CAS-4 valuation for captive consumption upheld; clarificatory circular applied retrospectively to sister-unit clearances

For goods cleared to a sister unit for captive consumption, assessable value was required to be determined by applying CAS-4, including by reference to the treatment of marketing, distribution and advertisement expenses. The Board Circular No. 692/08/2003-CX dated 13-2-2003 was treated as clarificatory and therefore retrospective in effect. On that basis, the valuation method for captively used goods was held to follow CAS-4, and the Revenue's challenge did not succeed.

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Issues: Whether, for goods cleared to a sister unit for captive consumption in manufacture of final products, the assessable value was to be determined by applying Cost Accounting Standard 4 and whether Board Circular No. 692/08/2003-CX dated 13-2-2003 was merely clarificatory and retrospective in effect.

Analysis: The dispute concerned inclusion of marketing, distribution and advertisement expenses in the assessable value of captively used goods. The Board circular clarified that assessable value is to be arrived at by following CAS-4. The Court relied on the settled position that the circular was clarificatory in nature and therefore applicable retrospectively. On that basis, the correct method for valuation of goods captively used by a sister unit was held to be CAS-4.

Conclusion: The assessable value had to be determined by applying CAS-4, and the Board circular was retrospective and clarificatory. The Revenue's appeal failed.

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