Captive Consumption - Valuation of goods

[Ashok Patil]

As per the provisions of Central Excise Valuation Rules, in case goods are captively consumed, the value of such goods shall be 110% of the cost of production irrespective of value charged to independent buyer.

Now, in case instead of valuing the goods at 110%, if those are valued at more than 110% (say around 150 to 200%) of cost of production then what will be consequences of such higher valuation. There is no intention of transferring CENVAT credit.

AI Summary

Valuation of captive consumption: duty governed by prescribed cost-based valuation, excess payment risks CENVAT disallowance.
Rule 8 prescribes valuation of captively consumed goods at a statutory percentage of cost of production (now 110%); transfer prices may differ for accounting but excise duty liability is governed by the valuation rules. Excise paid on a higher internal valuation is treated as excess/unauthorised collection, disallowing CENVAT credit to the buyer and permitting refund only upon proof negating unjust enrichment. Administrative guidance and case law address valuation rule applicability where production is partly sold and partly consumed.