ORDER
V.K. Ashtana, Member (J)
1. In these three revenue appeals against Order-in-Appeal No. 60/98(H-I) CE dated 25.5.98. revenue has contended that the Order-in-Appeal impugned has erred on the valuation of the removals of molasses by the respondents to their sister unit located adjacent inasmuch as that the order impugned has not upheld the valuation thereof as per the sale made by the respondents in November ’93 for removals made during the period in the present dispute which is September. October and November, 1994. The quantity of 49.8 Metric Tonnes of molasses were sold to some Animal Feed Mixing Plant at the rate of Rs. 2,400/- per MT in November 93.
2. In their grounds of appeal the revenue contends that since during the period of dispute there is no sale, therefore, the valuation of these excisable goods is to be done under the Central Excise Valuation Rules, wherein, the first applicable rule in this case would be Rule6(b)(i) The said rule reads as under:
(b) where the excisable goods are not sold by the assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles, the value shall be based–
(i) on the value of the comparable goods produced or manufactured by the assessee or by any other assessee:
Revenue contends that since the respondents had sold the same molasses at Rs. 2,400/- per MT in November ’93, therefore, in terms of the aforesaid rule, the same value should be adopted to value their clearances for the disputed period. Revenue further contends that the order impugned errs in accepting the value of Rs. 500/- per MT which was declared for these removals by the respondents because the removal is to their sister unit and the two are related.
3. Heard Shri S. Kannan. learned JDR, who contends that the moot question would be what would be the nearest equivalent price under the said Rule 6(b)(i). In answer to this, he submits that since the manufacturer respondent has sold these goods at the price of Rs.2.400/- only above an year ago, therefore, there is no need to going to the price of other assessees and to that extent the Order-in-Original had correctly held it to be the assessable value.
4. Learned DR further submits that even if it is held by the summarized statement of average price issued by the South Indian Sugar Mills Association, Andhra Pradesh and upheld by the impugned order is to be taken into account, then there are two different averages contained therein, for the private sector it is Rs. 1101.31 and for the Public Sector units it is Rs. 567.83. Learned DR submits that either of them are higher than the Rs. 500/- assessable value at which the goods had been cleared by the respondents. He reiterates all the grounds of appeal and prays that the order impugned may be set aside.
5. Heard Shri J.V. Suryanarayana, learned Senior Advocate instructed by Shri J. Venkaiah Naidu. Advocate for the respondents.
6. Learned Senior Counsel submits that it is not disputed that all removals of molasses to their so called sister units which is located within the main complex adjacent to the unit where molasses is produced and sugar is manufactured did not involve any sale, because they are only stock transfer, in view of this Section 4(l)(a) is not applicable in this case there being no sale. He further submits that, therefore, of necessity we have to take recourse to the Central Excise Valuation Rules, wherein, Rules 3, 4 and 5 are not applicable there being no sale and. therefore, no sale price being available. He further submits that Rule 6(b)(i) would be the relevant rule concerned inasmuch as that they cleared the said molasses to their sister unit for further captive consumption for manufacture of Alcohol and rectified spirit. Therefore, learned Senior Counsel does not dispute the applicability of this rule to the present facts of this case. The dispute arises when the particular import of the said rule is considered. It is his submission that the price of their stray sale of November’ 93 cannot be taken as the nearest equivalent price of their own goods for the disputed period which is for a period of one year there from. This is so because the Valuation Rules and the ascertaining of the nearest equivalent in the prescribed manner cannot be divorced from the main Section 4 which talks of the price at the place and time of removal. Furthermore, he submits that Rule 2(c) of the said valuation rules defines the value as the value under Section 4 of the Act. This only goes to re-enforce his submission that the nearest equivalent price will have to take into consideration the time factor also in terms of Section 4. Therefore, learned Senior Counsel submits that the compilation of the South Indian Sugar Mills Association which covers the relevant period is the most reliable evidence regarding price at which various sugar mills have cleared molasses on sale. He further submits that in this there are two classes or categories of manufacturers viz.. those falling in the Private Sector and those falling in the Public Sector. The prices of these two are different. He further submits that if we see the average of the prices complied for the public sector then their price of Rs. 500/- per MT is comparing favourable with this average price of Rs. 567.83. He submits that the price of private sector cannot be applied in their case as they are a completely 100% State Public Sector concern. He. therefore, submits that there is no infirmity in the Order-in-Appeal impugned and the revenue appeals deserve to be dismissed.
