ORDER
T.K. Jayaraman, Member (T)
1. The appeal is against the Order-in-Appeal dated 4-4-2001 passed by the Commissioner of Central Excise (Appeals), Hyderabad.
2. The short point in this appeal is valuation of Stator Wounds made out of retrieved stator stacks out of old stators in the Stator Rewinding Unit of the appellants and used for captive consumption in the manufacture of compressor or sent to their service centres.
3. The appellants who manufacture compressors have a parent company and also a Stator Rewinding Unit with separate central excise registration for the compressors. They manufacture Stator Wounds in the factory which are captively consumed. They also manufacture Stator Wounds in their Stator Rewinding Unit out of retrieved stator stacks as indicated above. The Stator Wounds are not sold. They are used in the manufacture of compressors or sent to their service centre. Since no sale is involved, the appellants resort to Rule 6b(i) of Central Excise Valuation Rules, 1975. Under this Rule value is based on value of comparable goods. While determining the value of the statpr wounds1 manufactured out of retrieved stator stacks, the appellants made adjustments taking into consideration all relevant factors and in particular, differences in the material characteristics of goods to be assessed and on comparable goods as provided in Rule 6(b) of the Central Excise Valuation Rules, 1975. The stator wounds manufactured in parent factory and the stator wounds manufactured in the services centres out of retrieved stator stacks are comparable goods. However there is one difference, the item manufactured in the parent factory is completely new whereas the item manufactured in the service centre is the component stator stack retrieved from old stators. Therefore, while arriving at the value, the appellant took into account the depreciation cost for the goods manufactured in the service centre. The stator stack used is old and used one. Hence adjustment was made as provided in the rules and the assessable value of these goods was less than the assessable value of the goods manufactured in the parent factory. The department did not accept this method of valuation. According to the department, the depreciation is not admissible. The original authority confirmed the differential duty of Rs. 28,28,953/- and the Commissioner (Appeals) upheld his order. Aggrieved over the decision of the Commissioner (Appeals), the appellant has come before this bench for redressal.
4. Shri G. Shivadas learned advocate appeared for the appellants and Shri L. Narasimha Murthy, SDR appeared for the Department.
5. The learned advocate urged that Rule 6(b) of the Central Excise Valuation Rules clearly provide for adjustments in the valuation of comparable goods. He said there is always difference between a new item and a used one. While costing the price, due allowance should be given for depreciation. The practice of adopting depreciation is not only recognized under the Income Tax Act but also in Customs and Central Excise Valuation. While clearing capital goods, on which Modvat credit is taken, due allowance is given for depreciation. This is provided in the rules. Similarly while clearing used machinery and motor machines in the Customs, depreciation is allowed in determining value for customs purposes. It is a settled law that while adopting values of comparable goods, necessary adjustments are to be made taking into account, the cost of raw materials, over-head costs etc. The learned advocate placed reliance on the following decisions :
(1) Assistant Executive Engineer, PSEB v. CCE [1999 (112) E.L.T. 270 (Tri.)]
(2) Rasan Detergents v. CCE [1991 (51) E.L.T. 391 (Tri.)]
(3) Union Carbide India v. CCE [2003 (158) E.L.T. 15 (S.C.)]
(4) M/s. Rajasthan Spinning & Weaving Mills Ltd., and Anr. v. CCE – Final Order No. 906-907/2004-NBA, dated 27-8-2004. [2005 (179) E.L.T. 70 (Tri.)]
(5) CCE, Calicut v. Steel Complex [2004 (176) E.L.T. 494 (Tri.) – 2004 (61) RLT 526]
(6) Crompton Greaves Ltd., v. CCE [2003 (158) E.L.T. 503 (Tri.) = 2004 (60) RLT 156]
It was also urged that the decision relied on by the original authority, in the case of HBL Aircraft Batteries Ltd., reported in 2003 (159) E.L.T. 1114 (Tri.) = 1998 (24) RLT 559 has been reversed by the Apex Court as reported in 2004 (167) E.L.T. 483 (S.C.) = 2004 (62) RLT 598.
6. The learned SDR reiterated the points made in the OIO and also OIA. He contended that there is no difference in material characteristics between the used stator stack and the new one. Hence depreciation according to him is not admissible.
7. We have considered the rival submissions. It is seen that Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975 itself provides for adjustments which are reasonable. The question is whether allowing depreciation for a used item is reasonable or not. In our view the cost of new item cannot be the same as the cost of an item used say for three years. In commercial practice while costing a used item, due allowance is given for depreciation of its value. Moreover all the case laws cited by the appellant are in their favour. Under these circumstances, the demand of the differential duty equating stator wounds manufactured out of new stator stacks and the stator wounds manufactured out of retrieved and used stator stacks is repugnant to the settled legal position as well as normal commercial practice. In the circumstances of the case, the appellant succeeds. We allow the appeal with consequential relief.