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2008 (4) TMI 300 - AT - Central ExciseValuation - Inputs transferred to sister unit on which appellant has taken credit Circular No. 643/34/2002-CX, dt. 1-7-02 - department submission for valuation of such inputs u/r 8 of the Valuation Rules, by resorting to Sr. No. 5 of the Circular, is not acceptable held that since there is no sale but only removal of inputs outside the factory, Sr. No. 14 of the Circular will be applied appeal of assessee is allowed
Issues:
Stay petition for waiver of pre-deposit of duty and penalty on inputs transferred to sister unit. Interpretation of Circular No. 643/34/2002-CX Sr. No. 5 for valuation under Rule 8 of the Valuation Rules. Application of Circular Sr. No. 14 for valuation when inputs are removed to sister unit without sale. Analysis: The appellant filed a stay petition seeking waiver of pre-deposit of duty and penalty on inputs transferred to their sister unit, contested by the department as captive consumption. The department relied on Circular No. 643/34/2002-CX Sr. No. 5, stating valuation under Rule 8 of the Valuation Rules at 115% of the cost of production. However, the Tribunal found the situation not covered by the said Circular, emphasizing Circular Sr. No. 14 instead for valuation in cases of input transfer without sale to a sister unit or another factory of the same company. Circular Sr. No. 14 discusses valuation when inputs or capital goods, on which Cenvat credit has been taken, are removed without sale to a sister unit. It clarifies that if no sale to independent buyers occurs, Rule 8 of the Valuation Rules applies, necessitating determination of cost of production. In the absence of such data, Rule 11 of the valuation rules is invoked, suggesting using the invoice value for Cenvat credit. For capital goods, depreciation based on prescribed rates is recommended. Given the absence of a sale and only removal of inputs outside the factory, the Tribunal decided to waive the pre-deposit of duty and penalties, staying recovery and proceeding to decide the appeal in favor of the appellant, granting consequential relief. The decision was pronounced after considering the relevant Circulars and valuation rules, ensuring fair treatment in the matter.
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