2017 (11) TMI 1385 - AT - Central Excise

Valuation - clinker manufactured and stock transferred to the sister unit - whether valuation will have to be determined under Rule 8 or Rule 4 of the Central Excise Valuation (Determination of the Price of Excisable Goods) Rules, 2000? - Held that - clarification has come from the Board after the amendment in Rule 8 of the Central Excise Rules vide Circular No. 975/9/2013-CX dated 25.11.2013 where it is clearly mentioned that the Rule 8 is apply even stock transfer is made to the sister concern and partly sold to the open market - appeal allowed - decided in favor of appellant.

Summary

Issues: Valuation of clinker transferred to sister unit under Central Excise Valuation Rules - Rule 4 vs. Rule 8

Analysis:
1. Valuation Issue: The appeal concerns the valuation of clinker manufactured and transferred to the appellant's sister unit, raising the question of whether Rule 4 or Rule 8 of the Central Excise Valuation Rules, 2000 should apply. The appellant paid duty under Rule 8 at 110% of the cost of production, while the Department sought application of Rule 4, which determines value based on transaction value. The core issue revolves around the correct valuation method for stock transfers to the sister unit alongside goods sold to outsiders.

2. Appellant's Arguments: The appellant, represented by counsel, argued that Rule 8 was applicable during the period in question, citing Circular No. 643/34/2002-CX and Circular No. 975/9/2013-CX as supporting documents. They contended that Rule 8 should apply even in cases of stock transfer to sister concerns, emphasizing that the assessable value should be 110% of the cost of production. The appellant sought to set aside the impugned order based on these grounds.

3. Revenue's Position: The Revenue, represented by the AR, relied on precedents such as Ultratech Cement Ltd. vs. CCE and Balajee Electro Steel Ltd. vs. CCE, where Rule 4 was applied for similar scenarios. They argued that the transaction value should be the basis for valuation when goods are transferred to sister units, as per the decisions of the Tribunal in relevant cases.

4. Tribunal's Analysis: The Tribunal examined the conflicting interpretations of Rule 8 in light of the amendment introduced through Notification No. 14/2013-CE (NT) dated 22.11.2013. Referring to Circulars and judicial decisions, the Tribunal noted that the new Rule clarified the application of 110% / 115% of the cost of production for valuation purposes. The Tribunal distinguished the earlier decisions based on the new Rule and the Supreme Court's ruling in CCE, Mumbai vs. Fiat India Pvt. Ltd. The Tribunal, aligning with its previous decision in a similar case, set aside the impugned order and allowed the appeals, emphasizing the consistent application of valuation rules under different circumstances.

5. Precedent and Decision: The Tribunal referenced the case of CCE, Indore vs. Surya Roshni Ltd., highlighting the importance of the new Rule and the Supreme Court's interpretation in resolving the valuation issue. By considering the totality of facts and following its earlier decision, the Tribunal allowed all appeals filed by the appellant, concluding the matter in favor of the appellant based on the updated understanding and application of the valuation rules.

This detailed analysis of the judgment provides a comprehensive overview of the issues, arguments presented, legal interpretations, and the ultimate decision reached by the Tribunal in resolving the valuation dispute concerning clinker transfers under the Central Excise Valuation Rules.