TaxTMI 
TaxTMI 
2026 (1) TMI 648
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....The pellets manufactured by the appellant are primarily cleared to its own manufacturing units located at Angul, in the State of Odisha and Raigarh, in the State of Chhattisgarh, for captive consumption. The appellant also sells iron ore pellets to independent third-party buyers. 2.1. With regard to the clearances made by the appellant to its own units for captive consumption, during the period in dispute, the excise duty was paid on the value determined in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (hereinafter referred to as "Valuation Rules") i.e., on the basis of 110% of the cost of production computed in terms of Cost Accounting Standard-4 ("CAS-4"). It is undisputed that the excise duty paid on the goods cleared for captive consumption to its own units at Angul and Raigarh, was available as CENVAT credit to the recipient units and had in fact, been so availed and utilized for the purpose of discharging excise duty on the downstream goods manufactured by using such pellets. 2.2. The records of the appellant's units were audited from time to time and the audit team, in its reports dated 16.05.2012 and 14.08.2013....
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....les is no longer res integra and has been decided by the Tribunal in the case of OCL India Ltd., having Final Order No. 76670 / 2024 dated 26.06.2024, which is affirmed by the Apex Court as reported in 2025 (5) TMI 63 - SC. The dispute in the case of OCL India Ltd (supra) was whether the cement clinker manufactured by Rajgangpur unit of OCL, which was captively consumed on stock transfer basis at its Kapilas unit in Odisha, as also at its Medinapore unit in West Bengal, was to be valued in terms of Rule 8 of the Valuation Rules or in terms of Rule 11 r.w. Rule 4 of the Valuation Rules, basis the price at which meager sales of about 5% were made to independent buyers, during the period, April'12 to November'13. In that case also, Revenue placed reliance on the decision of Aquamall Water Solutions Ltd. (supra) and Ispat Industries Ltd. (supra). The Tribunal in the case of OCL India Ltd. (supra), has held that Rule 4 of the Valuation Rules, is inapplicable and that valuation in respect of goods cleared to one's own units, for captive consumption, is to be in terms of Rule 8 of the Valuation Rules, as provided for in Circular No. 692/8/2003-C.X. dated 13.02.2003. In coming to this conc....
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....nal in its Order, reported in [2003 (153) E.L.T. 428], wherein admittedly the Aquamall was selling goods to a related person viz. Eureka Forbes Ltd. and also to independent third parties and all such sales were made from depots located in various States and that there were no sales made at the factory gate. In the facts of the present case, the dispute is not qua the valuation of sales made to related party, but is in respect of clearances made to its own unit for captive consumption. The factual position in both the cases being poles apart, the ratio laid down in the decision of Aquamall Water Solutions Ltd. (supra) cannot be applied to the facts of the present case. (vi) Even otherwise, the dispute in the case of Aquamall Water Solutions Ltd. (supra) was with respect to the basis of valuation to be adopted qua sales made to related party. In the present case, the appellant has cleared goods to its own unit for captive consumption, which has erroneously been presumed, both in the SCN and the Impugned Order, as clearances to related party. Since the clearance is to another unit of the same legal entity, for captive consumption, the same cannot by any stretch of imagination....
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....ium Company Ltd. (supra), wherein the dispute was with respect to valuation of calcined alumina cleared from the Damanjodi unit to the Angul unit, taken note of the fact that in case of Ispat Industries Ltd. (supra), goods were not cleared to other plant for captive consumption. Accordingly, it was held that the ratio laid down in the case of Ispat Industries Ltd. (supra), would not apply, in a case where goods are partly cleared for captive consumption and partly sold to independent third-party buyers. As noted by the Apex Court in the case of OCL India Ltd. (supra), the Tribunal decision in the case of National Aluminium Company Ltd. (supra), has been accepted and no appeal has been preferred against the same by the Revenue. Thus, in view of such observation made while deciding the case of OCL India Ltd. (supra), the decision in the case of National Aluminium Company Ltd. (supra), in effect, stands affirmed by the Apex Court. (ix) The underlying fact position in the case of Aquamall (supra) and Ispat (supra), being at variance and vastly different from the factual position in the present case, the ratio laid down in the said decisions, cannot be applied to the facts of t....
