Rule 8 of Central Excise Valuation Rules Inapplicable Where there is No Sale or Captive Consumption: CESTAT in BSNL case [Read Order]
CESTAT ruled that Rule 8 of the Central Excise Valuation Rules does not apply where goods are neither sold nor captively consumed by the assessee
![Rule 8 of Central Excise Valuation Rules Inapplicable Where there is No Sale or Captive Consumption: CESTAT in BSNL case [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/04/Relief-to-BSNL-BSNL-CESTAT-Quashes-Demand-of-Service-Tax-on-Telecom-Services-CESTAT-Demand-of-Service-Tax-Service-Tax-Telecom-Services-Service-Tax-Rules-TAxscan.jpg "Rule 8 of Central Excise Valuation Rules Inapplicable Where there is No Sale or Captive Consumption: CESTAT in BSNL case [Read Order]")
The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Rule 8 of the Central Excise Valuation Rules, 2000, is inapplicable in cases where there is neither a sale of goods nor captive consumption by the assessee. The dispute arose between Bharat Sanchar Nigam Limited (BSNL), the respondent, and the Commissioner of Central Excise, Mumbai-II,...
The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Rule 8 of the Central Excise Valuation Rules, 2000, is inapplicable in cases where there is neither a sale of goods nor captive consumption by the assessee.
The dispute arose between Bharat Sanchar Nigam Limited (BSNL), the respondent, and the Commissioner of Central Excise, Mumbai-II, concerning the valuation method adopted by BSNL for clearance of telecom equipment to its own units during the period from April 2007 to January 2008.
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The company assessed the goods based on the cost of production and paid excise duty accordingly. The department argued that the company ought to have paid duty on a value calculated at 110% of the cost of production as per Rule 8, read with Rule 11 of the Central Excise Valuation Rules, 2000.
The adjudicating authority, while passing the order dated 02.09.2008, dropped the proceedings initiated by the department. The Commissioner relied on a prior decision of the Kolkata tribunal in BSNL v. Commissioner of Central Excise, Haldia, and held that Rule 8 was not applicable since the goods were not captively consumed but transferred to BSNL's other units.
The revenue challenged this finding before the CESTAT, arguing that Rule 8 should have applied because BSNL's inter-unit transfers were not sales to independent buyers. The department explained that the duty should have been paid at the prescribed markup over cost of production.
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The company’s counsel argued that Rule 8 only applies in cases where goods are consumed by the manufacturer in the production of other goods, which was not the case here. They submitted that its valuation was consistent with legal provisions, as the goods were neither sold to unrelated parties nor captively consumed.
The tribunal referred to the Larger Bench decision in Interim Order No. 24/2004 dated 28.10.2024, which answered a reference on the same issue. The Larger Bench held that Rule 8 cannot be invoked in cases where there is no sale and the goods are not used in further manufacture by the assessee.
Agreeing with the Larger Bench's findings, the two-member bench comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) held that the valuation adopted by BSNL was lawful and consistent with the Rules. The tribunal dismissed the appeal filed by the revenue, confirming that Rule 8 of the Valuation Rules was inapplicable in the present facts.
To Read the full text of the Order CLICK HERE
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