Assessable Value on Goods Transferred to any Plant to be determined u/r 8 of Central Excise Valuation Rules where some Goods Sold to Independent Buyers: CESTAT [Read Order]

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the assessable value on goods transferred to any plant to be determined under Rule 8 of the Central Excise Valuation Rules, 2000 where some goods sold to independent buyers.

During the period April 2006 to September 2012, Appellant had both sales to independent buyers and also goods removed to their sister concern. We find that, under such facts and circumstances, the issue is wholly covered by ruling of the Larger Bench decision of the Tribunal in the case of Ispat Industries Ltd., Vs CCE.

The issue before the Larger Bench was whether the assessable value in respect of goods which are transferred to any plant/unit of the same assessee, is required to be determined as per Rule 4 or Rule 8 of Central Excise Valuation Rules 2000, in case where some goods were also sold to independent buyers.

The Larger Bench have held in the circumstances and facts as follows: “In view of what we have observed above, we answer the reference in the following terms: (a) the provisions of Rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to independent buyers; (b)the provisions of Rule 4 are in any case to be preferred over the provisions of Rule 8 not only for the reason that they occur first in the sequential order of the Valuation Rules but also for the reason that in a case where both the rules are applicable, the application of Rule 4 will lead to a determination of a value which will be more consistent and in accordance with the parent statutory provisions of Section 4 of the Central Excise Act, 1944.”

Rule 8 of the Valuation Rules requires that, where some goods are removed not by way of sale, but are used for consumption by the assessee or on his behalf in the production or manufacture of other articles, the value shall be determined at 110% / 115% of the cost of production. Whereas Rule 4 provides “the value of the excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of removal of goods under assessment”.

A Two-member Bench comprising Anil Choudhary, Judicial Member and AK Jyotishi, Technical Member observed that “Having considered the rival contentions, we find that the issue herein is squarely covered by the ruling of the Larger Bench of this Tribunal in the case of Ispat Industries ltd., which have been confirmed by the Gujarat High Court in the case of Ultra Tech Cements Ltd.,. Accordingly, we allow the Appeals and set aside the Impugned Orders. All penalties also stand set aside. Appellant is entitled to consequential benefits, if any, in accordance with the law.”

To Read the full text of the Order CLICK HERE

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