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....ld by the assessee and partly consumed captively, the goods sold would be assessed on the basis of "transaction value" [provided they meet the conditions of Sec. 4(1)(a)] and the goods captively consumed would be valued as per Rule 8 of the Valuation Rules. This is because, as per new Section 4, transaction value has to be determined for each removal. Where goods are transferred to a sister unit or another unit of the same company valuation will be done as per the proviso to Rule 9. (xii) In this regard, reliance placed by the Ld. Special Counsel for the Revenue, on paragraph 12 of Circular dated 01.07.2002, is misplaced as the said Paragraph 12 deals with valuation of sales made to a related party as also independent third-party buyers. It is in this context, that the Circular clarifies that the recourse would have to be taken to Rule 11 r.w. Rule 9 or Rule 10 of the Valuation Rules, as Rule 9/ Rule 10 cannot be directly applied, in the absence of all sales being made to related party. the relevant extract of para 12 of the Circular dated 01.07.2002 is reproduced herein below: Sr. no. Point of doubt Clarification 12. How will valuation be done when goods....
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.... (xv) Furthermore, the contention of the Ld. Special Counsel for the Revenue that valuation ought to be have arrived at in terms of Rule 4 of the Valuation Rules, is also otherwise unsustainable, as Rule 4 stipulates that value of excisable goods shall be based on value of 'such goods' sold for delivery at any other time nearest to the time of the removal. Neither the SCN or the Impugned Order has demonstrated as to how clearances made to appellant's own units, which were about 59% of the total clearances, could be said to be comparable with clearances ranging from 0.001% to 8%, made to independent third parties. It is not in dispute that as against approximately 77,00,000 MT of pellets which were cleared to its own unit for captive consumption, during the period of dispute, the highest clearance to independent third parties was about approximately 11,00,000 MT, which clearly shows difference in terms of the quantity cleared by the Appellant vis-à-vis the clearances to third party and therefore the two clearances are not comparable, so as to fall within the ambit of 'such goods'. (xvi) The burden was on the Revenue to have established that the excisable goods ....
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....riate duty of excise by such units. Thus, whatever duty was paid at the dispatching unit was seamlessly availed as credit at the receiving units, without any break, blockage or loss in the credit chain. (xix) It is settled law that where credit is fully admissible, there cannot be any non-levy or short-levy or non-payment or short payment of tax so as to warrant a demand for duty under Section 11A of the Act. Reliance in this regard is placed on the following decisions: * Britco Foods Company Ltd. v. CCE, Pune, 2001 (127) ELT 73 (Tri-Mum) affirmed by * Commissioner of C. Ex., Pune vs. Coca-Cola India Pvt. Ltd [2007 (4) TMI 17 - Supreme Court] * Commr. of C. Ex. & Cus., Vadodara-II vs. Indeos Abs Limited [2010 (3) TMI 656 - Gujarat High Court] * Steel Authority of India Limited vs. Commissioner of Central Excise & Service Tax, Ranchi-I [2025 (3) TMI 565 - CESTAT Kolkata] * Steel Authority of India Limited vs. Commissioner of Central Excise & Service Tax, Ranchi I [2025 (3) TMI 258 - CESTAT Kolkata] * Steel Authority of India Limited vs. Commissioner of CGST & Central Excise, Ranchi [2025 (11) TMI 1191 - CESTAT Kolkata] ....
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....records of the Appellant. In this regard, the Department has issued a letter No. V (1) 305/IA/B-II/2011 dated 19.09.2011 requesting for documents such as Balance Sheets, Trial Balance, Annual Financial Statements, annual returns and various other statutory documents. The Appellant vide Letter dated 05.03.2012 furnished such documents. b. Audit Observation No. 1 dated 16.05.2012, wherein, it was noticed that the Appellant had made short payment of duty as per CAS-4 on clearance of goods to its units for captive consumption for the period FY 2009-10 and FY 2010-11. c. Audit Observation No. 1 dated 14.08.2013, wherein it was observed that the Appellant had short paid duty on the value determined as per CAS-4 in respect of goods cleared for captive consumption to its own units, for the period FY 2011-12. d. On 23.05.2014, the Department had initiated audit for the period FY 2012-13, while on 29.05.2014, it initiated a computer assisted audit for FY 2013-14 and for this purpose called upon the Appellant to furnish copies of balance sheet, trail balance and other documents. (xxii) It is pertinent to note that in during audit, the aspect of clearances m....
