Whether Rule 8 of Valuation Rules is applicable where the products are cleared partly for home consumption and partly to independent buyers?

PJ/Case Laws/2012-13/1476

Case:- M/s AXIOM IMPEX INTERNATIONAL LTD V/S COMMISSIONER OF CENTRAL EXCISE, THANE-II

Citation:- 2013-TIOL-464-CESTAT-MUM

Brief Facts: - The applicants filed this application for waiver of pre-deposit of duty of Rs. 20,16,415/-, interest and penalty. They are engaged in the manufacture of HDPE/PP Tape & Strips. The applicants are clearing the same on payment of appropriate duty to the independent buyers as well as clearing to their another unit for captive consumption. The revenue is of the view that for the goods which are cleared to their another unit, the appellant is liable to pay duty as per the provisions of Rule 8 of Central Excise Valuation Rules. Show-cause notice was issued demanding duty of Rs.44,42,693/-, interest and penalty. In reply to the show-cause notice, the applicants submitted that some goods are being cleared to the independent buyers and some goods are being cleared at the higher value as determined by the Revenue as per CAS 4 certificate and the adjudicating authority dropped the demand approximately of Rs. 24 lakhs and confirmed the demand of approximately Rs. 20 lakhs.

Appellant’s Contention: - The appellant contended that they are clearing the same goods to the independent buyers and paying duty on the same value in respect of the goods which are cleared for captive consumption. Therefore, the demand is not sustainable. They relied upon the decision of the Tribunal in the case of CCE vs. Max India Ltd. - 2008 (231) E.L.T. 159 (Tri-Del.) in support of their claim.

Respondent’s Contention: - The respondent argued that as per Rule 8 of the Central Excise Valuation Rules, duty is to be paid in respect of the captively consumed goods on the basis of 115% of the cost of production of the goods and as the applicants are not paying appropriate duty, the demand is rightly made.

Reasoning of Judgment: - The Hon’ble CESTAT held that the applicants are clearing some quantity goods to the independent buyers on higher value as determined by the Revenue and the adjudicating authority dropped the demand of more than Rs. 24 lakhs. The Tribunal in the case of Max India Ltd. supra held that the provisions of Rule 8 of the Central Excise Valuation Rules are applicable only when the excisable goods are not sold but are cleared for captive consumption and the provisions are not applicable where the products are cleared partly for home consumption and partly cleared to independent buyers. In view of the above decision, prima facie, the applicants have made out a strong case in their favour. Therefore, pre-deposit of dues is waived and recovery thereof is stayed during the pendency of the appeal.

Decision: - Stay petition was allowed.

Comment:- The essence of this case is that Rule 8 of valuation rules regarding captive consumption is applicable when all the goods are cleared for captive consumption and not when some of the goods are also cleared to independent buyers.

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PJ/Case Laws/2012-13/1476

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