Cost of manufacture dispute: manufacturing-linked overheads includible, selling expenses excluded, and stay refused on prima facie review.

In a prima facie stay application on whether certain head office and selling-related expenses formed part of the cost of manufacture of captively consumed goods, expenses linked to factory maintenance, raw material procurement, and dealings with persons connected to manufacture were treated as includible. Research and development costs connected with manufacture, and packing expenses, were also treated as includible. Selling expenses were treated as not prima facie includible, leaving the applicant with a case only on publicity charges. On that basis, the stay of operation of the impugned order was refused.

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Issues: Whether the operation of the Commissioner (Appeals) order was fit to be stayed in proceedings concerning inclusion of head office, administrative, research and development, publicity, packing and selling expenses in the cost of manufacture of captively consumed goods.

Analysis: The application was considered only at the prima facie stage. Expenses relatable to the maintenance and upkeep of the factory, procurement of raw material, and dealing with persons connected with manufacture and procurement were treated as includible. Research and development expenses connected with manufacture were also treated as includible, as were packing-related expenses. Selling expenses were treated as not prima facie includible. On this view, the applicant was held to have no case except in relation to publicity charges.

Outcome: Stay of operation of the impugned order was refused and the appeal was dismissed.

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