TMI BlogTreatment of Scrap etc. taken as credit for recoveries under Valuation for Captive ConsumptionX X X X Extracts X X X X X X X X Extracts X X X X ..... Treatment of Scrap etc. taken as credit for recoveries under Valuation for Captive Consumption - By: - Rakesh Singh - Central Excise - Dated:- 26-12-2015 - - The word 'Captive Consumption broadly refers to goods produced or manufactured in a factory and used within the factory in the manufacture of other goods. When goods manufactured by one division/plant are transferred to and consumed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by another division/plant of the same organization or related undertaking for manufacturing another product(s), such goods are also said to be captively consumed. The valuation wrt Captive Consumption is preferably under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 . The Rule provides that where whole or part of the excisable goods are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 ten per cent of the cost of production or manufacture of such goods. On the introduction of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 , w.e.f. 1st of July 2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the general principles of costing were referred as the basis for the valuation. The treatment of scrap and waste is dealt in para 5.12 of Cost Accounting Standards-4 (CAS-4). In case, scrap or waste does not have ready market and it is used for reprocessing, the scrap or waste value is taken at a rate of input cost depending upon the stage at which such scrap or waste is recycled. The expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses incurred for making the scrap suitable for reprocessing shall be deducted from value of scrap or waste. Normal process loss is ignored for the sake of simplicity. If the cost calculation is done for the past period and if the actual sales realization of scrap is available, then the same shall be deducted after adjustment for opening and closing stock of scrap (to arrive at the realisable va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of scrap generated) from the cost of production for the relevant period. In case the scrap is not disposed off/sold during the period and lying in the stock, the realizable value of scrap can be calculated from the quotations/market rate. The entity has to keep proper records of input and output of a process and quantity of scrap generated during processing of material. This is demonstrated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an illustration below (Guidance Notes on CAS-4): Illustration A production process has three stages. Stage Input material cost Processing cost Total (Rs/ MT) (Rs/ MT) (Rs/ MT) 1 2000 500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2500 2 2500 1000 3500 3 3500 1000 4500 If during the production process at stage 3, the scrap is produced and the same is recycled at stage 2 after making an expenditure of ₹ 200 per MT to make it suitable for re-processing at s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage 2, then scrap will be valued @ Rs ( 2500 200 ) i.e. ₹ 2300.If no expenditure is involved to make scrap re-usable, the scrap value will be @ ₹ 2500. The scrap value for the scrap produced during a period calculated at the rate as explained above may be deducted to find out the cost o f production for the period. - - Scholarly articles for knowledge sharing authors experts pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fessionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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