Order Nos. A/2095-2096/2011-WZB/AHD in Appeal Nos. E/2931-2932/2006. Case: Commissioner of C. Ex., Ahmedabad Vs Kissan Industries Ltd.. CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal)
| Case Number | Order Nos. A/2095-2096/2011-WZB/AHD in Appeal Nos. E/2931-2932/2006 |
| Counsel | For Appellant: Shri M. A. Patel, Consultant and For Respondents: Shri R. S. Sangia, SDR |
| Judges | Ms. Archana Wadhwa, Member (J) and Dr. P. Babu, Member (T) |
| Issue | Central Excise Act, 1944 - Sections 4, 11AB; Central Excise (Valuation) Rules, 1975 - Rule 6(b)(ii) |
| Citation | 2012 (280) ELT 276 (Tri. - Ahmd.) |
| Judgement Date | June 22, 2011 |
| Court | CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal) |
Order:
Archana Wadhwa, Member (J)
1. M/s. Kisan Industries, Ahmedabad (M/s. KI for short) were engaged in manufacture of various excisable products. It was alleged by the Department that the transactions between the assessee and M/s. Nirma Ltd. (M/s. NL for short) were not on principal to principal basis as M/s. NL enjoyed special relationship with the said assessee. Therefore, it was alleged that the assessable value at which the assessee discharge duty on packing materials may be considered as normal price. A Show Cause Notice was issued to the assessee demanding Central Excise duty of Rs. 2,97,77,479/- (Rupees Two Crores, Ninety Seven Lakhs, Seventy Seven Thousands, Four Hundred and Seventy Nine only). On adjudication, the adjudicating authority dropped the proceedings initiated vide Show Cause Notice. Revenue is in appeal against this order of adjudicating authority.
2. The grounds of appeal are as follows:
"1. The adjudicating authority has erred in re-computing the quantum of Central Excise duty inasmuch as:
(i) Para 3 of Circular No. 692/8/2003-CX, dated 13-2-2003 clarifies that henceforth the cost of production captively consumed goods will be done in accordance with CAS-4. The word "henceforth" clearly implies the effect of the Circular is prospective in nature and not retrospective. However, in the instant case, the adjudicating authority has applied the CAS-4 principles even though the period involved is prior to the issuance of the said circular i.e. the years 1996-97 and 1997-98. Thus, the adjudicating authority has erred in computing the cost of production in accordance with CAS-4.
(ii) Interest on working capital has not been considered as a part of the cost of production in terms of CAS-4 principles. However, during the relevant period, CAS-4 was not applicable as discussed above and it formed a component of the cost of production for the determination of assessable value. In the case of Bombay Tyre International Ltd. 1983 (14) ELT 1896 (SC), it has been held by Hon''ble Supreme Court that "In cases where the sale is effected at the factory gate, the expenses incurred by the assessee upto the date of delivery on account of storage charges, handling charges, interest on inventories (stock carried by the manufacturers after clearance), charges for other services.... cannot be deducted because these expenses promote marketability of the article and thus enter into its value in the trade."
(iii) The conclusion derived at by observing the standards of CAS-4 regarding ''Abnormal and non-recurring cost'' at Para 24.4 of the impugned order is erroneous inasmuch as the CAS-4 standards were not applicable for the period in question as discussed above.
(iv) As per the accounting principles, the fixed overheads are not to be apportioned. The fixed costs are to be computed on actual basis inasmuch as the said costs are actually...
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