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....he cost of production which would be determined as per CAS-4. In course of audit of accounts of M/s Jindal Steel & Power Ltd, Barbil, for the year 2010-11 & 2011-12, it was found that although CAS-4 price of the goods cleared for captive consumption to its sister unit was not available with the assessee at the time of clearance of such goods, they did not follow the procedure of provisional assessment as per Rule 7 of Central Excise Rules, 2002, but paid duty on provisional prices. Later on, upon preparation of the CAS-4, they raised supplementary invoices on the revised price and paid differential duty thereon. However, there was still short payment of duty for the months of April, 2010 to October, 2010 and April, 2011 to July, 2011 to the extent of Rs. 5,35,13,056/- (Rupees Five crore Thirty five lakh Thirteen thousand Fifty six only). (Annexure-A/1 to A/2). (emphasis supplied) (xxv) It is settled law laid down by the Apex Court in the following cases that extended period of limitation cannot be invoked when divergent views are taken by the Revenue on similar facts: a. Jaiprakash Industries Ltd. v. CCE, Chandigarh [2002 (146) E.L.T. 481 (S.C.)] b. Me....
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....egories of buyers. The show cause notice covers the period January, 2010 to November, 2013. The provisions of Rule 8, 9, 10 & 11 as existed during the relevant period read as follows: Rule 8: Where 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 shall be one hundred and ten per cent of the cost of production or manufacture of such goods. Rule 9: When the assessee so arranges that the excisable goods are not sold by an assessee except to or through a person who is related in the manner specified in any of the sub- clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, the value of the goods shall be the normal transaction value at which these are sold by the related person at the time of removal, to buyers/not being related person); or where such goods are not sold to such buyers, to buyers (being related person), who sells such goods in retail: Provided that in a case where the related person does not sell the goods but uses or consumes such goods in the production or manufacture of articles, the value shall be....
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....ise Valuation (Determination of Price of Excisable goods) Rules, 2000 would apply for determination of excisable goods cleared to their sister units. (h) Chapter 3, Para 3(v) of CBEC's Excise Manual of Supplementary Instruction, 2005 provides that: "where goods are sold partly to related persons and party to independent buyers, there is no specific rule covering such a contingency, value in respect of sales to unrelated buyers cannot be adopted for sales to related buyers since as per section 4(1) transaction value is to be determine for each removal. For sales to unrelated buyers valuation will be done as per Section 4(1)(a) and for sale of the same goods to related buyers recourse will have to be taken to the Residuary Rule 11 read with Rule 9 (or 10). Rule 9 cannot be applied in such cases directly since it covers only those cases where all the sales are to be related to buyers only." (i) Aforesaid legal position has been reiterated by Board under paras 5 & 12 in their Circular no 643/34/2002-CX dated 01.07.2002. Thus, Statute is clear that provisions of CEVR Rules 8 apply only when excisable goods are not sold by the assessee but are entirely used....
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....ecisions of Tribunal [2025 (5) TMI 152-CESTAT Ahmedabad] & several other judgements/ Orders above views have been held. In the judgement of Hon'ble Apex Court in CCE Jaipur Vs. Scan Synthetics Ltd- 2008TIOL-34-SC-CX, it has been held that when independent factory sale price is available, that should be the basis for determining the value of same excisable goods captively consumed. Besides above, following case laws are relied upon:- * Avon Tubes Ltd Vs. CCE, Ludhiana [2007 (117) ECR 616 (Tribunal)] * Hindustan Copper Ltd. Vs. CCE Jaipur-I [2005-TIOL-751-CESTAT-DEL]. * Hindustan Copper Ltd. Vs. CCE, Jaipur-12006-TIOL-901-CESTAT-DEL. * Steel Complex Ltd. Vs. CCE, Calicut [2004 (171) ELT 255 (Tri.-Bang.)] (o) With regard to following judicial pronouncements relied upon by the appellant:- (i) M/s OCL India Limited [2024(6) TMI 1463 - CESTAT (Kol)] (ii) GST & CE Vs M/s OCL India Limited [2025 (5) TMI 63-SC] (iii) National Aluminium Company [2024 (4) TMI -1088 CESTAT (Kol)] (iv) Tata Steel vs Commr CGST, Rourkela [2025 (6) TMI 437-CESTAT (Kol)] the above decisions are clearly Per Incuriam wrongl....
