CROMPTON GREAVES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellant M/s. Crompton Greaves Ltd. manufactures electric stampings and laminations for captive use in the manufacture of electric motors, electric fans and transformers. In cases where in -house production of electric stampings and laminations is not sufficient to meet the full requirement for captive consumption, they purchase stampings and laminations from other manufacturers like M/s. G.K.W. Ltd., M/s. Devi Dayal Stainless Steel Industries. M/s. Prabha Engineering etc. Stampings and laminations were liable to central excise duty on ad valorem basis. Appellant sought department's approval for valuation of captively consumed stampings and laminations based on their cost of production under Rule 6(b)(ii) of Central Excise Valuation Rules, 1975. Subsequently, show cause notices were issued proposing to reassess the stampings and laminations on the basis of the value of stampings and laminations procured from other manufacturers. The differential duty demand was confirmed. When the matter came up before the Tribunal in appeal, the Tribunal remanded the case to the adjudicating authority for passing a fresh order after making the materials, if any, available to the assessee and after giving an opportunity of hearing to the assessee (Final Order No. 3844 -3845/96 -A, dated 24 -12 -96 in Appeal No. E/3758 -3759/87 -A). Pursuant to this order, the Assistant Commissioner of Central Excise, Mumbai passed his adjudication order No. 14/2002/A.C./Vikhroli Dn. Dated 20 -3 -2000 confirming part of the duty demand. The appellant challenged that order before the Commissioner (Appeals) inter alia on the ground that no material constituting the basis for the revised valuation has been disclosed to them and the valuation of all varieties of stampings and laminations had been earned out at a common value of Rs. 38.50 per kg. The Commissioner (Appeals), Central Excise, Mumbai II rejected that appeal under his Order -in -Appeal No. RJB/M -II/276/2002, dated 29 -8 -2002/7 -11 -2002. The present appeal is directed against that order.

(2.) THE appellant is contending that impugned order is entirely contrary to the legal provision on the subject and the directions of the Tribunal. It is being pointed out that sub -clause (i) of Rule 6(b) of Valuation Rules which is relied upon by the assessing authority specifically directs that "in determining the value under sub -clause, proper officer shall make such adjustments as appear to him reasonable, taking into consideration all the relevant factors and, in particular, the difference, if any, in the material characteristic of the goods to be assessed and of the comparable goods". It is the appellant's grievance that the entire goods in question have been reassessed at the highest price of purchase from M/s. G.K.W. Ltd. (Rs. 38.50 per kg.) while this price was for heavy stampings specially required for tailor made motors for heavy industries. This highest price of G.K.W. Ltd. has been applied to all 47 varieties of stampings and laminations of different ratings, while out of 47 ratings, 19 ratings were not manufactured by G.K.W. or any other manufacturer. They also have submitted that instead of carrying out the proceedings as ordered by the CEGAT after disclosing the materials on comparable goods, the lower authorities called upon the assessee to produce the relevant records. Since the assessee was unable to produce any records, the impugned orders confirmed the duty demands which were worked out at the highest price of one of the suppliers namely, G.K.W. Ltd. The appellant has submitted that the procedure, thus, adopted is in violation of the Tribunal's directions and for that reason alone the impugned orders are required to be set aside. Appellant also contended that since no materials were disclosed to them and since the entire valuation of different varieties of stampings and laminations was carried out at the highest purchase price of one of the suppliers, the impugned orders must be treated as passed without any reliable material or evidence and set aside. Ld. Counsel for appellant has submitted that the erroneous nature of the present orders will be clear from the fact that in earlier proceedings it had been noted by the Commissioner (Appeals) as well as the Tribunal that prices would vary depending upon several factors like features of the goods in question, the manufacturing technology and process of a particular manufacture etc. but none of these factors has been considered by the lower authorities. The learned Counsel for the appellants submitted that this is a case of complete non -application of mind by the lower authorities to all the relevant aspects on the issue of valuation. And of passing orders based on irrelevant materials. The appellants have also submitted that the belated demand is not at all justified inasmuch as the appellants were eligible for Modvat Credit/Proforma credit in respect of duty paid on the stampings and laminations used captively and, in case, any higher duty was paid on these inputs, the entire amount would be available as credit to the appellant.

(3.) WE have perused the records and have considered the submissions made by both sides. The objections raised by the appellant on the method of valuation are very serious and go to the very root of the matter. In the remand order, the Tribunal had specifically directed the adjudicating authority that materials relied upon should be disclosed to the appellants and the case heard again. However, no material was disclosed and the appellants were directed to produce the material. Valuation of several varieties of stampings and laminations were in dispute. The price of each variety was required to be determined after considering the price of comparable variety manufactured by the other manufacturers and assessable value for the goods determined after making required adjustments. This has not been at all. Instead, in an extremely simplistic manner, the highest value of one of the items purchased has been taken for valuation for all the varieties. This is highly arbitrary and creates hugely inflated tax demands. An order so passed without any reasonable basis cannot be allowed to stand. There is also considerable force in the appellant's submission that recovery of differential duty at this belated stage would be wholly unjust and unfair since the entire amount was available as credit to the appellants for payment of duty on finished products.