1. The question for consideration in this appeal is the valuation, for purposes of assessment, of two products, described as extreme pressure additive no. 156.00 and 156.10 manufactured by the appellant at its factory at Taloja, and cleared to its other factory at Turbhe for utilisation in the manufacture of chemical pesticides. The value of such goods is to be determined in accordance with the provisions of Rule 6(b) of the Central Excise (Valuation) Rule, 1975. The department was not satisfied about the correctness of the value which the appellant adopted for assessing the duty. It therefore proposed to add this value, profit margin at 9.9% and administrative overheads at 2.2%.
The Assistant Commissioner confirmed the proposal in the notice and also imposed a penalty. His order having been confirmed in appeal by the Commissioner (Appeals), the matter is before us.
2. It is the contention of the counsel for the appellant that there are no clearances for home consumption of these goods, nor is there any other comparable price available. The entire production of these two commodities at Taloja is either cleared to its factory at Turbhe or exported, and no part is cleared for home consumption. There is no manufacture by anyone else of comparable goods. In the situation, he says, the price at which the goods were exported should, after making such adjustments as may be necessary be held to be the value contemplated in Rule 6 (b). We are unable to accept this submission.
Clause (i) of Rule (6) provides for basing the value of the goods under consideration on "the value of comparable goods produced or manufactured by the assessee or by any other assessee. " Clause (c) of Rule 2 defines "value" in the rules to mean the value under Section 4 of the Act. The "value" referred to in clause (i) of Rule 6(b) is the value of comparable goods, produced either by the assessee or any other assessee, as determined under Sec.4. Hence, unless it can be shown that the price at which the goods were exported is identical accepted. It has to be kept in mind that even in cases where part of the goods are cleared for home consumption, and part exported, the export price may vary widely from the price for home consumption of an exporter. An exporter may have to face stiff competition from sellers, not only in his country, but from all those all over the world, and therefore may reduce his export price to levels below, and sometimes far below, his domestic price. He may thus "dump" his goods, sell them below his cost of production, to buyers in foreign countries. He may also receive various subsidies such as drawback specifically designed to enable him to reduce his export price. It is therefore reasonable to act on the premise that the export price would be substantially lower, sometimes substantially lower, than the price at which the same goods are cleared for home consumption.
3. The counsel for the appellant seeks to rely upon the decision of the larger bench of the Tribunal in Crompton Electronics vs CCE 2001 (118) ELT 262. The question for consideration before that bench was the valuation of electron guns manufactured by one person and sold to another. The department had alleged the existence of a relationship between the manufacturer and the seller of the goods in order to enhance the value declared by the manufacturer. The larger bench considered the provisions of Rule 6 (b). It noted the evidence produced by the manufacturer to the department to show that the identical goods were sold at the same price as it sold them by another manufacturer and that the export of the goods was at the same price. These facts are referred to in paragraphs 7 and 8 of the larger bench decision.
4. It is however not possible for us to agree that the larger bench has, in fact, held that, in determining the value of goods under Rule 6 (b) (i), the price at which such goods are exported by the assessee must be accepted. No doubt, paragraph 7 of the order records that the price at which the manufacturer exported its electron guns that was not different from the price it realised from the buyer to whom it was alleged to be related. However, the value has been determined by the larger bench not under clause (b) of sub section (1) of Section 4 of the Act but under clause (a). This is clear from paragraph 12. The perception of the larger bench with regard to Rule 6 (b) therefore did not contribute to the ratio of the decision. In any event, reference in paragraphs 7 and 8 appears to be in the nature of obiter dicta.
Further, the question that we have examined, the definition of the term "value" contained in Rule 2 of the valuation Rules was not raised before the larger bench and hence not considered.
5. It is next contended that, in any event, the elements that the department seeks to add has already been included, and the certificate issued by R.B. Jain and Associates, Charterted Account showing inclusion of notional provide at 9.95% and administrative and overhead totalling 3% in the value declared is cited in support.
6. The show cause notice does not indicate the basis upon which it seeks inclusion of these two elements. The counsel for the appellant states on instructions that no break up of any figures were given to the department. Merely paid on what is thought was a rate shown in the invoices based upon its costing. The costing data was not made available to the department. He also says that the Charted Accountant's certificate was not shown to the Assistant Commissioner but produced to the Commissioner (Appeals), who has not dealt with at all. In these circumstances, we are of the value that acceptability of this certificate should be considered by the Commissioner (Appeals). In doing so, either side is at liberty to produce evidence.
7. The appeal is accordingly allowed and the impugned order set aside.
The matter to be adjudicated by the Commissioner (Appeals) afresh.