2018 (12) TMI 161 - AT - Central Excise

Valuation - related party transaction - stock transfer of goods from Unit I to Unit II - From 2008 onwards, Unit I & Unit II were merged together - applicability of Rule 8 of Central Excise Valuation Rules, 2000 - Held that - Clearance of goods from Unit I to Unit II is in the nature of stock transfer for captive consumption and there is no sale. Hence valuation is to be determined in terms of Central Excise Valuation Rules, 2000 - Rule 8 of the said Rules provides for valuation of goods for captive consumption on the basis of cost production plus 115%/110%, as applicable during the relevant period. In the case of Ispat Industries Ltd. 2007 (2) TMI 5 - CESTAT, MUMBAI , the Larger Bench of Tribunal has expressed the view that in cases where a part of the goods manufactured is also sold to independent buyers in addition to clearance to sister concern, the valuation can be done on the basis of value of clearance made to independent buyers. The Larger Bench of the Tribunal has expressed the view that in such cases, there will be no need to adopt the valuation as per Rule 8 of Central Excise Valuation Rules, 2000 and Rule 4 ibid, will apply in such cases. Demand set aside - the appeal filed by the Revenue is rejected. Demand of differential duty - period 2003-04 - Held that - Since the clearance have been made from Unit I to Unit II, both belonging to the same Company, we are of the view that these lead to a revenue neutral situation - the demand for differential duty cannot be justified. Appeal allowed - decided in favor of assessee.

Summary

Issues: Valuation of goods for duty payment on stock transfer from Unit I to Unit II, Application of Central Excise Valuation Rules, 2000, Revenue neutrality in the case of stock transfers within the same company.

In the present case, the dispute revolved around the valuation of goods transferred from Unit I to Unit II for duty payment purposes. The Department contended that the valuation should be based on Rule 8 of the Central Excise Valuation Rules, 2000, as there was no sale involved in the transfer. The adjudicating authority, however, relied on a Tribunal decision and applied Rule 4 of the Valuation Rules, dropping the demand for Central Excise duty for the period 2004-2008. The Larger Bench's view was that when goods are sold to independent buyers in addition to being transferred within the company, valuation can be based on the value of clearance to independent buyers, and Rule 4 would apply in such cases. The Tribunal upheld the dropping of the demand for the said period based on this reasoning.

Regarding the demand for the period 2003-04, where no sale to independent buyers occurred, the adjudicating authority upheld the demand for differential duty based on Rule 8 of the Valuation Rules. However, considering the revenue neutrality in the situation where goods were transferred within the same company, the Tribunal referred to a similar case and a Supreme Court decision affirming the concept of revenue neutrality. Following this precedent, the Tribunal set aside the demand for duty even for the period 2003-2004, allowing the appeal filed by the assessee.

The Tribunal's decision emphasized the application of Central Excise Valuation Rules, 2000, in determining the duty payment on stock transfers within the same company. It highlighted the importance of considering revenue neutrality in such situations, where the transfer of goods does not impact the overall revenue due to the availability of cenvat credit for the receiving unit. The judgment provided a comprehensive analysis of the legal principles involved, referencing relevant case laws and tribunal decisions to support the conclusions reached in the matter.