TaxTMI 
TaxTMI 
2026 (6) TMI 1102
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....its at Hirakud and Renukoot on payment of duty. The Respondent avails CENVAT credit for the duty paid on the aforesaid raw materials received from their own factories/units on the basis of excise invoices issued by them. Such products received by the Respondent are worked upon by the Respondent and subsequently, the final products are cleared to the Respondent's own factories/units at Hirakud, Kollur, Mouda, Kalwa, Muri, Belgaum, Taloja, Silvassa, Alupuram, etc. 2.2 The assessable value of the inter-unit transfers is determined by cost-construction method, i.e., 110% of the cost of production. The cost of production determined for the final products cleared to the other factories/units of the Respondent is the sum total of the landed cost of metal products as raw materials received from other units and fabrication cost incurred for manufacture of final product at Belur factory. 2.3 Therefore, for determination of assessable value under the Central Excise Act, 1944, the cost of production is calculated based on CAS-4 certificate received from the Cost Accountant. 2.4 While maintaining books of accounts, the Respondent follows an accounting practice for management informatio....
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....nsidering such submissions, the underlying Order-in- Original confirmed the demand of excise duty along with interest and penalty, by applying Rule 8 of the Central Excise Valuation Rules, 2000 by adopting the internal/ notional 'transfer price' of the inputs received from other units, instead of the actual costs incurred while arriving at the cost of production of the rolled products stock transferred by the Respondent to its other units. The impugned Order-in-Original further states that the Respondent deliberately misstated their assessable value and attempted to prepare CAS-4 on the basis of wrong or mis-declared cost of production and hence, the extended period is rightly invoked. 2.9 Being aggrieved by the underlying Order-in-Original, the Respondent preferred an appeal before the ld.Commissioner (Appeals) of CGST & Central Excise, Kolkata, who set aside the entire demand based on the following findings: (i) The Respondent correctly valuated the goods in accordance with Rule 8 read with the CBEC Circular No.692/8/2003-CX dated 13.02.2003 which provide for valuation in accordance with CAS-4. (ii) Reliance was placed upon the decision pronounced in the case....
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.... being covered by the decision of this Tribunal in the respondent's own case i.e. Hindalco Industries Ltd. Vs. Commissioner of Central Excise & Customs, Kolkata II : 2023 (8) TMI 1676 CESTAT-Kolkata and CCEx. & CGST, Howrah Commissionerate, Kolkata Vs. M/s Hindalco Industries Ltd. : 2025 (11) TMI 1335-CESTATKolkata. 4.3 He further submits that even as per Circular No. 692/8/2003-Cx dated 13.02.2003 issued by the CBIC, it has been duly clarified that the cost of production of captively consumed goods should be done strictly in accordance with CAS-4 as issued by Cost Accountant. Therefore, the differential valuation attempted to be adopted by the Department is in direct contravention to this Circular, which as per the trite law, is binding on the Revenue. Reliance in this regard is placed on the decision of UOI v. Arviva Industries (I) Ltd., 2007 (209) E.L.T. 5 (SC). Hence, in compliance with Circular No.692/8/2003-Cx, the Respondent has correctly valued the cost of production in accordance with the CAS- 4 certificate issued by the Cost Accountant. 4.4 Therefore, the impugned Order-in-Appeal rightly upheld that the valuation adopted by the Respondent is in accordance with the C....
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....quired details were furnished in the periodic returns. In the instant case as well, the Respondent duly disclosed the required data in ER-1 returns, and therefore, as per this decision, the extended period of limitation is not invokable. 4.7 Hence, he submits that the entire demand has been rightly set aside by the ld.Commissioner (Appeals) of CGST & Central Excise, Kolkata II. 5. Heard both the parties and considered the submissions. 6. After considering the submissions made by both the sides, we find that the following issues have been framed for consideration : (i) Whether the cost of production as per CAS-4 adopted by the Respondent has to be arrived at on the basis of actual costs of inputs, fabrication etc. or on the basis of 'notional transfer price' adopted by the Respondent for its internal profitability assessment of units? (ii) Whether the extended period of limitation can be invoked for a periodical Show Cause Notice? (iii) Whether the demand can be sustained where the entire demand is revenue neutral ? Issue No.(i) Whether the cost of production as per CAS-4 adopted by the Respondent has to be arrived at on the basis of a....
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....sed on the actual landed cost of materials/ inputs as well as actual fabrication cost and other manufacturing costs, which have been incurred by the Appellant. It does not include any notional values. We observe that the finding of the Ld. Commissioner that the transfer price recorded in the books of accounts of the units should be adopted as cost of raw material for the purpose of CAS-4 certificate is incorrect since such price is only a notional value for internal accounting purposes and such notional value is neither recorded nor its impact is captured in the financial statements of the Appellant. 12. In this regard, the Appellant relied upon the decision of the Tribunal, chennai in the case of ITC Limited v. CCE, Chennai I 2015 (315) E.L.T. 143 (Tri. Chennai), wherein on identical set of facts, the Department wanted to include the value of IDSC/ICNS debit notes issued for inter-plant transfers 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 t....
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....ainable. Since the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise. 16. In view of the above discussion, we set aside the impugned order and allow the appeal filed by the Appellant." 8. Again, on the identical issue, this Tribunal in the case of CCE & CGST, Howrah Commissionerate, Kolkata v. M/s. Hindalco Industries Ltd., 2025 (11) TMI 1335 - CESTAT Kolkata, has held as under : "8. The 'transfer price' adopted in the internal accounting cannot be a basis for computing the cost of production since such transfer price adopted in the financial records has no relation to the cost of production and is only a notional price linked to prices prevailing at the London Metal Exchange. It is to be noted in this context that the transfer price adopted is solely for the purpose of management information to arrive at the profitability of the units and to comply with the Accounting Standards. This has also been clarified by the Cost Auditor as well as the Statutory Auditor of the respondent by way of certificates. 8.1. We also take note of the submission made by the respondent that at the time of consolidation ....