7. We have carefully considered the submissions as well as the records of the case. We find that in this case it is not disputed that there are no normal sales of molasses by the respondents during the period of dispute but merely stock transfers to their adjacent sister unit for further captive consumption for manufacture of alcohol/ rectified spirit. We also find that it is not disputed that, therefore, assessable value of these molasses cannot be determined in accordance with Section 4(l)(a) of the Central Excise Act, 1944. Of necessity, therefore, we have to turn to the Central Excise Valuation Rules, 1975. In this we find that since there are no sales available during the period of dispute, therefore, the valuation of these goods cannot be done with respect to either Rules 3. 4 or 5 ibid. Considering the applicability of Rule 6. we find that Rule 6(a) is not applicable because the goods here are not sold in retail. Therefore, the first rule in this hierarchy of rules which is applicable is found to be Rule 6(b). The same has already been extracted above and satisfy the facts of this case because the goods are not sold but are consumed on this behalf in their sister unit for production of other articles. Therefore, the value of these molasses would be determined as per Rule 6(b)(i) i.e. on the value of comparable goods produced or manufactured by the assessee or by any other assessee. The moot point for determination is whether the value of the similar quality molasses sold in one stray case by this very respondent twelve months earlier is to be adopted under this rule or the value of similar type of molasses on which it has been sold by other assessees of that region. In answer to this question, we find that the contention of revenue that the stray sale of Rs. 2,400/- per MT which was made by the respondents in the month of November ’93 cannot be accepted as the nearest equivalent price under this rule because of the fact that it is a price which was available over twelve months earlier. The nearest equivalent price has necessarily, in the spirit of Section 4, to be at a time which is nearest to the period of dispute. We find that the order impugned has upheld the clearances made on an assessable value of Rs 500/- per MT based on a summarised statement of average price issued by the South Indian Sugar Mills Association. Andhra Pradesh and which was submitted by the present respondent before the Commissioner (Appeals). The same is also available on our records and a perusal thereof shows that the public sector units in Andhra Pradesh which manufacture sugar and, therefore, consequently sell molasses have sold on prices ranging from Rs. 500/- per MT to Rs. 610.27 per MT during the period 1.10.94 to 31.7.95. It is also the the contention of revenue that the higher sale price evidenced therein on average of Rs. 1101.31 in respect of private sector units should be made applicable to the facts of this case. We do not think it would be fair or equitable to do so for the reason that when price of other assessees are to be compared under Rule 6(b)(i) then equity demands that price of assessees falling under a distinct category or class should get preference over assessees falling in a different class or category. The private sector units definitely fall under a separate category as distinguished from the category of public sector units which operate under a different commercial environment. Therefore, we feel that the price of public sector units alone should be considered under this rule as price of comparable goods of other assessees in arriving at the assessable value of these goods as the respondents are themselves also a public sector undertaking of the State of Andhra Pradesh. If that be so. then the compilation of the said South Indian Sugar Mills Association is nothing but a price enquiry of various sugar mills in that region in the State of Andhra Pradesh. We have no doubt about the authenticity or the genuineness of the price reproted therein as the said association is a neutral body. In fact the work which would have been done by the Department, showing the price, is readily available as neutral evidence on record in this behalf.
8. Therefore, in view of the aforesaid findings, we do not find any infirmity in the Order-in-Appeal impugned before us in accepting the price of Rs. 500/- per MT which very closely approximates the average price of Rs. 567.83 and is equivalent to the price of two public sector units of about Rs. 500/- per MT i.e. units at Hindupur and Metpally.
9. In view of this, we find no merit in the revenue appeals which compel us to interfere with the Order-in-Appeal impugned and the said appeals are, therefore, dismissed.
Pronounced and dictated in open Court.