In the case of Eastman Spinning Mills (P) Ltd. v. Commissioner of Central Excise,Madura, it was held that that in case of captive consumption, the valuation would be done under Rule 8 and if same goods are partly sold by the assessee then such goods should be assessed on the basis of transaction value and duty to be determined as per Section 4 for each removal.
Facts of the Case
The brief facts of the case are that appellants are manufacturers of cotton yarn and cleared on payment of Excise duty. The finished goods were partly cleared to their own partnership firms and partly cleared to the unrelated buyers. The adjudicating authority in his order No.55/2003 dt. 8.12.2003 dropped the recovery of differential duty of Rs.16,27,108/- and Rs.3,37,488/-. Consequent to the said OIO, the appellant preferred refund claim for the differential duty already paid under protest. Refund was also sanctioned vide OIO No.3/2004 dt. 28.4.2004. Revenue preferred appeals before Lower Appellate Authority against both OIOs dt. 8.12.2003 and 28.4.2004. The Commissioner (Appeals) in the impugned OIA No.40/2005 dt. 21.3.2005 and OIA No.205/2005 dt. 13.10.2005 set aside the OIOs and allowed the Revenue’s appeals. Hence the appellants preferred these two appeals.
Contentions of the Assessee
The appellants submitted chart indicating the Date and Events and also submitted paper book containing case laws. Even though the Director of the appellant company is partner of the other firm, M/s.Eastman Exports, they are not related person as per Section 4 of Customs Act read with valuation Rules as there is no mutuality of interest. It was submitted that 50% of the finished goods were cleared on DTA sale to the unrelated buyers and the goods cleared to their partnership firm were cleared at higher price than what was cleared to unrelated buyers. The assessee relied on the following case laws :-
(1) Ultra Refriegerators Pvt. Ltd. Vs CCE Delhi- 2004 (170) ELT 341 (Tri.-Del.)
(2) Ispat Industries Ltd. Vs CCE Raigad- 2007 (209) ELT 185 (Tri.-LB)
(3) Birdi Steels Vs CCE Ludhiana- 2005 (179) ELT 82 (Tri.-Del.)
(4) Pepsico India Holdings (P) Ltd. Vs CCE Mumbai- 2004 (163) ELT 478 (Tri.-Del.)
(5) Gangotri Electrocastings Ltd. Vs CCE & ST Patna- 2013 (293) ELT 395 (Tri.-Kolkata)
Contentions of the Revenue
The Revenue reiterated the findings of the impugned orders both on merit as well as on limitation and also referred to Board’s circular dt. 1.7.2002 at point No.5 and point No.12 wherein the Board has clarified that for the goods captively consumed and also for the goods transferred to the sister unit where the Board has clarified that assessable value will be 115%.
Held by Hon’ble CESTAT
The Hon’ble CESTAT stated that the method of valuation when goods are partly cleared to related person, has been clarified by the Board in their circular dt. 1.7.2002 wherein the Board has categorically clarified that in case of captive consumption, the goods in their own factory valuation would be done under Rule 8. Board also clarified that when same goods are partly sold by the assessee then such goods should be assessed on the basis of transaction value and duty to be determined as per Section 4 for each removal. This issue stands settled by the Tribunal’s Larger Bench in the case of Ispat Industries Ltd. Vs CCE Raigad (supra).
In the above Tribunal’s LB decision, it is clearly held that provisions of Rule 8 will not apply where the goods were partly cleared to independent buyer and also held that rule 4 is to be preferred over rule 8. This Tribunal in the case of Gangotri Electrocastings Ltd. Vs CCE & ST Patna (supra) has held that clearances to related person, value should be on the basis of sales of same goods cleared to independent customers as per rule 4. The ratio of Tribunal’s LB in Ispat Industries (supra) and the above Tribunal decision in Gangotri Electrocastings (supra) is squarely applicable to the facts of this case.
In view of the above, the appeal is allowed.