Captive Consumption

Agarwal Shraff & Co. Chartered Accountants Central Excise procedure for transfer of goods to a sister unit or another factory of the same company For clarification of doubt regarding valuation to be done in case of transfer to a sister unit or another factory of the same company for further use in the manufacture of goods circular no. 643/34/2002-cx dated 1st July, 2002 was issued. Point no. 5 of the above circular stated that where goods are transferred to a sister unit or another unit of the same company valuation will be done as per proviso to rule 9 of The Central Excise (Valuation), 2000. Proviso to Rule 9 The Central Excise (Valuation), 2000 states that where the related person does not sell the goods but uses or consumes such goods in the production or manufacture of articles, the value shall be determined in the manner specified in rule 8 Rule 8 The Central Excise (Valuation), 2000 states 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 one hundred and fifteen percent of the cost of production or manufacture of such goods. For calculating cost of production it has been clarified vide circular no. 692/08/2003-cx that cost of production will henceforth be in accordance with the Cost Accounting Standard – 4 issued by The Institute of Cost & Works Accountants of India on 23.1.2003.