Determination of Assessable value as per Rule 9 of Central Excise (Valuation) Rules not Applicable on Independent seller: CESTAT [Read Order]

The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that determination of assessable value as per Rule 9 of the Central Excise ( Valuation ) Rules, 2000 is  not applicable to independent sellers.

Fie Spherotech, Rajendra Krishnaji Pujari, Chandrakant Vasudev Deshpande, the appellants are engaged in the manufacture of excisable goods viz., castings for automobile components and other machinery parts, falling under Chapter 73, 84 & 87 of the First Schedule to the Central Excise Tariff Act, 1985.  During the July 2004 to March 2008, the appellants had cleared the goods to the independent customers and also to the other related persons. In respect of clearances made to the independent buyers as well as the related persons, the appellants had determined the assessable value in terms of Section 4 of the Central Excise Act, 1944. 

The department had alleged that determination of assessable value under Section 4 of the Act of 1944 is not proper and correct, and the assessable value should have been determined under Rule 9 read with Rule 8 of the Central Excise (Valuation) Rules, 2000. On the basis of such allegation, show cause proceedings were initiated by the department, seeking for recovery of the differential amount of duty in respect of the finished goods cleared to the related persons.

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 The show cause notice issued in this regard, was adjudicated by the Commissioner of Customs and Central Excise, Kolhapur vide the impugned order dated 30.03.2012, wherein the proposals levelled against the appellants were dropped. In the impugned order dated 30.03.2012, the  adjudicating authority has held that since the goods were cleared to both the independent buyers as well as the related persons, the valuation cannot be determined under Rule 9 read with Rule 8 of the Valuation Rules, 2000.

Feeling aggrieved with the impugned order dated 30.03.2012, Revenue has preferred these appeals before the Tribunal.  Revenue has assailed the impugned orders on the ground that in respect of the supplies effected by the appellants to the related persons, the provisions of Rule 9 read with Rule 8 of the Valuation Rules, 2000 should be applicable for determination of the assessable value for the purpose of discharge of the Central Excise duty liability thereon.

A two-member bench of S.K. Mohanty, Member ( Judicial ) and M.M. Parthiban, Member ( Technical ) found that the  adjudicating authority has dealt with the issue of supplies effected by the appellants to separate class of buyers viz., the ‘independent buyers’ and the ‘related persons’. Since, Rule 9 read with Rule 8 of the Valuation Rules, 2000 has specifically provided that the said statutory provisions are applicable only when the goods are supplies exclusively to the related persons, the said provision shall not have the application in the case of appellants inasmuch as they had sold the goods also to the independent buyers, apart from selling the same to the related persons.

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The Tribunal vide Final Order had disposed of three numbers of appeals. Against the said order passed by the Tribunal, the respondent herein had filed the Miscellaneous Application for rectification of mistake  was allowed by the Tribunal, by way of recalling the Final Order dated 14.07.2022.  Since, the Final Order in its entirety was recalled, Registry was confused about relisting of the matter for fresh hearing and accordingly, listed all the three appeals for hearing on 12.12.2024. However, on careful reading of both the Final Order dated 14.07.2022 and the Miscellaneous Order dated 25.07.2024, it was evident that appeals  have already been disposed of by the Tribunal, in rejecting the said appeals filed by Revenue.

The tribunal upheld the impugned order passed by the adjudicating authority in support of dropping the show cause proceedings initiated against the respondents. The appeal filed by the Revenue is dismissed. 

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