2025-VIL-1093-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Valuation of goods cleared to sister unit, Captive Consumption, Third Party Sales - Appellant cleared goods to its sister units for captive consumption and also sold the same goods to independent third-party buyers. The Revenue sought to assess the goods cleared to sister units based on Rule 8 of the Central Excise Valuation Rules, 2000 - The assessee contended that since they had contemporaneous sales to unrelated buyers, the assessable value should be determined based on the transaction value of such sales as per Rule 4, rendering Rule 8 inapplicable - Whether Rule 8 of the Central Excise Valuation Rules, 2000, is applicable for valuing goods cleared to a sister unit when the assessee also sells a part of the same goods to independent buyers - HELD - Rule 8 applies only in a situation where the entire production of excisable goods is captively consumed and not sold. When an assessee clears a part of the total production to third parties, the value for clearances to sister/related units must be the transaction value of sales to such independent buyers, not the value derived from the costing method under Rule 8 - The Larger Bench of the Tribunal has held that Rule 8 will not apply where some part of the production is cleared to independent buyers and that Rule 4 is to be preferred over Rule 8 as it is more consistent with the parent statute - The assessee produced ledger extracts which clearly demonstrated sales to various third-party, unrelated buyers. Therefore, the assessee was not required to follow the costing-plus-profit margin method prescribed under Rule 8 for determining the assessable value - The demand for differential duty on the ground of incorrect valuation was set aside - Further, when the excise duty paid by one unit is fully available as CENVAT credit to the receiving sister unit of the same assessee, the situation results in revenue neutrality. In such a scenario, there is no financial gain to the assessee by adopting a lower assessable value, and therefore, no motive to evade duty can be attributed. Consequently, the invocation of the extended period of limitation is not permissible as the ingredients for alleging suppression of facts with intent to evade duty are absent. Since the department was aware of the valuation through the assessee's monthly returns, there was no case of suppression - The demand was set aside on the grounds of revenue neutrality and also as being barred by limitation – The impugned order is set aside and the appeal is allowed - Whether a demand for excise duty can be confirmed solely on the basis of an uncorroborated debit note found during a search, without any evidence of the actual receipt of consideration - HELD - A demand cannot be sustained merely on the basis of a document like a debit note without any direct or corroborative evidence to prove its authenticity and the actual realization of the amount by the assessee. Documents or statements can raise doubts but cannot be taken as conclusive proof of clandestine removal in the absence of corroborative evidence such as statements from buyers or discrepancies in stock. Since the department failed to provide any evidence to corroborate that the assessee had received the amount mentioned in the debit note, the demand was not legally sustainable - The demand based on debit note is set aside.
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