Valuation of semi-finished goods must reflect removal condition, not depot-sale pricing, where further manufacture is pending.

Semi-finished goods cleared to another unit for further manufacture must be valued in the condition in which they are removed from the factory, not as fully finished goods. The valuation method applicable to depot sales or post-clearance sales cannot be applied where the goods have not attained finished status at the time of transfer. The tribunal followed its earlier view on the same issue and held that treating an incomplete product as a finished product for valuation was incorrect. The demand raised on that basis was therefore unsustainable.

---

---

Issues: Whether semi-finished goods cleared to another unit for further manufacture were liable to be valued as fully finished goods, and whether the valuation had to be made on the basis applicable to stock transfers rather than depot sales.

Analysis: The goods were found to have been cleared only in semi-finished condition and had not attained the status of fully finished goods at the time of removal from the factory. The valuation method applicable to goods sold from a depot or other place after clearance could not be applied where the goods were merely transferred to another unit for completion of manufacture. In such a case, the correct basis is the condition in which the goods are removed, and applying the depot-sale formula would wrongly treat an incomplete product as if it were a finished product. The earlier bench view on the same issue was followed.

Conclusion: The demand based on valuation of the semi-finished goods as fully finished goods was unsustainable, and the appeal was allowed.

Ratio Decidendi: Semi-finished goods transferred to another unit for further manufacture cannot be valued on the basis applicable to finished goods sold from a depot or similar place; they must be assessed in the condition in which they are removed.

---