2004 (11) TMI 139 - AT - Central Excise

Summary

Issues: Valuation of Stator Wounds made out of retrieved stator stacks for captive consumption in manufacturing compressors or sent to service centers.

In this case, the appeal was made against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals) regarding the valuation of Stator Wounds made out of retrieved stator stacks. The appellants, who manufacture compressors, have a Stator Rewinding Unit where Stator Wounds are manufactured for captive consumption or sent to service centers. The appellants used Rule 6b(i) of Central Excise Valuation Rules, 1975 for valuation based on comparable goods, making adjustments for differences in material characteristics. The stator wounds manufactured in the parent factory and service centers were considered comparable, with the only difference being the newness of the items. The appellant took depreciation costs into account for goods manufactured in the service center due to the use of old stator stacks. The department disagreed with this valuation method, leading to a confirmed differential duty by the original authority and upheld by the Commissioner (Appeals).

The appellant argued for adjustments in valuation under Rule 6(b) of the Central Excise Valuation Rules, emphasizing the difference between new and used items and the need for depreciation allowance. The appellant cited various legal precedents supporting the allowance of depreciation for used items in valuation practices in different contexts, such as customs and income tax laws. The appellant also highlighted the reversal of a decision relied upon by the original authority, strengthening their argument for depreciation allowance. On the other hand, the Department contended that there was no significant difference in material characteristics between used and new stator stacks, therefore, depreciation should not be allowed.

Upon considering the submissions, the Tribunal observed that Rule 6(b)(i) of the Central Excise Valuation Rules allows for reasonable adjustments in valuation. The Tribunal acknowledged the commercial practice of allowing depreciation for used items, emphasizing that the cost of a new item cannot be the same as that of a used item. The Tribunal found the appellant's arguments supported by legal precedents and commercial practices, concluding that demanding the same duty for stator wounds made from new and used stator stacks goes against established legal positions and commercial norms. Consequently, the Tribunal ruled in favor of the appellant, allowing the appeal and providing consequential relief.