SCAN SYNTHETICS LTD. Vs. COMMISSIONER OF CENTRAL EXCISE,

JUDGEMENT

(1.) THE appellants are manufacturers of grey yarn. They sell part of the grey yarn manufactured by them and captively consume the remaining in the manufacture of dyed yarn.

(2.) THE impugned order has demanded short levied duty in respect of grey yarn captively consumed for the period 1995 -1998. The ground for the demand is that the assessable value of the captively consumed yarn should have been fixed based on its cost of production and not the sale price of the goods. As against the above findings on short levy in the impugned order, the appellant's contention is that the original assessments and duty paid were correct and no short levy had taken place. It has been explained that the appellant disposed of the grey yarn manufactured by them in 3 ways, i.e. sale to independent purchasers, sale to independent purchasers who entrusted the yarn purchased by them to the appellant for dyeing on job work basis and captive consumption in the manufacture of dyed yarn. The appellant submits that in terms of Section 4(1)(a) of the Central Excise Act, value of goods for the purpose of charging them to excise duty is the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade. They point out that in the present case, since part of the goods produced were being sold to independent wholesale buyers, those prices alone can constitute the assessable value for all the goods produced and since original payment of duty for all the goods manufactured by the appellants, including, the captively consumed portion of the goods, was made at the sale price to independent wholesale buyers those assessments had taken place at the correct value. The learned Sr. Counsel representing the appellant emphasised during the hearing of the case that it is settled law that in cases where normal price as contemplated in Section 4(1)(a) was available, other criteria for valuation like cost of production were not to be considered at all. He relied on the decisions of the Tribunal reported in 1987 (27) E.L.T. 272, 1988 (35) E.L.T. 495, 1991 (52) E.L.T. 142 and 1999 (105) E.L.T. 71 in support of this proposition. The Id. Sr. Counsel also pointed out that even if captively consumed goods were to be valued in terms of Valuation Rules (Rule 6) their valuation should be at the price of comparable goods and valuation based on cost of production is to be resorted to for determining the assessable value only if comparable price is not available. He pointed out that in the present case since the goods were being sold to independent wholesale buyers, this comparable price should constitute the assessable value and not cost of production. He has relied on the decisions of this Tribunal reported in 1996 (82) E.L.T. 574, 1996 (88) E.L.T. 574, 1998 (102) E.L.T. 373, 1999 (105) E.L.T. 71, 2000 (124) E.L.T. 457 in support of this submission. Ld. Sr. Counsel also pointed out that the Adjudicating Authority was in error in holding that the appellant was not selling the goods to buyers other than those who entrusted the grey yarn bought by them for further dyeing. It is submitted that details of yarn sold to independent buyers (other than those who entrusted dyeing work with them) was submitted during the adjudication proceedings. The invoices relating to such sales have been filed in the present appeal also and it has been pointed out during hearing that such sales worked out to more than 15% during the relevant period and was much more than the sales to purchasers who entrusted the grey yarn for dyeing operations also. We have heard the ld. SDR for the Revenue also.

(3.) THE perusal of the records of the case establishes that the appellant was selling a considerable portion of their produce to independent purchasers. Those goods were assessed treating the sale prices as normal prices and duty assessed. Those assessments have not been doubted in the present proceedings also. Thus, for the grey yarn manufactured by the appellant, normal price as contemplated in Section 4(1)(a) of the Central Excise Act existed. It is settled law that in a case where goods are being sold at normal price to wholesale buyers, all the goods, including captively consumed goods, should be assessed at the normal price to wholesale dealers. Separate valuation of the captively consumed goods by taking resort to Valuation Rules is not called for in such cases. Further, following the method prescribed in Valuation Rules for the valuation of captively consumed goods does not yield a different result in the present case. Rule 6(b)(i) of Central Excise Valuation Rules relating to valuation of captively consumed goods stipulates that the value shall be based on the value of comparable goods produced by the assessee himself or by any other assessee. Sub -rule (ii) of Rule 6 states that "if the value cannot be determined under Sub -rule (i) the same may be determined based on cost of production. In the present case, even if the assessable value was fixed based on the price of the comparable goods (sale to price to dealers) the duty payable would have been the same as the duty originally paid.