Cost of production governs valuation of inter-unit transfers without independent sale; fresh examination of supporting records was required.

Where goods are transferred between two units of the same assessee without sale to an independent buyer, valuation must be determined on the basis of cost of production under Rule 6 of the Central Excise Valuation Rules. The existing valuation exercise was found incomplete because the supporting certificates and cost records had not been properly examined with reference to the relevant Board circulars. The valuation order was therefore set aside and the matter remanded for fresh determination of assessable value after proper scrutiny of the financial material, including reference to the costing authority if necessary.

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Issues: Whether the value of goods transferred between two units of the same assessee, without sale to independent buyers, had to be determined on the basis of cost of production under Rule 6 of the Central Excise Valuation Rules, and whether the matter required reconsideration of the certificates and cost records produced by the assessee.

Analysis: The goods were cleared between two units of the same assessee and were not sold to any independent buyer. In such a situation, the appropriate basis for valuation was cost of production. The certificates produced by the assessee had not been examined by the adjudicating authority or by the costing expert with reference to the relevant Board circulars. The valuation exercise therefore required a fresh examination of the supporting financial material and, if necessary, reference to the costing authority before arriving at the assessable value.

Conclusion: The existing valuation order was set aside and the matter was remanded for fresh determination of value on the basis of cost of production under Rule 6.

Ratio Decidendi: Where goods are transferred between sister units without sale to an independent buyer, valuation must be determined on the basis of cost of production, and relevant supporting certificates and accounts must be examined before fixing assessable value.

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