2006 (6) TMI 325 - AT - Central Excise

Summary

Issues:
1. Addition of 2% service charges in the assessable value for captive consumption.
2. Interpretation of Valuation Rules 1975 regarding related persons and additional charges.

Issue 1: Addition of 2% service charges in the assessable value for captive consumption:
The appeal was filed by the Revenue against the order of the Commissioner (Appeals) concerning the addition of 2% service charges in the assessable value for captive consumption. The Commissioner (Appeals) found that the appellants were not related persons with M/s. Larsen & Turbo Ltd. during the period of dispute, and there was no flow back in the transactions between them. Relying on a tribunal decision, the Commissioner (Appeals) allowed the appeals against the lower authority's order.

Issue 2: Interpretation of Valuation Rules 1975 regarding related persons and additional charges:
The Revenue contended that there should be an addition of 2% service charges as per Rule 6(b)(i) of Valuation Rules 1975 since the Electrodes were captively consumed by both the assessee and M/s. Larsen & Turbo Ltd. However, the Tribunal found that since no charge was collected for the Electrodes captively consumed by M/s. Larsen & Turbo Ltd. or the assessee, such charges cannot be added. The Tribunal also noted that the class of buyers for electrodes consumed by M/s. Larsen & Turbo Ltd. and those sold as distributor/dealer could differ, impacting the prices under the Valuation Rules. Consequently, the Tribunal rejected the appeal filed by the Revenue to overturn the Commissioner's order.

In conclusion, the Tribunal upheld the Commissioner (Appeals)'s decision, emphasizing that the absence of charge collection for captively consumed Electrodes by M/s. Larsen & Turbo Ltd. and the assessee precluded the addition of service charges. The Tribunal also highlighted the potential differences in pricing for electrodes consumed by different classes of buyers, supporting the rejection of the Revenue's appeal.