IS CAS 4 CERTIFICATE REQUIRED ( RULE 8 OF VALUATION)

[Asked by Guest]

Dear Sir,

We had sent a intermediate product to one of our processor(Job worker) under rule 8 Valuation on duty payment alongwith with CAS4 certificate and he had availed credit on that , but the product has remained unused, So if the job worker has to sell such product without processing, So whether he has to do valuation under rule 3(5) of Cenvat credit rules 2004, by reversing full credit availed on that product, IF yes then whether for such clearance is it required to issue CAS 4 certificate again by the processor at the time of sale of such products.

[Rajagopalan Ranganathan]

Sir,

Rule 8 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 states that-

8. Where whole or part of the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value of such goods that are consumed shall be one hundred and ten per cent of the cost of production or manufacture of such goods.

My basic doubt is whether sending the intermediate product to a processor under job work notification can be treated as captive consumption. Captive consumption means goods are not sold but consumed within the same factory or another factory of the same manufacturer, that is, inter unit transfer. In your case clearance of intermediate product to one of your processor cannot be treated as captive consumption. Therefore you need not follow rule 8 for valuation of such intermediate product. It can be sent to the processor by quoting normal transaction value as if you have sold to independent, non-related buyer and of course on payment of duty. The processor can avail the credit of duty paid by you and adopt transaction value as per his invoice for payment of duty when sells the intermediate product as such and utilize the credit taken.

[Rajagopalan Ranganathan]

Sir,

Rule 8 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 states that-

8. Where whole or part of the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value of such goods that are consumed shall be one hundred and ten per cent of the cost of production or manufacture of such goods.

My basic doubt is whether sending the intermediate product to a processor under job work notification can be treated as captive consumption. Captive consumption means goods are not sold but consumed within the same factory or another factory of the same manufacturer, that is, inter unit transfer. In your case clearance of intermediate product to one of your processor cannot be treated as captive consumption. Therefore you need not follow rule 8 for valuation of such intermediate product and you do not require to obtain CAS-4 Certificate. It can be sent to the processor by quoting normal transaction value as if you have sold to independent, non-related buyer and of course on payment of duty. The processor can avail the credit of duty paid by you and adopt transaction value as per his invoice for payment of duty when sells the intermediate product as such and utilize the credit taken.

[YAGAY and SUN]

Dear Sandesh,

Rule 8 of the Valuation Rules, is not applicable in your matter. Please pay duty under Section 4 of the Central Excise Act, 1944 read with Rule 3 of the Valuation Rules. Further, in our opinion, even Rule 10A of the Valuation Rules would not be applicable, since, Job-work is not done.

Regards

YAGAY and SUN

(Management and Indirect Tax Consultants)

AI Summary

Captive consumption principle not triggered for job work transfers; transaction value governs valuation and CAS 4 not required.
Rule 8 applies only to captive consumption (inter unit consumption) and does not cover clearance of intermediate goods to a processor under job work; such transfers should be valued by normal transaction value with duty paid accordingly, CAS 4 is not required, and the processor may avail and utilise credit of duty paid and adopt the transaction value on resale.