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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.
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