2011 (4) TMI 141 - AT - Central Excise

CESTAT Upholds Decision on Valuation of Intermediate Products

CCE, Chennai Versus M/s. Eveready Industries (I) Ltd.,

The Appellate Tribunal CESTAT, Chennai upheld the Commissioner (A)'s decision regarding the valuation of intermediate products transferred between ... Valuation of intermediate products - Rule 8 of Central Excise Valuation Rules, 2000 the value is to be determined based on cost of production + 15% notional margin - The company is maintaining cost accounting records as required under Section 209 (1) (d) of the Companies Act - The cost of materials consumed includes materials transferred from other units of the company valued as per Cost Accounting Records maintained U/S 209 (1) (d), in accordance with Clause 6 of CAS 4 – As per the case of Union Carbide India Ltd. Vs Collector of Central Excise, Calcutta [2003 (9) TMI 89 - SUPREME COURT OF INDIA], – Appeal in fovour of the assessee. Issues: Valuation of intermediate products transferred between factoriesAnalysis:The judgment by the Appellate Tribunal CESTAT, Chennai revolves around the valuation of intermediate products transferred between factories. The Revenue challenged the Commissioner (A)'s decision upholding the adjudicating authority's order regarding the valuation of products transferred from one factory to another. The Tribunal referred to its Final Order No. 542/10 dated 11.05.10, which settled the issue in favor of the assessees based on the Cost Accountant certificate certifying the cost of material in accordance with cost accounting standard-4 (CAS-4) as instructed by the CBEC. The Tribunal emphasized that the cost of production for determining the assessable value of goods captively consumed should be computed in accordance with CAS-4, excluding marketing costs, corporate overheads, and interest. The judgment highlighted the importance of considering the actual cost incurred for raw materials and not including notional profits while determining the cost of production. The Tribunal also relied on certificates issued by Chartered Accountants to ascertain the cost of production for different products. The judgment cited a previous case where the Supreme Court held that in the case of captive consumption, the cost of production should include the actual cost together with notional profit, a method prescribed in CAS-4 and followed by the assessees. The Tribunal upheld the impugned order, rejecting the Revenue's appeal and cross-objection.Furthermore, the Commissioner (A) also determined that the correct method is to adopt the actual cost of material during the year, rather than on a notional or average basis. This decision aligns with the Tribunal's earlier order in the assessee's case, confirming that the adoption of the actual cost of material during the year is legally sound. Therefore, the Tribunal upheld the impugned order and dismissed the appeal, emphasizing the importance of adhering to the actual cost of material for valuation purposes.