Valuation of inputs transferred to a sister unit without sale must follow Cenvat rules, not Section 4 loading of post-removal costs.

Inputs removed as such to a sister unit without sale must be valued under the Cenvat removal provisions by reference to the original invoice value on which credit was taken. Post-removal expenses such as freight, loading and unloading cannot be added to compute a higher amount under Section 4, because the transfer is not a sale and the rules do not permit enlarging the duty-linked liability beyond the amount contemplated by the applicable Cenvat framework. The valuation approach was therefore applied in favour of the assessee and against the Revenue.

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Issues: Whether inputs removed as such to a sister unit, without sale, are to be valued under Section 4 of the Central Excise Act, 1944 by taking transaction value and adding freight, loading, unloading and similar post-removal expenses, or whether the amount payable is confined to the duty-linked amount prescribed under the relevant Cenvat Rules.

Analysis: The removal in question was a transfer to a sister unit and not a sale. In such a situation, the governing provisions require the value to be determined consistently with the rules applicable to removal of inputs as such, and the applicable circular and the Supreme Court decision relied upon drew a clear distinction between sale and transfer. Where there is no sale, the invoice value on which credit was originally taken is the relevant reference, and post-removal expenses cannot be loaded so as to make the amount payable exceed the duty-linked amount contemplated by the rules.

Conclusion: The issue is decided against the Revenue and in favour of the assessee; the transfer to the sister unit was not to be valued by adding post-removal expenses under Section 4.

Ratio Decidendi: For inputs removed as such to a sister unit without sale, valuation must be determined in accordance with the Cenvat removal provisions and the original invoice value, and post-removal expenses cannot be added to enlarge the duty liability beyond the amount contemplated by the rules.

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