XYZ Ltd. a manufacturer, produced a product "A" by using raw material X on 28-2-2017. Product "A" is movable, marketable and excisable. Product "A" was issued for captive consumption to product "B" on March 2, 2017. Prod

As per the Cost Accounting Standard - 4 issued by the Institute of Cost Accountants of India 'CMA' "captive consumption" means consumption of goods manufactured by one division or unit and consumed by another division or unit of the same organization or related undertakings for manufacturing other product or products. Goods for captive consumption are also known as intermediate goods. Intermediate goods are liable to excise duty only, if they are movable and marketable. In the case of Moti Laminates (P) Ltd. vs CCE (1995) , it was held by the Apex Court that the articles in crude and elementary form are not dutiable as they are merely in nature of intermediate products but not marketable in that condition. So, far as the valuation of such intermediate goods is concerned, they are valued at 110% of the cost of production. As per Rule - 5 of the Central Excise Rules, 2002, the applicable rate of duty on such goods will be the duty prevailing on the date when such goods are removed from the factory or warehouse for captive consumption. The intermediate product shall be liable to excise duty even if the final product is wholly exempt or chargeable to zero rate of duty. In the instant case product A is movable and marketable and will be liable to excise duty even if final product B is exempt from duty. The rate of duty applicable on intermediate goods as per rule 5 will be the rate applicable on the date when the product A was removed for captive consumption i.e. March 2, 2017 and the excise duty shall be payable on the value of ₹15,00,000/- @ 6% = ₹90,000/-