TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 1676
X X X X Extracts X X X X
X X X X Extracts X X X X
.... thickness falling under Chapter Heading 7606 and 7607 of the First Schedule to the Central Excise Tariff Act, 1985 to its other units for use in further manufacture of final products. The Appellant receives duty paid slabs, strips in coil form, pigs, ingots and other rolled products of aluminium required for the manufacture of final products from their own units located at Hirakud and Renukoot on payment of duty. The Appellant avails Cenvat credit of the duty paid on the aforesaid raw materials received from their own units on the basis of excise invoices issued by them. Such products received by them are worked upon and subsequently, the final products are cleared to their own units located at Hirakud, Kollur, Mouda, Kalwa, Muri, Belgaum,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Accounting Standards, whereby the inter-unit transfers are recorded in books of the units at a notional price (hereinafter referred to as "transfer price") linked to prices of metals prevailing at London Metal Exchange. In view of the aforementioned practice of the Appellant in maintaining the books of accounts, the Department issued the following Show Cause Notices, alleging undervaluation of the final products cleared by the Appellant to their own factories while determining the assessable value on the basis of 'Cost Construction Method' under Section 4(1)(b) read with proviso to Rule 9 and Rule 8 of the Central Excise Valuation Rules, 2000, thereby contravening Rule 6 of the Central Excise Rules, 2002. Show Cause Notice Period ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch 'transfer price' has no relation with the cost of production of the stock so transferred to the other units, and hence, should not be taken for calculating the cost of production. Such internal transfer price is recorded in internal accounting as revenue of one unit and cost of another unit, and thus, its effect gets nullified in their financial statements. The said fact was affirmed by the Cost Auditor as well as their statutory auditor. However, without considering such submissions, the impugned Order has confirmed the demand of excise duty of Rs. 4,36,10,639 by applying Rule 8 of the Central Excise Valuation Rules, 2000. The adjudicating authority has adopted the internal/ notional 'transfer price' of the raw materials, i.e., ingots, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able. Therefore, the Appellant determined the assessable value on the basis of estimated cost of production based on CAS-4 certificate of previous year plus addition for inflation and forecast of price increase in the current year. Later, as soon as the CAS-4 certificate was received and the cost of the current year was known to them, they ensured that the central excise duty paid was equal to or higher than duty payable as per CAS-4 certificate of the current year. We observe that the method adopted by the Appellant to arrive at the assessable value is legally tenable and there is no infirmity in it. 10. We observe that the impugned order has confirmed the demand by adopting a notional price linked to prices of metals prevailing at Lond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ansfers for the purpose of determination of value under CAS-4 certificate. Such debit notes reflected notional value of profit on inter-plant transfers for the purpose of evaluating the operational efficiencies/ profitability of their various units/divisions. However, the Tribunal held that "the value of IDSC/ICNC debit note is notional in nature and cannot be considered as cost of raw material for the purpose of determining value under Rule 8 of Valuation Rules for captive consumption". It was held that only actual costs are includible to arrive at the CAS-4 value under Rule 8. 13. We find that Circular No. 692/8/2003-Cx dated 13.02.2003 issued by the Department of Revenue has clarified that the cost of production of captively consumed ....