ORDER
T.K. Jayaraman, Member (T)
1. These appeals have been filed against the following Orders- in-Appeals passed by the Commissioner of Customs and Central Excise (Appeal), Guntur.
1. Order in Appeal No. 201/2004(G) Central Excise dated 2.8.2004
2. Order in Appeal No. 202/2004(G) Central Excise dated 2.8.2004
3. Order in Appeal No. 203/2004(G) Central Excise dated 3.8.2004
2. All the above appeals involve a common question of fact and law. The appellants manufactured certain dutiable goods and transferred them to their sister unit. While clearing the goods, the appellants paid duty on the transaction value adopted in respect of similar goods sold to independent buyers. However as the goods are not sold they contended that duty ought to have been paid as per Rule 8 of the valuation Rule 2000 read with CBEC circular dated 1.7.2002. Since they had paid excess duty the claim refund of the excess amount paid. Refund amounts involved in the appeals are as follows:
i. Rs. 4606/-
ii. Rs. 6485/-
iii. Rs. 4757/-
3. The lower authority rejected the refund claim holding that when the duty is paid on the basis of the transaction value and when there is sale at the factory gate there is no necessity to take recource to Rule 8 of the Valuation rule. Therefore he rejected the refund claim. The Commissioner (Appeals) upheld the order of the lower authority.
4. Shri. K.S. Reddy learned JDR appeared for the Revenue. None appeared for the appellant.
5. On a careful consideration of the issue, we find that when the goods are not sold and cleared, either for captive consumption or to sister unit’s duty should be paid on the basis of the cost of the products in terms of Rule 8 of the Valuation Rules. This is also clarified by the CBEC in its circular dated 1.7.2002. The said clarification is reproduced below:
How
will valuation be done in cases of captive consumption (i.e. consumed within
the same factory) including transfer to a sister unit or another factory of
the same company/firm for further use in the manufacture of goods?
For
captive consumption in one’s own factory, valuation would be done as per Rule
8 of the Valuation Rules i.e. the assessable value will be 115% of the
“cost of production” of the goods.
If the
same goods are partly sold by the assessee and partly consumed captively, the
goods sold would be assessed on the basis of “transaction value”
[provided they meet the conditions of Section 4(1)(a) and the goods captively
consumed would be valued as per Rule 8 of the Valuation Rules. This is
because, as per new Section 4, transaction value has to be determined for
each removal.
Where
goods are transferred to a sister unit or another unit of the same company
valuation will be done as per the proviso to Rule 9.
6. In view of the clear legal position, duty should be paid under Rule 8 as contended by the appellants. Therefore, they are entitled for the refund claim. It should be ensured that the appellants reverse the Cenvat credit if any taken in the sister units. With the above observation we allow the appeal.
(Pronounced in open Court on 14 Aug 2007)