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....nces to related persons as opposed to independent buyers, nor did they disclose in their statutory ER-1 returns the differential values or the simultaneous clearance to units with mutuality of interest. Sub-clause (iv) of clause (b) of Section 4(3) of the Central Excise Act, 1944, explicitly defines such units as "related persons." The appellant's related units operated under the same PAN-based registration and had mutual financial interest, leaving no ambiguity whatsoever regarding their status as related persons under Section 4(3)(b) of the Central Excise Act, 1944. Consequently, they were fully aware that transactions with such related units fell squarely within the purview of the valuation provisions under Rule 11 of the Central Excise Valuation Rules, 2000 (CEVR). - The statutory scheme under Section 4 of the Central Excise Act, 1944, read together with Rules 8, 9, and 11 of the CEVR, and further reinforced by CBEC Circular F.No. 6/39/2000-CX-I dated 01.07.2002 and Para 3(v) of Chapter 3 of the CBEC Manual, leaves no room for doubt: where goods are cleared to both independent buyers and related persons, valuation must be undertaken strictly under Rule 11. There is no ....
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....espite the unequivocal provisions of the statute. Thus, all the essential elements of suppression, as required under the proviso to Section 11A(1) of the Central Excise Act, 1944, are fully satisfied. (s) Accordingly, the invocation of the extended period of limitation is both legally justified and entirely appropriate. 6.1. On the basis of the above submissions, the Ld. Special Counsel for the Revenue prayed that the appeal be rejected. 7. Heard the parties and considered their submissions. 8. We find that the following issues emerge from the submissions made by both the sides: - (1) Whether the appellant is correct in following Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 ["the Valuation Rules" for short] for arriving at the value in respect of clearances of goods to their own units at Angul and Raigarh, when most of the quantity of such goods manufactured by them is cleared to their own units and part of the quantity is cleared to third party buyers, or not. (2) Whether it is a case of revenue neutrality, or not. (3) Whether the extended period of limitation can be invoked in the facts....
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....of 2018 [2024 (6) TMI 1463 - CESTAT, Kolkata], wherein the facts of the case were as under: - "2. The facts of the case are that the appellant is engaged in manufacture of clinker cement. Clinker is the intermediate product to manufacture cement. The appellant has two other unit at Kapilas Cement Works, Cuttack in the State of Odisha and Bengal Cement Works at Medinapore, in the state of West Bengal which are engaged in manufacture of cement. For all three units the appellant have opted separate registration. The clinker manufactured in appellant's unit was utilized as follows: a. Captively consumed by the Appellant (Rajgangpur unit) to manufacture cement b. Stock transferred to Kapilas unit to manufacture cement. c. Stock transferred to Bengal unit to manufacture cement starting 2014, and d. Sold to independent buyers at 'transaction value' (in very meager proportion of 2% to 5%) 3. On stock transfer of clinker, the Appellant paid excise duty at 110% of cost of production in accordance with Rule 8 of the Central Excise Valuation Rules, 2000 ('Valuation Rules'). The Kapilas and Bengal units availed Cenvat Cre....
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....#39;s Circular No. 258/92/96-CX, dated 30-10-96 [1996 (88) ELT T9], may be deemed to be modified accordingly so far as it relates to determination of cost of production for captively consumed goods. 5. This Circular may be brought to the notice of the field formations. 6. Suitable Trade Notices may be issued for the benefit of the Trade. 7. Hindi version will follow. 8. Receipt of these instructions may be acknowledged." In view of the above, the Circular clarified the position that the cost of production of captively consumed goods will be done strictly in accordance with CAS-4. Admittedly, in this case also, the appellant has adopted the above said Circular and was paying duty as per CAS-4 in terms of Rule 8 of the Valuation Rules. 8. Further, in the appellant's own case for the earlier period, this Tribunal vide order dated 04.03.2005, has observed as under: "5. A perusal of the Circular dated 13-2-2003 makes it clear that what is being advised under that circular is to follow "the general principles of costing". The Circular also makes it clear that "ICWAI has since developed the costing standards.....". About t....
