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INDIRECT TAX QUERY

CA Sidhi Gaur (Chartered Accountant) (247 Points)

07 November 2009

Cental excise Valuation( Determination of price of excisable goods)Rules 2000, Applicability of Rule 8 in case of goods partly sold and partly captively consumed.

AS PER Circular no. 643/34/2002, goods partly sold shud be valued as per transaction value and goods partly captively consumed shud be valued as per Rule 8..

BUT according to TRIBUNAL's decision in ISPAT IND. LTD. 2007, when goods r captively consumed entirely then Rule 8 is applicable otherwise Rule 4.

Plz clarify the situation regarding parlty captive consumption.

thanx in advance..

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2 Replies

Ashish Ojha (Chartered Accountant) (469 Points)
Replied 05 December 2009

If we look at the language of the Rule 8-

"Where the excisable goods are not sold by the assessee but are used for the consumption by him in the production or manufacture of other articles, the value shall be 110% of the cost of production or manufacture of such goods"

In the language it is not mentioned that entire stock of goods should be used, thus if also read rule 11 which provides for-

if the value of excisable goods cannot be determined using the foregoing rules, the value should be determined using reasonable means consistent with the principles and provisions of these rules and section 4(1) of the Act.

thus notional amount of 110% should be used for captively consumed part and transaction value for the sold part..

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Swati (CA) (76 Points)
Replied 06 December 2009

Dear Sidhi,

Right or wrong, the judgement in the case of Ispat Ind holds the field today. Therefore, if the goods identical to intermediate goods are also sold in the market, the intermediate goods are to be valued at transaction value of the goods sold in the market.

However, if the entire production of IGs is captively onsumed, the valuation will be as per 110% of the COP of the intermediate goods.