2025 (3) TMI 261 - AT - Central Excise

Clinkers transferred to sister concern must be valued under Rule 4 with Rule 11, not Rule 8

M/s. Ultra Tech Cement Ltd. Versus Commissioner of Central Excise, Mangalore

CESTAT Bangalore held that clinkers transferred by appellant to sister concern must be valued under Rule 4 read with Rule 11 of Central Excise Valuation ... Method of Valuation - clinkers transferred by the appellant to their sister concern - to be valued under Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 or under Rule 4 read with Rule 11 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000? - Revenue neutrality - HELD THAT:- This Tribunal in appellant’s own case for their own unit for the period from March 2011 to November 2013 held that Rule 4 read with Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 be adopted following the judgment of the Larger Bench of the Tribunal in the case of Ispat Industries case [2006 (9) TMI 181 - SUPREME COURT]. This Tribunal in M/S. ULTRATECH CEMENT LTD., (UNIT: RAJASHREE CEMENT WORKS) , VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, [2024 (1) TMI 663 - CESTAT BANGALORE] observed as 'we have no hesitation to hold that the appropriate rules for determination of the assessable value of the goods for the transferred clinkers to sister units will be Rule 4 read with 11 of the Central Excise Valuation Rules, 2004 rather than Rule 8 of the Central Excise Valuation Rules, 2000 for the period in question.' Revenue neutrality - HELD THAT:- The revenue neutrality is not a statutory concept but a principle of equity developed by courts as a mitigating factor in appreciating the intention of the persons while applying the principle of law to a particular situation to determine the reason for non-payment of duty. Revenue neutrality cannot be considered as an incentive not to follow the statutory provision governing principle of valuation solely on the ground that the other unit could avail the benefit of credit of the differential duty payable. Conclusion - i) The goods transferred should be valued under Rule 4 read with Rule 11. ii) Revenue neutrality cannot be a reason to deviate from statutory provisions and that the correct method of valuation should be applied. Appeal allowed by way of remand. The appeal in this case was filed against an Order-in-Appeal issued by the Commissioner of Central Excise (Appeals), Mysore, regarding the valuation of cement and clinkers under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The core issue was whether the goods transferred by the appellants to their sister units should be valued under Rule 4 or Rule 8 of the said Rules.The appellant had cleared cement to their own units, declaring the assessable value as 110% of the cost of production under Rule 8. The Revenue contended that Rule 4 read with Rule 11 should apply as a portion of the goods were sold to independent buyers. The Tribunal, in a previous order, had held that Rule 4 should be applied for such transactions.The appellant argued that the valuation was based on assumptions and presumptions and that the goods transferred were for captive consumption, hence Rule 8 should apply. They also relied on a subsequent amendment to the Rules and various judicial precedents to support their position.The Tribunal considered the arguments and held that the goods transferred should be valued under Rule 4 read with Rule 11, following the precedent set in the appellant's own case. The Tribunal emphasized that revenue neutrality cannot be a reason to deviate from statutory provisions and that the correct method of valuation should be applied. Therefore, the appeal was allowed, and the case was remanded to re-determine the assessable value and differential duty without imposing penalties.In conclusion, the Tribunal determined that the goods transferred by the appellant to their sister units should be valued under Rule 4 read with Rule 11 of the Central Excise Valuation Rules, 2000. The principle of revenue neutrality was not a valid reason to deviate from the correct valuation method. The appeal was allowed by way of remand for reassessment of the differential duty without penalties.