Inter Unit Transfer of goods among three units - CESTAT Larger Bench holds cost of material at Second unit does not include notional profit of 15%/10%
1. ITC, Bhadrachalam clears paper to its own unit, ITC, Chennai and pays duty on 110% of the cost of production, as per Rule 8 of the Valuation Rules.
2. ITC, Chennai uses the paper as raw material for manufacturing packaging materials which is cleared to own units of ITC.
3. Cigarette units of ITC use the packing material.
The question is, “What is the value for payment of duty payable by ITC, Chennai?”
This was the question before the Larger Bench of the CESTAT.
The issue referred for resolution is:
(i) 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 cost) excluding notional loading (i.e. 15°/o / 10%) of the goods manufactured by the one unit,, would be the cost of raw material of the another unit (who used the goods in the manufacture of another article) for the purpose of determining value under Rule 8 of Valuation Rules and CAS-4 issued by ICWAI, for transferring the goods to their other unit for further use.
(ii) Whether the decision of Chennai Bench in the case of CCE Vs Eveready Industries Ltd. - (OR) the decision of Mumbai Bench in the case of Tata Iron and Steel Co. Ltd. Vs CCE - had enunciated the correct position of law on the above issue.
The CESTAT Larger Bench resolved the issue last week in Chennai. Please See Breaking News for the solution.