As a relief to ITC, the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) of Chennai Bench set aside the demand for excise duty and penalty.
Ms L. Maithili, Advocate appeared for the Appellant and Smt. K. Komathi, Additional Commissioner appeared for the Respondent.
The Tribunal vide Interim Order No. 37/2014 dated 11.02.2014 had decided the Issues No. 1 and 3 therein and had set aside the demand of duty along with interest and penalty. The issue was whether the IDSC/ICNC debit note raised by Bhadrachalam Unit has to be considered as a component of the cost of raw materials of the appellant and whether the unabsorbed overheads due to idle capacity have to be included in the cost of production.
The Issue before the Larger Bench is Whether, in the case of inter-unit transfer of goods for captive consumption, the entire value (i.e. 115% / 110% of the cost of production) OR the actual cost of production (i.e. 100% of the cost) excluding notional loading of the goods manufactured by the one unit, would be the cost of raw material of another unit to determine value under Rule 8 of Valuation Rules and CAS-4 issued by ICWAI, for transferring the goods to their other unit for further use.
It was held that 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 appellantis 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 excise duty by the Bhadrachalam unit cannot however be considered as comprised in the cost of the raw material consumed for the manufacture of packaging material and thus constituting the cost of production at the Chennai unit;
In light of the decision by the Larger Bench, the Tribunal comprising of Ms Sulekha Beevi C S, Member (Judicial) and Mr Vasa Seshagiri Rao, Member (Technical) set aside the demand, interest and penalties.
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