9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (4) TMI 280 - AT - Central ExciseInter-unit transfer of goods for captive consumption - Valuation - whether the cost of production of the goods - the packaging material that is manufactured by the Chennai unit of the appellant should be computed at 115%/110% of the cost of production/manufacture of the raw material procured from its Bhadrachalam Unit or at the actual cost of such raw material since there was only a stock transfer and not a sale of these goods by the Bhadrachalam Unit to the Chennai unit? - Held that - Since Rule 8 mandates loading of specified percentage (15% or 10% as the case may be) on the cost of production of goods cleared to another unit for captive consumption in the later unit for computing excise duty payable by the first unit, the cost of production (in the present case, packaging material manufactured by the Chennai unit) must only be considered in terms of CAS -4 as mandated by Board s circular dt. 13.2.2003. None of the clauses, in particular clause 5.1 of CAS -4 deal with excisable value of captively consumed goods. The CAS -4 sets out standards for computation of captively consumed goods. Loading of a percentage of the cost of production (mandated by Rule 8 of the Valuation Rules) is clearly not a requirement of CAS -4. The cost of production must therefore be computed strictly and invariably only under CAS -4. On the aforesaid analyses, we are compelled to the conclusion that in determining the cost of production of packaging material, the cost of paper and paper board (the raw material procured from the Bhadrachalam unit of the appellant for captive consumption at the Chennai unit) must be taken as the actual cost of production determined in terms of CAS -4 and as set out in Appendix-I of the said standard; and would not include loading of the notional amount, of 15%/10% to the cost of production of the raw material, which loading is solely pursuant to mandate of Rule 8 of the Valuation Rules and for remittance of excise duty by the Bhadrachalam unit. This loading would not constitute the procurement cost of the raw material manufactured by the Bhadrachalam unit, for the Chennai unit, which used these goods for manufacture of the packaging material. In the case of Inter-unit transfer of goods for captive consumption, the actual cost of production (100% of the cost of production), of the raw material procured from the Bhadrachalam unit of the appellant excluding the national loading under Rule 8 - 15%/10% is the cost of raw material in the hands of the Chennai unit, for determining the cost of production of packaging material manufactured by the Chennai unit. The percentage of loading on such cost of production, mandated by provisions of Rule 8 for remittance of excise duty by the Bhadrachalam unit cannot not however be considered as comprised in the cost of the raw material consumed for manufacture of packaging material and thus constituting the cost of production at the Chennai unit; In view of the conclusions recorded we hold that the decision of the Chennai Division Bench of CESTAT in the Final Order dt. 11.5.2010 in Revenue s appeal in Eveready Industries and the subsequent decision of the same Regional Bench in the judgment reported in 2011 (4) TMI 141 - CESTAT, CHENNAI represent the correct position in law, the decision of the Mumbai Division Bench in Tata Iron and Steel Co, Ltd, Vs CCE Thane-II (2013 (8) TMI 461 - CESTAT MUMBAI ) does not represent correct view regarding application of Rule 8 of the Valuation Rules and the same is overruled.
Issues Involved:
1. Inter-unit transfer of goods for captive consumption and valuation under Rule 8 of Valuation Rules. 2. Correct position of law as per conflicting decisions of Chennai Bench and Mumbai Bench. Issue-wise Detailed Analysis: Issue (i): Inter-unit transfer of goods for captive consumption and valuation under Rule 8 of Valuation Rules. The primary issue referred to the Larger Bench was whether, in the case of inter-unit transfer of goods for captive consumption, the entire value (i.e., 115% / 110% of the cost of production) or the actual cost of production (i.e., 100% of cost) excluding notional loading (i.e., 15%/10%) of the goods manufactured by one unit would be the cost of raw material of another unit for determining value under Rule 8 of Valuation Rules and CAS-4 issued by ICWAI. The appellant, engaged in manufacturing packaging material, procured raw materials from its Bhadrachalam unit. The Bhadrachalam unit paid excise duty based on the value determined under Rule 8 of the Valuation Rules, following CAS-4 standards, which included a notional loading of 115%/110% of the cost of production. The appellant cleared its goods to other units, also determining the value in terms of Rule 8 of the Valuation Rules. The Tribunal analyzed the provisions of Section 4 of the Central Excise Act, 1944, and Rule 8 of the Valuation Rules. Rule 8 mandates that the value of excisable goods used for captive consumption shall be 110% (or 115% before 04.08.2003) of the cost of production. The Board's Circular No. 692/08/2003-CX clarified that the cost of production for captively consumed goods should be computed as per CAS-4. CAS-4 defines "cost of production" and includes various cost components. It specifies that the cost of self-manufactured items should be considered as the material cost for subsequent products, excluding the notional loading mandated by Rule 8 for excise duty remittance. The Tribunal concluded that the cost of production for the Chennai unit should be computed at 100% of the cost of production of the raw material procured from the Bhadrachalam unit, excluding the notional loading of 15%/10%. This notional loading is solely for the purpose of remitting excise duty by the Bhadrachalam unit and does not constitute the procurement cost for the Chennai unit. Issue (ii): Correct position of law as per conflicting decisions of Chennai Bench and Mumbai Bench. The Tribunal examined the conflicting decisions of the Chennai Bench in CCE Vs Eveready Industries Ltd. and the Mumbai Bench in Tata Iron and Steel Co. Ltd. Vs CCE. The Chennai Bench had held that the cost of production for captive consumption should be computed at 100% of the cost of production, excluding the notional loading. The Mumbai Bench, however, concluded that the cost of billets at Tarapur unit would be 115%/110% of the cost of production of billets. The Tribunal found that the Mumbai Bench had not correctly appreciated the issue and had erroneously concluded that the value of goods cleared for captive consumption should include the notional loading. The Tribunal emphasized that Rule 8 mandates loading of the specified percentage for remittance of excise duty by the first unit but does not require this loading to be included in the cost of production for the subsequent unit. The Tribunal held that the decisions of the Chennai Bench in Eveready Industries correctly represented the law, while the decision of the Mumbai Bench in Tata Iron and Steel Co. Ltd. was overruled. Conclusion: The Tribunal concluded that in the case of inter-unit transfer of goods for captive consumption, the actual cost of production (100% of the cost) of the raw material procured from the Bhadrachalam unit should be considered for determining the cost of production at the Chennai unit. The notional loading of 15%/10% mandated by Rule 8 for remittance of excise duty by the Bhadrachalam unit should not be included in the cost of production for the Chennai unit. The Tribunal answered the reference accordingly and remitted the matter for consideration by the appropriate Division Bench in terms of the analyses and conclusions provided.
|
