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of <h1>Appellate Tribunal directs reassessment under Rule 6(b)(ii) of Central Excise Valuation Rules, emphasizing natural justice.</h1> <h3>BRAKES INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, CHENNAI</h3> The Appellate Tribunal CESTAT, CHENNAI remitted the case involving the valuation of goods transferred to sister units under Rule 6(b)(ii) of Central ... Valuation - Stock Transfer to sister unit Issues: Valuation of goods transferred to sister units under Rule 6(b)(ii) of Central Excise Valuation Rules, 1975 (CVR).Comprehensive Analysis:Issue 1: Valuation Methodology DisputeThe case involved M/s. Brakes India Ltd. clearing unmachined castings to sister concerns, leading to a dispute on the correct valuation method. The authorities alleged an incorrect valuation method, resulting in a Show Cause Notice for recovery of short-paid amount. The original authority focused on adding the cost of additives and raw materials related to invisible loss in determining the cost of castings cleared. The Commissioner (Appeals) examined alternative valuation methods proposed by both the assessee and the Revenue, ultimately siding with the department's method, which included all goods produced, not just those cleared to sister units, to determine unit cost.Issue 2: Principles of Natural JusticeThe appeal challenged the Commissioner (Appeals) order, alleging a violation of natural justice as the method decided was not disclosed earlier. It was argued that all cost elements, including material cost, overheads, and profit margin, should be considered under Rule 6(b)(ii) of CVR. The authorities were criticized for not factoring in profits if the unit operated without profit, which would have lowered the value and demand on the assessee. The appeal also highlighted the failure to consider the auditors' certified cost working and cited relevant apex court judgments.Issue 3: Application of CAS-4 and Profit MarginThe central argument revolved around the application of CAS-4 for determining the cost of production of castings and the profit margin to be adopted. The original authority's rejection of the cost per unit of raw material method was upheld, and CAS-4, recognized post-order, was not considered. The impugned order adopted the total cost of raw materials for determining production cost per unit of finished goods, which was affirmed by the Commissioner (Appeals). Referring to apex court cases, the Tribunal ordered the application of CAS-4 for valuation and allowed a lesser profit margin if justified by the assessee.ConclusionThe Tribunal remitted the matter to the original authority to determine the assessable value following CAS-4 and potentially adopt a lesser profit margin based on the assessee's evidence. The decision emphasized adherence to principles of natural justice and the correct application of valuation rules, settling the dispute over the valuation of goods transferred to sister units under Rule 6(b)(ii) of CVR.This detailed analysis covers the valuation methodology dispute, principles of natural justice, and the application of CAS-4 and profit margin in the legal judgment delivered by the Appellate Tribunal CESTAT, CHENNAI.
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