(See 2013-TIOL-1856-CESTAT-MUM)
