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2016 (5) TMI 306

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..... ever, where the goods are entirely transferred to a sister unit, it is reasonable to adopt the value shown in the invoice on the basis of which Cenvat Credit was taken by the assessee i.e. the invoice of the supplier of the pellets to the assessee. As it is clear that the present is a case of transfer and not sale of pellets, no infirmity can be found with the Tribunal’s judgment, which only follows the circular dated 1.7.2001. In addition, the Tribunal was also correct in holding that post manufacturing expenses cannot be loaded on to the amount equal to the duty of excise leviable on such goods as this amount would, then, cease to be an amount equal to the duty of excise but would be something more. Therefore, on both these counts it i .....

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..... e purchased from Mandovi Pellets and Essar Steel Limited. These were carried to the factory of IIL. Credit was availed by IIL of the duty paid on the entire quantity so procured. As and when required by the sister company IMIL, pellets were transferred through a conveyor from IIL s plant to IMIL s premises under cover of an invoice and on reversing an amount equal to the Cenvat credit availed on inputs that were so transferred. In addition to such invoices, IIL also raised debit notes on IMIL for recovering actual expenditure incurred by it in relation to the procuring of such iron ore pellets, such as bank commission, interest, etc. 4. The aforesaid two companies were issued show cause notices dated 29.9.2003 and 14.10.2003 respectively .....

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..... the supplier of the pellets, IIL, and IMIL. This being so, the Tribunal applied a circular dated 1.7.2002 by which, where no sale is involved but only a transfer by one sister unit to another, the value shown in the invoice on the basis of which Cenvat credit was taken by the assessee would be the value for the purpose of Rule 57AB and Rule 3(4). It was further held that additional consideration could not be added inasmuch as the amount spoken of in the Rule 57AB and Rule 3(4) is an amount equal to the duty of excise which is leviable on such goods. Post manufacturing expenses cannot possibly amount to a duty of excise leviable on such goods and therefore all amounts paid under the debit notes between IIL and IMIL could not be added to the .....

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..... sibly have been applied to the facts of this case. 9. Having heard the learned counsel for the parties, it is important to first set out the relevant rules. Rule 57AB(1C) of the Central Excise Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules, 2001 as they read at the relevant time, read as follows:- 57(1C) When inputs or capital goods, on which credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under Section 4 of the said Central Excise Act, and such removal shall be made under the cover of an in .....

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..... e no problem in ascertaining the transaction value by application of sec.4(1)(a) or the Valuation Rules. [Provided tariff values have not been fixed for the inputs or they are not assessed under Section 4A on the basis of MRP ] There may be cases where the inputs or capital goods are removed as such to a sister unit of the assessee or to another factory of the same company and where no sale is involved. It may be noticed that sub rule (1C) of Rule 57AB of the erstwhile Central Excise Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules 2001 (now 2002, talk of determination of value for such goods and not the said goods . Thus, if the assessee partly sells the inputs to independent buyers and partly transfers to its sister units, th .....

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..... is circular makes it clear that a distinction is made between inputs on which credit has been taken which are removed on sale, and those which are removed on transfer. If removed on sale, transaction value on the application of Section 4(1)(a) of the valuation rules is to be looked at. However, where the goods are entirely transferred to a sister unit, it is reasonable to adopt the value shown in the invoice on the basis of which Cenvat Credit was taken by the assessee i.e. the invoice of the supplier of the pellets to the assessee. 12. As it is clear that the present is a case of transfer and not sale of pellets, no infirmity can be found with the Tribunal s judgment, which only follows the circular dated 1.7.2001. In addition, the Tr .....

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