Valuation of sister-unit transfers under Board circular upheld where invoice value was adopted and Cenvat credit was reversed.

Valuation of inputs transferred to a sister unit was assessed under the Board circular governing such removals, where no independent sale took place and the assessee had reversed the Cenvat credit, issued invoices and filed returns. The circular permitted reasonable valuation under the residuary framework, and specifically supported adoption of the invoice value on which credit was originally taken. Because the assessee followed that prescribed method and it did not conflict with any statutory provision, the valuation adopted could not be rejected. The demand of central excise duty on that basis was therefore unsustainable, and the appeal was allowed.

---

---

Issues: Whether the demand of central excise duty on removal of inputs to a sister unit was sustainable when the assessee had reversed the credit and valued the goods on the basis of the invoice on which Cenvat credit was originally taken, in terms of the Board circular governing such transfers.

Analysis: The assessee had transferred inputs to a sister unit after reversing the credit availed on those inputs and had issued proper invoices and filed returns. The dispute turned on valuation of such removals where no sale to an independent buyer took place. The Board circular clarified that in cases where inputs or capital goods are transferred to a sister unit and no independent sale exists, valuation may be determined by reasonable means under the residuary valuation framework, and it would be reasonable to adopt the value shown in the invoice on the basis of which Cenvat credit was originally taken. The appellate authority had referred to the circular but rejected the assessee's case without assigning reasons. Since the assessee had followed the circular and its method was not contrary to any statutory provision, the valuation adopted by the assessee could not be faulted.

Conclusion: The demand could not be sustained and the assessee's appeal was allowed.

Ratio Decidendi: Where a departmental circular prescribes the valuation method for transfer of inputs to a sister unit and the assessee follows that method without violating any statutory provision, the demand based on a different valuation approach is unsustainable.

---