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....thout considering the modifications subsequently made in them. The issue considered in the Eswaran & Sons Engineers Ltd. judgment war altogether different. It was as to what was the effect of a subsequent circular on a demand which had been raised prior to the issue of a circular. The Court observed as under: "13. Under Section 378 of the Act, the Board is empowered to issue instructions to Central Excise Officers, for the purpose of uniformity in the classification of excisable goods, which instructions, are required to be followed by such officers. However, under proviso (a) to Section 37B an exception is made. The said proviso states that the said Instructions, orders or directions cannot make any Central Excise Officer to dispose of a particular case in a particular manner. Similarly, under proviso (b) such Instructions, shall not bind the discretion of Commissioner of Central Excise (Appeals), appellate In view of the proviso to Section 37B, the said Circular dated 14-7- 1994 issued by the Board was not applicable to the facts of the present case, As stated above, in the present case, the Assistant Collector had taken a prima facie view for purposes ....
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.... the Larger Bench of this Tribunal held that the assessable goods transferred to another plant of the same assesse is required to determine the value as per Rule 4 of the Valuation Rules as the goods were sold to the independent buyers also. 10. We find that said decision is distinguishable on the facts of the case, as in that case, the goods were cleared to another plant not for captive consumption whereas in the case in hand, the goods in question have been cleared to their sister unit for captive consumption in manufacturing of excisable goods i.e. aluminium, which has been cleared by the appellant on payment of duty. Therefore, the said decision cannot be applied to this case. 11. We further take note of the fact that the Circular dated 13.02.2003 on the basis of which the appellant paid the duty is binding on the Revenue as held by the Hon'ble Apex Court in the case of Ratan Melting and Wire Industries (supra) 12. Therefore, we hold that the appellant has correctly paid the duty on the goods in question, which has been captively consumed by the sister unit for manufacturing of excisable goods in terms of CBEC Circular No 692/8/2003-CX dated 13.02....
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....ferential duty demand is not called for. Some of the decisions on identical issues are given below : Steel Authority of India Limited v. Commissioner of Central Excise & Service Tax, Ranchi-I, 2025 (3) TMI 565- CESTAT Kolkata "3. The appellant submits that the entire demand is not sustainable on the ground of revenue neutrality. The final product cleared from the Appellant's factory to their other units are used by the other factories in the manufacture of their dutiable finished products which are cleared by them on payment of applicable excise duty. The other factories of the Appellant are availing the credit of duty paid by the Appellant and utilizing the same for payment of duty on the final product cleared. Thus, the Appellant submits that the differential duty confirmed shall be available as credit to the Appellant's other factories/units. Hence, demand of differential duty is clearly revenue neutral. .... 6.1. We observe that the issue is no longer res integra, as this Tribunal has already decided this issue in the Appellant's own case Steel Authority of India v. Commissioner of Central Excise & Service Tax, Ranchi I, vide Final Order No. ....
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....ts." 11.3. Therefore, in that view, if duty is paid by the appellant, the same would be available as CENVAT Credit to the appellant in their own unit and in these circumstances, we hold that it is a revenue neutral situation. Issue No. (3): Whether the extended period of limitation can be invoked in the facts and circumstances of the present case, or not. 12. The Ld. Counsel for the appellant has also submitted before us that periodical audits had been conducted in their unit during the impugned period, on 16.05.2012 and 14.08.2013, but nowhere was any observation made as to there being an infirmity in the value determined by the appellant under Rule 8 in terms of Cost Accounting Standard-4 (CAS-4). In these circumstances, we find that the issue to be decided is whether the Show Cause Notice issued to the appellant on 11.12.2014 is barred by limitation or not. 12.1. The said issue has been examined by the Hon'ble Apex Court in the case of Commissioner, Service Tax v. Spicejet Ltd. [(2023) 10 Centax 275 (Tri. - Del.) = 2023 (79) G.S.T.L. 271 (Tri. - Del.)] wherein the facts of the case were that during the audit of records of the respondent therein (i.e., M/s. Spicejet L....