Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *   CBIC issues draft rules for Customs valuation *  Top Headlines: Threshold for Benami deals, green bond investors, and more *  Govt aims 1-hour clearance for goods at all ports *  Exporters Allowed To Use RoDTEP, RoSCTL Scrips To Pay Customs Duty, Transfer Them; Rules Amended *  Millions of labourers to be affected by brick producers’ strike over hike in GST, coal rates *  Inauguration of ‘kendriya GST parisar’ *  Transporter can seek Release of Conveyance alone, not Goods under GST Act: Madras HC *  GST: Quoting of DIN Mandatory for Responding to Notice, Govt Modifies Portal *  Firms can soon file claims for GST credits of ?400 cr *  CBIC issues modalities for filing transitional credit under GST. *  Mumbai: Man creates 36 fake GST firms, arrested for input tax credit fraud of Rs 23 cr *  Report to restructure Commerce Ministry under study; idea is to set up trade promotion body: Goyal *  Firms can soon file claims for GST credits of ?400 cr *  Gambling Alert! Govt May Levy Up To 28% GST; UP, Bengal Back Move *  EPFO backs raising retirement age to ease pressure on pension funds *  India Moving Up Power Scale, Set to Become Third Largest Economy By 2030 *  Airfares Get Expensive: What Changes for Flyers From Today? *  IRCTC Latest News: Passengers to Pay More For Cancelling Confirmed Rail Tickets Soon. *  IBC prevails over Customs Act, says Supreme Court. *  As GST enters sixth year, a time for evaluation and reassessment *  There’s GST on daily essentials as Centre needs money to buy MLAs: Arvind Kejriwal *  Now, GST on cancellation of confirmed train tickets, hotel bookings *  GST kitty for top States could rise 20% in FY23, says Crisil *  French customs officials seize another cargo vessel over Russia sanctions *  TradeLens builds on Asia momentum with Pakistan Customs deal *  Hike tax on tobacco, reduce affordability & increase revenue: Civil society organizations to GST council *  Bihar: ?10 crore tax evasion on tobacco products detected in raids *  Centre failed on GST, COVID; would it be anti-national? Rajan on Infosys row *  Service Tax not Chargeable on Income Tax TDS portion paid by recipient: CESTAT grants relief to TVS *  Foreign portfolio investors make net investment of Rs 7575cr in Sep so far
Subject News *  Run-up to Budget: Monetary threshold for GST offences may rise to Rs 25 cr *   GST (Tax) E-invoice Must For Businesses With Over Rs 5 Crore Annual Turnover *   Both Central GST and excise duty can be imposed on tobacco, rules Karnataka high court *   CBIC Issues Clarification On Extended Timelines For GST Compliance *   CBIC Issues Clarification On Extended Timelines For GST Compliance *  Budget 2023- 9.6 crore gas connections *  GST: Tamil Nadu Issues Instructions for Assessment and Adjudication Proceedings *  GST: CBIC Extends Last Date for filing of ITC *  GST collection in September surpasses Rs 1.4 lakh crore for straight seventh time *  Dollar smuggling case: Customs chargesheet names M Sivasankar as key conspirator. *  Hike in GST rates fuels inflation *  Assam: CBI arrests GST commissioner in Guwahati *  GST fraud worth ?824cr by 15 insurance Cos detected *  India proposes 15% customs duties on 22 items imported from UK *  Decriminalising certain offences under GST on cards *  Surge in GST collections more due to higher inflation: India Ratings *  MNRE Notifies BCD and Hike in GST Rates as ‘Change in Law’ Events But With a Condition | Mercom India *   Solar projects awarded before customs duty change allowed cost pass-through *  Rajasthan High Court Dismisses Writ Petitions Challenging Levy Of GST On Royalty *   GST revenue in September likely at Rs 1.45 lakh crore *  Govt working on decriminalising certain offences under GST, lower compounding charge *  Building an institution like GST Council takes time, trashing is easy: Sitharaman *  GST collections in Sept may touch ?1.5 lakh crore *  KTR asks Centre to withdraw GST on handlooms *  After Gameskraft, More Online Gaming Startups To Receive GST Tax Claims *  Madras HC: AAR Application Filed Under VAT Does Not Survive After GST Enactment *  Threshold for criminal offences under GST law may be raised *  Bengaluru: Gaming company faces biggest GST notice of Rs 21,000 crore *  CBIC clarifies Classification of Cranes for GST, Customs Duty *  Customs seize gold hidden in bicycle in Kerala airport  

Comments

Print   |    |  Comment

PJ/Case Law/2013-14/2054

Correctness of valuation done by assessee as per Rule 8.

Case:- COMMISSIONER OF CENTRAL EXCISE, NAGPUR Vs DIFFUSION ENGINEERING LTD. 

Citation:-2013-TIOL-1856-CESTAT-MUM

Brief facts:-The Revenue is in appeal against Order-in-Appeal NO. RK/193 to 194/NGP-I/2004 issued on 29/07/2004 passed by the Commissioner of Customs & Central Excise (Appeals), Nagpur. Vide the impugned order, the learned appellate authority held that determination of value by the respondent-assessee, M/s. Diffusion Engineers Ltd. under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 read with Section 4(1)(d) of the Central Excise Act, 1944 is correct in law and, therefore, the duty demands confirmed on the respondent-assessee by the adjudicating authority amounting to Rs. 5,75,750/- along with interest thereon and imposing equivalent amount of penalty under Section 11AC and additional penalty of Rs. 3,00,000/- imposed under Rule 25 of the Central Excise Rules, 2002 are not sustainable in law.

The respondent-assessee, M/s. Diffusion Engineers Ltd., has two units named as Unit No.1 situated at plot NO. T-5&6, MIDC Industrial Area, Higna, Nagpur and Unit NO.2 situated at Plot NO. N-78, MIDC Industrial Area, Hingna Road, Nagpur 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 for under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) 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 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. Hence the Revenue is in appeal before the Tribunal.

Appellant’s contention:- The learned Additional Commissioner (AR) appearing for the Revenue submits that inasmuch as 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 of the said Valuation Rules but should have determined the value under Rule 5 i.e., on the basis of like goods sold. It is his submission 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.

Respondent’s contention:-The learned counsel for the respondent submits that Rule 8 of the Valuation Rules, 2000 does not envisage captive consumption for manufacture of excisable goods and uses the expression "articles". Further, the CBEC, vide Circular NO. 643/34/2002-CX dated 01/07/2002 has also clarified that if excisable goods are captively consumed, then Rule 8 shall apply and where such goods are transferred to a sister-unit, then valuation can be done under Rule 9. Rule 9, also in a situation where there is no sale, provides that valuation prescribed in Rule 8 can be adopted in the case of captive consumption. From this circular, it is 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 by the respondent, following the procedure prescribed under Rule 8 is correct in law and, therefore, the impugned order passed by the lower appellate authority is sustainable in law.

Reasoning of judgment:- The Tribunal held that the 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.

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. Therefore, no infirmity was found in the order passed by the lower appellate authority. Accordingly, appeal filed by the Revenue was dismissed as devoid of merits. The cross-objection filed was also disposed of.

Decision:- Appeal rejected.

Comment:- The substance of this case is that Rule 8 does not state that the goods should be directly be used in production of excisable goods. For captive consumption, the goods may be used in manufacturing or producing excisable goods or other articles. Accordingly, as unit no. 2 used the goods sent by unit no. 1 for repair-reconditioning, valuation as per Rule 8 adopted by assessee was found to be correct and proper as per the provisions of law.  
 

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com