Captive clearance valuation under Rule 8 must follow CAS-4 cost of production, including the supplying unit's loaded costs.

For captive clearances and inter-unit transfers of excisable goods within the same assessee, Rule 8 of the Central Excise Valuation Rules, 2000 requires assessable value to be taken at 110% of the cost of production or manufacture, computed in accordance with CAS-4. The Tribunal treated the Board circular on CAS-4 computation as applicable for the period in question and noted that cost components include material consumed, duties and taxes, freight, and similar procurement expenses. On that basis, the department's valuation method, which reflected the supplying unit's loaded cost structure, was accepted and the demand for duty, interest, and penalty was sustained.

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Issues: Whether, for excisable goods transferred between units of the same assessee and used captively in the manufacture of another product, the assessable value under Rule 8 of the Central Excise Valuation Rules, 2000 was to be taken at 110% of the cost of production computed in accordance with CAS-4 and the Board circular, as against the assessee's method of excluding the prior unit's loaded value.

Analysis: The dispute turned on the meaning of valuation by cost of production in a case of non-sale, captive consumption and inter-unit transfer within the same corporate entity. The Tribunal noted that Section 4 of the Central Excise Act, 1944 requires valuation in the prescribed manner where the goods are not sold, and Rule 8 of the Central Excise Valuation Rules, 2000 prescribes value at 110% of the cost of production or manufacture. It further held that the Board's circular requiring computation as per CAS-4 governed the period in question, and that the cost components under CAS-4 include material consumed, duties and taxes, freight and similar procurement expenses. On that basis, the value adopted by the department, including the cost structure reflected at the supplying unit, was accepted. The Tribunal declined to disturb the earlier departmental confirmation of duty, interest and penalty.

Conclusion: The assessable value had to be computed under Rule 8 on the basis of 110% of cost of production in terms of CAS-4, and the demand was sustainable against the assessee.

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