The amendment to Rule 8 of the Central Excise Valuation Rules, 2000, which allows valuation at 110% of cost for captive consumption even when part of the goods are sold to independent buyers, is retrospective in application.

Heard both sides and perused the case records.

2. Brief facts of the case are that the appellants are inter alia, engaged in the manufacture of PVC Resin, PVC Compound, PVC Pipes & fittings thereof, falling under Chapter 39 of First Schedule to the Central Excise Tariff Act, 1985. The appellants clear the said excisable goods to the independent buyers as well as captively consume the same in their other unit for manufacture of PVC pipes and fittings. For selling the goods to the independent buyers, the appellants had adopted the value in terms of Section 4(1)(a) of the Central Excise Act, 1944 and in respect of clearances made to their sister concern, they had adopted the value under Section 4(1)(b) ibid read with Rule 8 of the Central Excise Valuation (Determination of Price of the Excisable Goods) Rules, 2000. The adoption of value for the captively consumed goods under Rule 8 ibid was objected to by the Department on the ground that the valuation should be done under Rule 4 of the Valuation Rules, 2000. On the basis of such understanding, show-cause proceedings were initiated against the appellants, which culminated into the adjudication order dated 16.03.2016, wherein the learned Commissioner of Central Excise and Service Tax, Kolhapur has confirmed the differential Central Excise duty along with interest and also imposed penalty on the appellants. Feeling aggrieved with the impugned order dated 16.03.2016, the appellants have preferred this appeal before the Tribunal.

3. The issue involved in the present appeal for consideration by the Tribunal is, whether in respect of excisable goods cleared to the sister concern, the appellants are required to follow Rule 8 or Rule 4 of the Valuation Rules, 2000 as claimed by the Department. Rule 8 of the Valuation Rules, 2000 provides that 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 110% of the cost of production or manufacture of such goods. Rule 8 of the Valuation Rules, 2000 underwent amendment w.e.f. 01.12.2013 by Notification No. 14/2013-C.E. (N.T.) dated 22.11.2013, providing that the said rule would be applicable, where whole or part of 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. In such an eventuality, the value shall be 110% of the cost of production or manufacture of such goods. The appellants at this stage had adopted the valuation procedure provided under Rule 8 ibid. However, Department has objected to the fact that unamended Rule 8 was effective upto 30.11.2013, and only captive consumption of excisable goods alone would fall under the purview of Rule 8 ibid and the scope thereunder would not be extendable in the case, where the goods are also sold to the independent buyers.

4. The issue, whether sale to independent buyer should be provided with different treatment, in comparison to the goods consumed captively in the unit of the manufacture as provided in the amended Rule 8 of the Valuation Rules, 2000 has been dealt with by this Bench of the Tribunal in the case of Ultratech Cement Ltd. Vs. Commissioner of CGST, Nagpur and vide Final Order No. A/87621/2024 dated 04.11.2024, the Bench has recorded the following observations: -

“7.3 Deriving the concept of transaction value contained in Section 4 ibid, the appellants had determined the value, at which clinkers would be remove