CESTAT Rejects Cost based Valuation for Prototype Vehicles

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal, set aside the excise demand raised by the Revenue on prototype commercial vehicles transferred to another unit for testing. 

The Tribunal held that Rule 8 of the Central Excise Valuation Rules, 2000, which mandates valuation at 110% of the cost of production for captive consumption, was inapplicable since prototype vehicles used for testing are not consumed in the manufacture of any further excisable goods. 

The Tribunal reaffirmed that valuation should be determined under Rule 4 based on the value of comparable goods.