TMI Blog2020 (7) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of rule 8 of the 2000 Valuation Rules by paying duty @110% at the cost of production. In view of the decision of the larger Bench of the Tribunal in I.T.C Ltd., it has to be held that the Appellant was justified in reducing the assessable value to the actual cost of production (i.e. 100% of cost excluding the notional loading of 15% or 10% of the goods manufactured by the Taloja Unit) as the cost of raw material for the Belur Unit for the purpose of determining the assessable value under rule 8 of the 2000 Valuation Rules. Department relied upon the larger Bench decision of the Tribunal in EICHER MOTORS LTD. VERSUS COMMISSONER OF C. EX., INDORE [ 2008 (6) TMI 19 - CESTAT NEW DELHI] . A perusal of the said decision indicates that Eicher Motors Ltd was engaged in the manufacture and sale of bus/truck. It supplied chassis on payment of excise duty under rule 8 of the 2000 Valuation Rules @110% of the cost of manufacture of the chassis to M/s. Bhagirath Coal and Metal Fabricators Pvt. Ltd. for building the bodies of buses/ trucks on job work basis. The Tribunal held that 110% of the cost of chassis should be considered to arrive at the assessable value at the end of Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umption to the Belur Unit, the entire value (i.e. 115% or 110% as the case may be) of the cost of production or the actual cost of production (i.e. 100% of cost excluding the notional loading of 15% or 10%) of the goods, manufactured by the Taloja Unit, would be the cost of the raw material for the Belur Unit of the Appellant for the purpose of determining the assessable value under rule 8 of the 2000 Valuation Rules, for ultimately transferring the goods to the supplier of goods. 4. Rule 8 of the 2000 Valuation Rules, as it existed prior to August 5, 2003, provided that where whole or part of the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value of such goods that are consumed shall be one hundred and fifteen per cent of the cost of production or manufacture of such goods. However, with effect from August 5, 2003, the value of goods consumed was reduced to 110 per cent of the cost of production or manufacture of such goods from 115%. 5. The Commissioner (Appeals) placed reliance upon a decision of the larger bench of this Tribunal in Eicher Motors Ltd vs. Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red at Belur=₹ 110.75 per kg. (v) Therefore, the under valuation is Rs.(119.09-110.75)=₹ 8.34 per kg. (vi) Total quantity of goods cleared to M/s. AMCO Pvt. Ltd. from 01.04.2001 to 31.12.2003 on such conversion account= 4,02,539 kg. (vii) Thus, total under valuation= Rs.(4,02,539x8.34) =₹ 33,57,175.00 (viii) Therefore, short levy of duty amounts to ₹ 33,57,175.00 x16% =₹ 5,37,148.00 Case-II Contract between M/s. Raviraj Foils Ltd. M/s. Indian Aluminium Company Ltd. (i) Value of H.R. Coil received from INDAL, Taloja =₹ 102.15 (ii) Conversion cost of such H.R.Coil to Foil stock at Belur unit=₹ 16.91 (the total conversion cost of Foil scraps/Aluminium Ingots to H.R.Coils at Taloja and its subsequent conversion to Aluminium Foil Stocks/Aluminium H.R. Closures etc. at its factory at Belur being ₹ 27.50/kg.) (iii) Thus, full intrinsic cost of the raw material received at Belur Unit viz. that of H.R. Coils plus the conversion cost packing cost (amounting ₹ 0.90 as per contract) at the end of Belur amounts to Rs.(102.15+16.9+0.90)= ₹ 119.96 per kg. (iv) The assessable value of Aluminium Foil s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l also prepare one annual account and balance sheet for all these divisions together. The Taloja Unit while discharging their duty liability prior to transfer of the partly-processed materials to its sister unit at Belur rightly followed the provisions of rule 8 of the Valuation Rules, by paying duty @110% of the cost of production. 9. The correct position with regard to case I and case II of Annexure A to the show cause notice, was pointed out by the Appellant as follows: 9. Having regard to the above, the Noticee respectfully submits that the differential duty arrived at in the Notice with reference to the Annexure-A thereto has not been correctly done. The Noticee has recalculated the assessable value considering the invoice value of the raw materials as 110% of the cost of production. In the Case-I in the Annexure-A to the Notice, it has been noted that HR Coil was received from Indal Taloja @ ₹ 103.70 per KG, conversion cost of such HR Coil to foil stock at Belur Unit @₹ 15.39 per KG and the full intrinsic value has been found to be ₹ 119.09 per KG (₹ 103.70+₹ 15.39), whereas the Noticee has paid duty on the Assessable Value @ ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 100% of the cost of production at the Appellant s Taloja Unit, even though the Appellant paid Central Excise duty on the assessable value calculated at 110% of the cost of production as per Rule 8 of the said Valuation Rules. 12. I find that similar issue is extensively dealt with in the decision of Hon ble Tribunal in Eicher Motors Ltd. versus Commissioner of Central Excise, Indore [2008 (228) ELT 43 (Tri.- LB)] xxx xxx xxx 18. In view of the above, the principle settled in the case of Eicher Motors Ltd. (Supra) by the Hon ble Tribunal (Larger Bench) is squarely applicable to the present case. The contention of the Appellant that the job work was undertaken by their two different divisions located at two different places will not come to their rescue in as much as they undertook the job work in their two units on goods supplied free of cost by the said suppliers of goods. It is immaterial whether they did job work in one or two of their units. The principle laid down is that statutorily determined value under Rule 8 of the said Valuation Rules would apply at all stages and for all purposes whenever the question of ascertaining the value in non-sale transaction arises. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here cannot be demand of any interest from the Appellant in terms of Section 11AB of the Act. 13. Shri K.Choudhary learned Authorized Representative of the Department, however, supported the order passed by the Commissioner (Appeals) and submitted that there is no error in the impugned order as it is based on a decision rendered by a Larger Bench of the Tribunal in Eicher Motors Ltd. 14. The submissions advanced by the learned counsel for the Appellant and the learned Authorised Representative of the Department have been considered. 15. Section 4 of the Excise Act deals with valuation of excisable goods for purposes of charging of duty of excise and is reproduced below: Section 4 (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall- (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0%) 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; (b) In view of the conclusions recorded in (a) above, we hold that the decision of the Chennai Division Bench of CESTAT in the Final Order dated 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 (274) ELT 564 represent the correct position in law. The decision of the Mumbai Division bench in Tata Iron and Steel Co. Ltd. v. CCE, Thane-II- 2013-TIOL-707= 2014 (300) ELT 571 (Tri.- Mumbai) does not represent correct view regarding application of Rule 8 of the Valuation Rules and the same is overruled. 20. It needs to be noted that I.T.C Ltd. was engaged in the manufacture of packaging material. It had u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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. 9.1 The answer to the issue turns upon interpretation of Rule 8, in particular on the expression cost of production of manufacture of such goods , in the said Rule. ( emphasis supplied ) 23. The Tribunal ultimately concluded as follows: 18. 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 dated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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