2013 (11) TMI 1340 - AT - Central Excise

Valuation - Assessment of clearances on cost construction basis Assessee transferred goods to their sister unit Held that - Following Ispat Industries Ltd. vs. CCE, Raigad 2007 (2) TMI 5 - CESTAT, MUMBAI - Transfer of part of production to another plant of the same assessee and balance production sold to independent buyers would not attract the provisions of Rule 8 in respect of transferred production - Rule 8 of Central Excise (Valuation ) Rules, 2000 would apply only where entire production of a particular commodity is captively consumed - the assessee is partly selling their goods to independent buyers and partly transferring the same to their sister units, thus, the cost construction based assessable value adopted by the Revenue is not justified - order are set aside and appeals Decided in favour of Assessee.

Summary

Issues involved:
Assessment of duty based on cost of construction for goods transferred to sister unit, validity of special audit report, dispute over assessable value for goods transferred internally.

Analysis:
The judgment pertains to the issue of assessing duty on goods transferred internally to a sister unit based on cost of construction, rather than the assessable value used for independent wholesale buyers. The appellant, engaged in manufacturing steel products, transferred goods to their sister unit in Raipur, availing Cenvat credit for duty paid. The Revenue conducted a special audit by Cost and Management Accountants, leading to a dispute over the cost of production. The appellant objected to the audit report's power cost calculation, which was later revised in their favor. Despite this, a show cause notice was issued demanding duty based on cost construction, disregarding the revised report. The Commissioner upheld the demand, leading to the appeal.

The Tribunal found that the appellant's practice of using the same assessable value for both independent buyers and internal transfers was justified. Referring to a precedent, it clarified that Rule 8 of the Central Excise (Valuation) Rules, 2000, concerning captive consumption, did not apply as the appellant sold goods to both independent buyers and sister units. The Tribunal emphasized that correct costing, especially when determined by the Revenue, should be considered. Relying on the Larger Bench decision in Ispat Industries Ltd. vs. CCE, Raigad, the Tribunal ruled in favor of the appellant, setting aside the impugned orders and allowing the appeals. The judgment provided consequential relief to the appellants and disposed of cross objections accordingly.