2026 (1) TMI 1509 - AT - Central Excise

Valuation of captively consumed goods: Rule 8 valuation approach upheld and central excise demand based on market-price methodology set aside

Valuation of captively consumed goods must follow valuation rule applicable to intra-company transfers rather than market sale price; the tribunal ... Valuation of captively consumed goods - Whether the clearances made by the appellant to its own units for captive consumption is to be valued in terms of Rule 8 of the Valuation Rules or on the basis of the price, on which, the sales are made to independent third party buyers in terms of Rule 4 of the Central Excise valuation (Determination of price of excisable goods) 2002 read with Section 4(1)(b) of the Central Excise Act, 1944. - HELD THAT:- The issue has been examined by this Tribunal in the case of Jindal Steel & Power Limited Vs. Commissioner of CGST & Central Excise, [2026 (1) TMI 648 - CESTAT KOLKATA] ' hold that the appellant has correctly valued their goods in terms of Rule 8 of the Valuation Rules and therefore, the demand of central excise duty by adopting Rules 4 and 11 of the Valuation Rules is not sustainable.” In view of this, we hold that the appellant has rightly paid the duty in terms of Rule 8 of the Valuation Rules, 2000. Therefore, the demand of Central Excise duty as per the impugned order is not sustainable. Accordingly, the impugned demand is set aside and the appeal is allowed with consequential relief, if any. Issues: Whether clearances made to the appellant's sister/own units for captive consumption are to be valued under Rule 8 of the Valuation Rules (cost of production in accordance with CAS-4) or under Rule 4 (transaction value based on sales to independent buyers) for the period in question.Analysis: The Tribunal examined prior decisions and the CBEC Circular No. 692/8/2003-CX dated 13.02.2003 which directs that cost of production for captively consumed goods be determined in accordance with Cost Accounting Standard CAS-4 and that Rule 8 principles apply to captive consumption. The Tribunal distinguished authorities relied upon by Revenue where transfers were not for captive consumption. On the facts, goods were transferred for captive consumption by the sister unit and duty had been paid adopting CAS-4 under Rule 8. The Tribunal held that the Circular is binding on Revenue and that earlier contrary instructions have been modified by the 2003 Circular; therefore Rule 4 based transaction value is not applicable to clearances for captive consumption in these facts.Conclusion: The appellant correctly valued and paid duty under Rule 8 of the Valuation Rules (as per CAS-4) for clearances to sister units for captive consumption; the impugned demand based on Rules 4 and 11 is not sustainable.