By TIOL News Service

AHMEDABAD, SEPT 12, 2014: DURING scrutiny of records it appeared to the CERA Audit that the appellants were transferring excisable goods to their own manufacturing unit on a value determined based on the factory gate sale of the same product to independent buyers.The CERA Audit was of the view that the appellant had to discharge duty liability on such transfers to their own units based on the valuation of goods under Rule 8 of the Valuation Rules, 2000 read with Board Circular dated 13.02.2003.

SCNs came to be issued invoking the extended period and they all met the same fate as is the norm. The adjudicating authority confirmed the demands along with interest but spared the appellants of any penalty. This obviously made the Revenue unhappy and what happened was that both the appellant as well as the Revenue is before the CESTAT.

The appellant adverted to the Larger Bench decision in M/s. Ispat Industries Ltd.- 2007-TIOL-245-CESTAT-MUM-LB and submitted that in order to overcome the law which has been settled by the Larger Bench, Notification No.14/2013-C.E.(N.T.), dt. 22.11.2013 has been issued amending Rule 8 of Valuation Rules, 2000 to indicate that valuation of the goods consumed captively shall be based on the cost of production or manufacturing thereof & that the period involved in all these appeals are prior to 22.11.2013.

The AR supported the order of the adjudicating insofar as confirmation of demand and interest was concerned but submitted that penalties also ought to have been imposed as proposed in SCNs. The AR also placed reliance on the Madras High Court decision in Lakshmi Mills Co. Ltd. and where it is held that value of goods captively consumed has to be determined, when the price is not sole consideration for sale, in accordance with Rule 8 of the Central Excise Valuation Rules, 2000.

The Bench inter-alia observed -

++ Undisputed facts are M/s. RIL has discharged central excise duty on the clearances made to their own unit by determining value based on the assessable value of the same products cleared to independent buyers. It is also undisputed that the clearances to independent buyers are accepted by the department as based on transaction value.

++ On the factual matrix as indicated hereinabove, we find that the revenue seeks to demand differential duty from M/s. RIL on the ground that they should have followed the provisions of Rule 8 of the Central Excise Valuation Rules, 2000. In our considered view, the adjudicating authority is in error in confirming the demands on this point as provision can be brought into play when the value of a particular product cannot be ascertained if only consumed captively. Our this view is fortified by the order of the Larger Bench of the Tribunal in the case of M/s. Ispat Industries Ltd. (supra).

(See 2014-TIOL-1740-CESTAT-AHM)