Rule 8 valuation for inter-unit captive consumption uses actual production cost, excluding prior notional loading.

Rule 8 valuation for inter-unit transfers within the same assessee under the Central Excise valuation scheme is based on the actual cost of production of the transferred goods at the receiving unit. The notional loading applied at the supplying unit for excise duty computation does not form part of the raw material cost in the hands of the receiving unit. The text distinguishes this situation from a separate factual context involving supply to an outside job worker and indicates that the larger Bench view on inter-unit captive consumption governs the valuation approach. On that basis, assessable value at the receiving unit is computed without adding the earlier notional uplift.

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Issues: Whether, in determining assessable value under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 for goods transferred between two units of the same assessee for captive consumption, the receiving unit must take the actual cost of production of the transferred goods or the loaded value including the notional addition already applied at the supplying unit.

Analysis: Section 4(1)(b) of the Central Excise Act, 1944 applies where goods are not sold, and valuation is then governed by Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The rule requires the value of captively consumed goods to be 115% of cost of production prior to 5 August 2003 and 110% thereafter for the unit clearing those goods. In a case of inter-unit transfer within the same assessee, the value adopted for duty at the supplying unit is a duty-computation figure and does not become part of the raw material cost in the hands of the receiving unit. The cost of the transferred goods at the receiving unit must therefore be taken at the actual cost of production, without adding the notional loading applied for excise duty at the earlier stage. The larger Bench ruling on inter-unit captive consumption was held applicable, while the decision dealing with a different factual situation of supply to an outside job worker was held inapplicable.

Conclusion: The assessable value at the receiving unit had to be computed on the actual cost of production of the transferred goods, excluding the notional loading under Rule 8, and the demand could not be sustained.

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