Pranav B Prem

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi has set aside the excise duty demand raised against Ultratech Cement Ltd. in respect of cement cleared in 50 kg bags for captive consumption between May 2016 and June 2017. The Bench comprising Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) held that valuation of such cement cannot be made under Section 4A of the Central Excise Act, which requires duty payment based on the retail sale price (RSP). Instead, captive-use clearances attract valuation under Section 4(1)(b) read with Rule 8 of the Central Excise Valuation Rules, 2000.

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Ultratech Cement manufactures and clears cement in three modes—retail sale, supply to industrial and institutional consumers, and captive consumption. While retail packages bear RSP and are assessed to duty under Section 4A, cement supplied to contractors inside the factory for construction and maintenance work is treated as captive consumption, with duty discharged based on 110% of the cost of production under Rule 8.

The Department alleged that because the cement was sent in 50 kg bags to contractors, such contractors should be characterized as “industrial/institutional consumers,” requiring affixation of RSP and assessment under Section 4A. A show cause notice issued in May 2018 demanded differential duty, interest and penalty on that basis, and the Deputy Commissioner confirmed the proposal through order dated 30 October 2019. The Commissioner (Appeals) upheld the demand through order dated 30 March 2021, prompting Ultratech to approach the Tribunal.

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The Tribunal observed that the identical issue had already been decided in Ultratech’s favour for earlier periods (2010–2015 and 2015–2016), where both the Commissioner (Appeals) and CESTAT had held that cement cleared for captive consumption does not constitute a retail package and, therefore, the Packaged Commodities Rules do not apply. The Tribunal noted that the Department’s challenge to the Grasim Industries judgment—central to this legal interpretation—had already been dismissed by the Supreme Court in 2019, giving finality to the principle that affixation of RSP is not required for packages “not intended for retail sale.”

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The Bench held that the Commissioner (Appeals) erred in ignoring binding precedents in Ultratech’s own earlier litigation. It reiterated that captive consumption does not involve sale, and therefore the valuation mechanism for retail packaged goods under Section 4A cannot apply. Cement issued to contractors for construction inside the factory falls within the ambit of self-consumption, and valuation is correctly determined under Section 4(1)(b) read with Rule 8 of the 2000 Rules.  Finding the demand unsustainable, the Tribunal set aside the impugned order dated 30 March 2021 and allowed Ultratech Cement’s appeal with consequential relief. 

Appearance

Counsel For  Petitioner: B.L. Narasimhan and Shri Dhruv Tiwari

Counsel For Respondent: S.K. Ray, Authorized Representative

Cause Title: Ultratech Cement Ltd. Versus Commissioner, CGST

Case No: Excise Appeal No. 50815 Of 2021

Coram: Justice Dilip Gupta (President), Hemambika R. Priya (Technical Member)