Case: M/S.Hbl Aircraft Batteries Ltd Vs. Commnr. Of Central Excise,Hyd

price is not the sole consideration in the transaction with MOD, the money value of the silver flowing from MOD to the appellant, i.e. Rs.2500/- per kg. should be taken into account while determining the assessable value. Appellants contend that the comparable price taken by the silver in determining the value of silver is not correct. Comparable value under Rule 6(b)(ii) could be taken into account when the value of the excisable goods cannot be ascertained under Rule 4 or Rule 5. Reliance is placed on Ashok Leyland Ltd. vs. Collector of Central Excise, Madras, 2002 (146) ELT 503 (SC) , in which it was held that sale of goods to different classes of buyers does not make normal price unascertainable as to attract Section 4(1)(d). It is contended that the normal price of battery is the price at which it is sold to MOD and accordingly the value of silver is to be ascertained. 6. Respondents contend that normal price should be ascertained by reference to the transaction. Since the transaction with MOD is a special arrangement, the contract price cannot be taken into account as such transaction is not done in the ordinary course of business. Therefore, the market value of the silver should be taken into account. It is contended that in order to claim the benefit of the proviso, the appellant should show normal practice of whole sale trade. Since the supply of old life expired batteries to retrieve the silver forms a special arrangement it will not constitute a normal practice. It is contended that even if some raw material is supplied free of cost for the purpose of excise duty, the market value should be taken into account. 7. Section 4 of the Central Excise and Salt Act deals with valuation of excisable goods which are chargeable to duty with reference to the value. Valuation is based ordinarily on the price thereof that is at the price at which goods subject to excise duty are sold by manufacturer to a buyer. In exceptional circumstances when the valuation cannot be so more that closest equivalent thereof is determined in the manner prescribed in the valuation Rules. Value for the purpose of the said Rules is value under Section 4 of the Act and is to be determined under Rules 4 and 5. Rule 6 has to be invoked only in situation when assessment of value of goods subject to excise duty cannot be determined under Rules 4 & 5. When the goods are not sold by the manufacturer but are used or consumed in the manufacture of other goods, the value is to be determined upon the value of compatable goods manufactured, and if that cannot be done on the cost of production, if any, which he would have normally earned as the sale of such goods. 8. This view, we have set out above finds support, from decisions in Ashok Layland vs. CCE Madras, 2002 (146) ELT 503 ; Union Carbide (India) vs. CCE Calcutta, 2003 (158) ELT 15 , Burn Standard Company Ltd. vs. UOI, 1992 (60) 671; CCE vs. Dai Ichi Karkaria Ltd., 1999 (112) ELT 353. 9. The assessable value of the silver should be taken at Rs.2500/- per kg. which is the rate at which MOD used to get the silver from the mint. The price charged by the appellants was in terms of the contract entered into by them with MOD. As per the terms of the contract, MOD was to supply the silver to manufacture the batteries. Since the stock of silver in the mint depleted, MOD supplied the old life expired batteries to retrieve the silver and to use the recovered silver in the manufacture of new batteries. As per terms of the contract, the appellants were to give a rebate to the MOD in the price to be charged per battery and this was the reason for the difference in prices between the batteries supplied to MOD and HAL. 10. The value of the silver supplied to the appellants is determinable. Had the stock of silver in the mint did not deplete, MOD would have supplied silver from the mint. Since the stock depleted, MOD supplied old life expired batteries for the recovery of silver. This will not make the value of silver undeterminable. The value of the silver supplied would be Rs. 2500/- per kg., the price at which MOD would get the silver from the mint. The question of determining the assessable value of silver based on the value of the comparable goods would arise only when the value is undeterminable. The the present case that question does not arise. 11. The supply of silver by MOD being one of the stipulation in the contract between MOD and the appellant, would constitute a normal practice of the wholesale trade in such goods. As per the first proviso to Section 4(1)(d), where in the accordance with the normal practice of the wholesale trade, goods are sold at different prices to different classes of buyers, each such price shall be deemed to be the normal price of such goods in relation to each such class of buyers. Therefore, the normal price of battery sold to MOD by the appellants is Rs.33,393/- and the assessable value of silver used in the manufacture of such battery is at Rs.2500/- per kg. and cannot take the market value of silver.12. The contract between the MOD and the assessee provided for supply of silver from the mint at a particular rate and had to be supplied by the MOD and in lieu thereof the appellants were allowed to retrieve silver from old used batteries, and their special feature cannot be ignored. Batteries of the nature in question are largely used only by MOD. Hence the view taken by the Tribunal down to adjudicating authority cannot be sustained.13. Hence, we allow this appeal and set aside the order of the Tribunal and thereby the order for differential cannot be enforced. 14.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Section 4 of the Central Excise and Salt Act deals with valuation of excisable goods which are chargeable to duty with reference to the value. Valuation is based ordinarily on the price thereof that is at the price at which goods subject to excise duty are sold by manufacturer to a buyer. In exceptional circumstances when the valuation cannot be so more that closest equivalent thereof is determined in the manner prescribed in the valuation Rules. Value for the purpose of the said Rules is value under Section 4 of the Act and is to be determined under Rules 4 and 5. Rule 6 has to be invoked only in situation when assessment of value of goods subject to excise duty cannot be determined under Rules 4 & 5. When the goods are not sold by the manufacturer but are used or consumed in the manufacture of other goods, the value is to be determined upon the value of compatable goods manufactured, and if that cannot be done on the cost of production, if any, which he would have normally earned as the sale of suchsupply of silver by MOD being one of the stipulation in the contract between MOD and the appellant, would constitute a normal practice of the wholesale trade in such goods. As per the first proviso to Section 4(1)(d), where in the accordance with the normal practice of the wholesale trade, goods are sold at different prices to different classes of buyers, each such price shall be deemed to be the normal price of such goods in relation to each such class of buyers. Therefore, the normal price of battery sold to MOD by the appellants is Rs.33,393/- and the assessable value of silver used in the manufacture of such battery is at Rs.2500/- per kg. and cannot take the market value of silver.12. The contract between the MOD and the assessee provided for supply of silver from the mint at a particular rate and had to be supplied by the MOD and in lieu thereof the appellants were allowed to retrieve silver from old used batteries, and their special feature cannot be ignored. Batteries of the nature in question are largely used only by MOD. Hence the view taken by the Tribunal down to adjudicating authority cannot be sustained.13. Hence, we allow this appeal and set aside the order of the Tribunal and thereby the order for differential cannot be enforced.