When no other price available at time of stock transfer value should be determined via best judgment method

Haldia Petrochemicals Limited Vs Commissioner of Central Excise (CESTAT Kolkata)

CESTAT Kolkata held that when there is no other price available at the time of clearance of the goods from the factory to depot on stock transfer basis, the only way available is to determine the assessable value based on the best judgment method.

Facts- The Appellant had commissioned its Petrochemical Complex at Haldia in 2001 and also set up a depot at Budge Budge for catering to domestic and export market. They stock transferred their finished goods to the said depot in February and March 2002. The issue involved in the present appeal is regarding valuation of the said goods cleared from factory to depot on stock transfer basis and eventually sold therefrom. Since there was no prevailing depot price on the date of clearance from factory for the purposes of application of Rule 7 of the valuation Rules and neither was there any ex-factory selling price, the Appellant discharged duty on the basis of import parity price as published by Platts, an international organization which notifies the prices of petrochemical products worldwide. According to the Appellant, the domestic prices in the Petchem Industry are bench marked to the import parity price and hence they adopted this import parity price for the purpose of payment of duty.

A show cause notice dated 02.04.2003 was issued to the Appellant alleging that they have violated Rule 7 and 9 of Valuation Rules and demanded differential duty on the basis of ultimate sale price of the said goods from the depot over a period of time from 30 March 2002 to 5 November 2002. The Notice was adjudicated and the demand was confirmed vide Order-in-Original dated 30.09.2010. On appeal, the Ld. Appellate Commissioner upheld the order of the adjudicating authority, vide his order dated 10.10.2011(Impugned order). The Appellant is before us against the impugned order.

Conclusion- We observe that when there is no other price available at the time of clearance of the goods from the factory to depot on stock transfer basis, the only way available is to determine the assessable value based on the best judgment method. In this case, the Appellant discharged duty on the basis of import parity price as published by Platts, an international organization which notifies the prices of petrochemical products worldwide. According to the Appellant, the domestic prices in the Petchem Industry are bench marked to the import parity price and hence they adopted this import parity price for the purpose of payment of duty. We observe that under these circumstances, when there is no other price available, the adoption of import parity price as published by Platts by the Appellant cannot be faulted. The department has adopted the ultimate selling price of the goods from the depot. We observe that there is no provision in the Valuation Rules which permits chasing the selling price of the said goods from the depot and pay duty on the basis of the ultimate selling price from the depot. Accordingly, we hold that the demand confirmed in the impugned order on the basis of the ultimate selling price of the goods from the depot is not sustainable and accordingly we set aside the same.

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