valuation on stock transfer Rule 8 of valuation rule

[onkar kumar]

Dear Member Can any body tell me whether the decision in case of M/s Ispat Industries ltd. Vrs. CCE, Raigad 2007(209) ELT 185 (Tri-LB) has been overruled by any court?  In this case the tribunal held that when there is stock transfer for captive consumption as well as sell to independent buyer, Rule 8 of valuation rule will not be applicable for stock transfer case and goods will be valued under sectin 4(1)(a) i.e. transaction value. Thank You

[YAGAY and SUN]

In your scenario the principle  of 'Greatest Aggregate Quantity' will be applicable which has been defined in the Rule 7 of the Customs Valuation Rule.

 

[onkar kumar]

Rule 7 will not be applicable as rule 7 enunciate situation where goods are transferred to 'other place'  from where the goods finally sold to an unrelated buyer. i..e selling of goods from some other premises after clearance from the  factory. Here case is of stock transfer for captive consumption and this situation has been described in rule 8.

Thanks

Onkar 

[onkar kumar]

Sorry! Are you talking about Customs valuation Rules, but why Customs valuation would come in this matter.

Thanks

[YAGAY and SUN]

I knew that you will raise this question.  I make you understand by appended exhibit:-

Say, you are 'A' company and also do the stock transfer the 'X' item to their unit @ Rs. 100 for 10 units.  But the same X item is also being sold @ Rs. 125 for 20 Units. Therefore, the aboved principal would come to the picture and you would have to pay the differential duty on the goods removed for captive comsumptionwhich were sent to your other unit.

Hence transaction value would be Rs.125/-  for 10 units since you are selling the same goods to independent buyer on higher price and quantity.

[onkar kumar]

Thanks for reply but my question is still unanswered that "Why will Rule 8 be not applicable" i.e 110% of cost of production. Like wise Rule 9 and 10 there is no cluase in rule 8 like " goods not sold by an assessee except to or through" Hence partly cleared for captive consumption and partly cleared / sold to independent buyer  does not makes immune from 110% valuation for captive consumption.

Welcome for comments.

Onkar

[YAGAY and SUN]

Please specify the quanties supplied to Independent Buyer as well as quantities supplied to your other unit alongwith the assessable value.

[onkar kumar]

Assessable value is the same i.e. uniform rate. Quantity approx 40% cleared to other unit of self for further use in manufacture and rest 60% to 4-5 different independent buyer.

Thank You 

[YAGAY and SUN]

If the assessable value is same for both the parties i.e. own unit and independent buyer, then, there should not be any demand of duty by the department.

[onkar kumar]

I want to know the provision. Conditions under section 4(1)(a)  is not being fulfilled. Fully covered in Rule 8 of valuation Rule. What is the reason for non applicability of rule 8 of valuation rule in this type of case?

 

[onkar kumar]

I want to know the provision. Conditions under section 4(1)(a)  is not being fulfilled. Fully covered in Rule 8 of valuation Rule. Wht is the reason for non applicability of Rule 8 of valuation Rule in this type of case?

Thank You  

[JAMES PG]

The same decision has been upheld in Gangotri Electrocastings Ltd  Vs CCE, Patna on 17th April,2012

[Vijay kumar]

Apparently, the said decision of the Larger Bench of Hon'ble CESTAT has not been overruled, but rather has been consistently followed in other cases like Daman Ganga ang Gangotri Electrocastings. The reason is - in the opinion of the Tribunal, Rule 8 cannot be applied when part of the goods are sold to independent buyers. In other words, it would be applicable only when the goods are exclusively transferred to its own unit, though the wording is not so. In any case, it was opined that among Rule 4 and Rule 8, the former comes first sequentially and more than that, it is closest in spirit to Section 4. Thus, it has to be understood that where a particular item is partly stock transferred and partly sold to independent buyers, Rules 4 should be applied for the former. If such item is exclusively transferred to own units, Rule 8 will be applicable. It may be noted that in Rule 9, there is a provision of "except to or through a related person", where there is no ambiguity.

[YAGAY and SUN]

M/S. GANGOTRI ELECTROCASTINGS LTD. Versus COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, PATNA

[onkar kumar]

Thanks for reply

AI Summary

Stock transfer valuation: apply transaction value when goods are partly sold to independent buyers, not presumptive cost-based valuation.
When identical goods are partly sold to independent buyers and partly stock-transferred for captive use, valuation for the transferred portion should follow the transaction value principle rather than a presumptive cost-based rule, because sales to independent buyers establish the market transaction value that governs valuation; cost-based valuation applies only where transfers are exclusively to related units.