TaxTMI 
TaxTMI 
2020 (7) TMI 514
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....Pvt. Ltd. and M/s. Raviraj Foils Ltd. [The supplier of goods]. The Appellant received foil scraps/ aluminium ingot from the supplier of goods for conversion into rolled products. This conversion job was to be undertaken by the Appellant partly through the Taloja Unit of the Appellant and partly through the Belur Unit of the Appellant. The Appellant contends that the Taloja Unit and the Belur Unit paid Central Excise duty in respect of the processes done by them by calculating the assessable value on the basis of the cost of production as contemplated under rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 [2000 Valuation Rules]. 3. The dispute that has arisen for consideration in this Appeal is whether in the case of inter unit transfer of goods from the Taloja Unit for captive consumption to the Belur Unit, the entire value (i.e. 115% or 110% as the case may be) of the cost of production or the actual cost of production (i.e. 100% of cost excluding the notional loading of 15% or 10%) of the goods, manufactured by the Taloja Unit, would be the cost of the raw material for the Belur Unit of the Appellant for the purpose of determining t....
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....with M/s. Amco India Pvt. Ltd. (Case-I) and with M/s. Raviraj Foils Ltd. (Case-II). It is as follows: ANNEXURE-A Case-I Contract between M/s.AMCO India Pvt. Ltd. & M/s. Indian Aluminium Company Ltd. (i) Value of H.R. Coil received from INDAL, Taloja= Rs. 103.70 (ii) Conversion cost of such H.R.Coil to Foil Stock at Belur Unit=Rs. 15.39 (the total conversion cost of Foil scraps/Aluminium Ingots to H.R.Coils at Taloja and its subsequent conversion to Aluminium Foil Stocks/ Aluminium H.R. Closures etc. at its factory at Belur being Rs. 24 kg.) (iii) Thus, full intrinsic cost of the raw material received at Belur Unit viz. that of H.R. Coils plus the conversion cost at the end of Belur amounts to Rs.(103.70+15.39)=Rs. 119.09 per kg. (iv) The assessable value of Aluminium Foil stock declared at Belur=Rs. 110.75 per kg. (v) Therefore, the under valuation is Rs.(119.09-110.75)=Rs. 8.34 per kg. (vi) Total quantity of goods cleared to M/s. AMCO Pvt. Ltd. from 01.04.2001 to 31.12.2003 on such conversion account= 4,02,539 kg. (vii) Thus, total under valuation= Rs.(4,02,539x8.34) =Rs. 33,57,175.00 ....
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.... Co. Ltd. (presently known as M/s. Hindalco Industries Ltd.) and the job work was undertaken by the company through two units, the ratio of the decision, which was laid down in the case of M/s. Pawan Biscuits Co. Ltd. case has to apply to the company as a whole. Had both the divisions been in one factory, there would not have been any scope for the Department to add the profit margin @10% of the cost of production of each divisions. By applying the same logic, as the two units of the company are located at two different places, there seems to be no legal justification to consider the invoice value, which was calculated @ 110% of the cost of production at Taloja Unit to arrive at the assessable value of the end of Belur Unit where final processing was undertaken. It is needless to state that M/s. Hindalco Industrial Ltd. (earlier M/s. Indian Aluminium Co. Ltd) prepared and still also prepare one annual account and balance sheet for all these divisions together. The Taloja Unit while discharging their duty liability prior to transfer of the partly-processed materials to its sister unit at Belur rightly followed the provisions of rule 8 of the Valuation Rules, by paying duty @110% of ....
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....isunderstood the valuation provisions of the law and therefore, the demand of duty of Rs. 6,40,362/- was totally devoid of merit. 11. As noticed above, the Additional Commissioner did not accept the contentions advanced by the Appellant and confirmed the demand with interest and penalty. The Commissioner (Appeals) also did not accept the contentions of the Appellant. The relevant portion of the order passed by the Commissioner (Appeals) is reproduced below: "11. The issue to be decided here is whether Central Excise Duty is to be charged on the value arrived at on the basis of full intrinsic cost of raw materials received in the Appellant's Belur Unit plus the conversion cost, packing cost and profit made, appropriated at Belur Unit, or, the duty is to be charged on the cost of materials at the hands of the Appellant at 100% of the cost of production at the Appellant's Taloja Unit, even though the Appellant paid Central Excise duty on the assessable value calculated at 110% of the cost of production as per Rule 8 of the said Valuation Rules. 12. I find that similar issue is extensively dealt with in the decision of Hon'ble Tribunal in Eicher Motors Ltd. versus ....
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....ulated the cost of production by adding the processing charges, which included profit, to the value of the raw materials received from the suppliers of the goods. The Taloja Unit had calculated the assessable at 110%/115% of the cost of the production to remit central excise duty in course of stock-transfer to Belur Unit. Since the conversion charges at the hand of Taloja Unit included profit and the further notional loading (i.e. 15%/10%) made by the Taloja Unit for remitting central excise duty, need not be considered at the Belur Unit to avoid an absurd result; (v) The extended period of limitation could not have been invoked in the facts and circumstances of the case; (vi) There is no justifiable reason for imposing penalty under Section 11AC of the Excise Act; and (vii) There being no liability of any short paid or not paid duty in the instant case, there cannot be demand of any interest from the Appellant in terms of Section 11AB of the Act. 13. Shri K.Choudhary learned Authorized Representative of the Department, however, supported the order passed by the Commissioner (Appeals) and submitted that there is no error in the impugned order as it is ....
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.... even in the case of inter-unit transfer of goods from the Taloja Unit for captive consumption to the Belur Unit, the entire value (i.e. 115% or 110% of the cost of production) would be the cost of the raw material at the Belur Unit for purpose of determining the assessable value under rule 8 of the 2000 Valuation Rules for transferring the goods to the suppliers. 19. This issue has been dealt with at length by a larger Bench of the Tribunal in I.T.C Ltd. The larger Bench answered the reference on February 12, 2016 in the following manner: "20. In the light of our foregoing analysis, discussion and reasons, we answer the reference as under: (a) In the case of inter-unit transfer of goods for captive consumption, the actual cost of production (100% of the cost of production), of the raw material procured from the Bhadrachalam unit of the Appellant (excluding the notional loading under Rule 8- 15%/10%) is the cost of raw material in the hands of the Chennai unit, for determining the cost of production of packaging material manufactured by the Chennai unit. The percentage of loading on such cost of production, mandated by provisions of Rule 8 for remittance of exc....
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....not in dispute. The issue is therefore regarding the interpretation of Rule 8 of the Valuation Rules." (emphasis supplied) 22. The Tribunal then observed: "8. Since Bhadrachalam unit of ITC Ltd. was not selling the raw material but was captively consuming these goods at its Chennai unit, Section 4(1)(b) of the Act and Rule 8 of the Valuation Rules becomes applicable, as already considered. In view of mandate of Rule 8, Bhadrachalam unit was remitting excise duty at the time of clearance of such raw material, at 115%/110% of the cost of production and since 5-8-2003 at 110% of such cost for remittance of excise duty. The Bhadrachalam unit was remitting excise duty accordingly and undisputedly. 9. The issue is whether the cost of production of the goods the packaging material that is manufactured by the Chennai unit of the Appellant should be computed at 115%/110% of the cost of production/manufacture of the raw material procured from its Bhadrachalam Unit or at the actual cost of such raw material since there was only a stock transfer and not a sale of these goods by the Bhadrachalam Unit to the Chennai unit. 9.1 The answer to the issue turns u....