Inter-unit transfer valuation under excise rules must follow CAS-4 based Rule 8, not independent buyer prices.

Clearances of goods from one unit to another within the same company, without sale, were required to be valued under Rule 8 of the Central Excise Valuation Rules at 110% of CAS-4 value. The note records that duty had been paid on that basis, so there was no warrant to replace the prescribed valuation with the prices charged to independent buyers. It further notes that the arrangement was revenue neutral because duty paid at the sending unit would be available as credit at the receiving unit. On that basis, the differential duty demand was held unsustainable and the appeal was allowed.

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Issues: Whether, for clearances of goods from one unit to another unit of the same company without sale, valuation for central excise duty was required to be made under Rule 8 on the basis of 110% of CAS-4 value, and whether differential duty could be demanded by adopting the value of clearances to independent buyers.

Analysis: The goods were transferred between two units owned by the same company and no sale took place. In such cases, Rule 8 of the Central Excise Valuation Rules governs valuation and requires adoption of 110% of the value ascertained on CAS-4 basis. The record showed that duty had been paid on that basis, but the adjudicating authority did not accept it. The Tribunal held that once valuation was correctly made under the prescribed rule, there was no basis to substitute the prices at which goods were sold to independent buyers. It also accepted the plea that the situation was revenue neutral, since duty paid at the sending unit would be available as credit at the receiving unit.

Conclusion: The demand of differential duty was unsustainable and the appeal was allowed.

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