Summary
A manufacturer of organic chemicals consumed captively the specially denatured spirit produced at its own unit; the Commissioner valued the spirit for excise by adopting the highest price prevailing on a particular date at another distillery, confirmed the demand under three show cause notices and imposed penalty. After an earlier remand by the Supreme Court requiring the method of valuation to be examined, the Tribunal held that under Rule 6(b)(i) of the Central Excise Valuation Rules the normal price of comparable goods must be a conservative, representative price and not the highest price. The Supreme Court dismissed the Revenue's appeal, holding that the Tribunal's approach accords with the principle in A.K. Roy v. Voltas, drawn from Vacuum Oil Company, that the price representing the real value of goods for taxation must be conservative in every respect.
Issues
- Whether, in valuing goods cleared for captive consumption on the basis of comparable goods under Rule 6(b)(i) of the Central Excise Valuation Rules, the assessing officer may adopt the highest price prevailing at another unit on a particular date rather than a conservative representative price.
Provisions considered
- Rule 6(b)(i), Central Excise (Valuation) Rules, 1975Where goods are captively consumed and valued on the price of comparable goods of the same or other assessees, the most conservative price must be adopted, since the highest price loses the character of the normal price at which goods are ordinarily sold in wholesale trade. (¶¶ 3, 5, 6, 9)
- Section 30 (as construed in Vacuum Oil Company and A.K. Roy v. Voltas), Sea Customs Act, 1878The 'wholesale cash price' representing the real value of goods must be conservative in every respect, a net cash price free of loading for post-importation charges, credit or trade discount; this principle governs the determination of normal price for excise as well. (¶¶ 7, 8, 9)
Held
- The Commissioner's selection of the highest rate of the product at the Sarai distillery on a specific date was not a valid exercise of discretion; the Tribunal, on remand, correctly applied the settled principle that the most conservative representative price is to be taken, and its order cannot be faulted. (¶¶ 3, 4, 5, 7, 9)
Result
Appeal dismissed with no order as to costs; CESTAT, Principal Bench order dated 27.07.2009 in Excise Appeal No. 467 of 2001 affirmed; pending applications disposed of.