2017 (10) TMI 191 - AT - Central Excise

Transfer of goods from one unit to another - Rule 8 of Central Excise Valuation Rules - department was of the view that duty is required to be paid on the basis of the valuation of goods adopted for clearance to other independent buyers from the Pithampur unit - Held that - goods have been cleared from Pithampur unit to Ambarnath unit. Both units are owned by the same company and there is no sale involved in the transfer of goods from one unit to another. Under such circumstances, Rule 8 of Central Excise Valuation Rules specifically prescribes that the valuation for purpose of charging of excise duty is required to be made on the basis of 110% of the value of the goods ascertained as per the CAS-4. Since the excise duty has been paid as prescribed under the Central Excise Valuation Rules, we are of the view that this is in order and there is no basis to adopt the valuation of goods cleared to independent buyers - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Valuation of goods transferred between units owned by the same company for further manufacture
- Application of Rule 8 of Central Excise Valuation Rules
- Demand of differential excise duty based on valuation of goods cleared to independent buyers
- Revenue neutral situation due to Cenvat Credit Rules

Analysis:

The appeal was filed against an order-in-original passed by the Commissioner, Customs & Central Excise, Indore, regarding the valuation of goods transferred between two units owned by the same company for further manufacture. The appellant, engaged in manufacturing FRP rods, argued that the transfer did not involve a sale but was for further manufacturing under Cenvat Credit Rules. The appellant contended that the valuation should be based on 110% of the value of goods as per CAS-4 standards, as done under Rule 8, thus negating the demand for differential duty.

During the hearing, the appellant's counsel argued that since no sale was involved in the transfer of goods between units, the valuation should be based on CAS-4 standards, ensuring a revenue neutral situation due to Cenvat credit availability at the receiving unit. On the other hand, the Revenue's representative justified the demand for differential duty by citing higher prices of similar goods sold to independent parties from the source unit.

Upon review, the Tribunal noted that the goods were transferred between units owned by the same company without any sale transaction. Rule 8 of Central Excise Valuation Rules mandates the valuation for excise duty purposes at 110% of the goods' value as per CAS-4 standards in such cases. The Tribunal found that the duty had been paid based on this valuation method, which was not considered by the adjudicating authority. Consequently, the Tribunal concluded that the payment of duty as per the prescribed valuation rules was in order, rejecting the adoption of valuation for goods sold to independent buyers.

Given the revenue neutral nature of the situation and compliance with Central Excise Valuation Rules, the Tribunal set aside the impugned order and allowed the appeal, emphasizing that there was no justification for the demand of the claimed differential duty. The judgment highlighted the importance of adhering to valuation rules in cases of inter-unit transfers within the same company to maintain consistency and prevent unwarranted duty demands.