2013 (1) TMI 662 - AT - Central Excise

Tribunal rules in favor of cigarette manufacturer in excise duty dispute

The Tribunal ruled in favor of the appellant, a cigarette manufacturer, in a dispute over the valuation of captively consumed goods for excise duty ... Captive Consumption – Is it compulsory to add the profit margin, to arrive at the assessable value of captively consumed goods – Assessee is the manufacturer of cigrates – Filed a price declaration of captively consumed goods – But did not include any profit margin while arriving at the value of the captively consumed goods – Show cause notices were issued demanding differential duty - Held that:- company has been making losses consistently since 1995-96 onwards up to 1999-2000 and the period of demand involved in the case is from April, 1997 to March, 1998. Therefore, it is not a case of the company making a loss for a given year and making profits in other years. As decided in the case of CCE, Aurangabad v. Raymonds Ltd. [2006 (10) TMI 7 SUPREME COURT OF INDIA] - Wherein it was held that profit margin has to be added taking into account the actual profits made in a given year. – Granted complete waiver of the pre-deposit of the dues adjudged and stay recovery thereof during the pendency of the appeal – In favour of assessee. Issues:1. Valuation of captively consumed goods for excise duty calculation.Analysis:The case involved an appeal against an order passed by the Commissioner of Central Excise (Appeals) concerning the valuation of captively consumed goods by a cigarette manufacturer. The manufacturer, incurring losses, did not include any profit margin while determining the assessable value of the goods. The dispute arose when show cause notices demanded differential duty, contending that a notional profit margin of 10% should have been included. The lower authorities upheld the duty demands, leading to the appeal before the Commissioner (Appeals).The appellant argued that due to continuous losses from 1995-96 onwards, no profit element should be included in the assessable value calculation. Referring to a Board Circular and a Supreme Court judgment, the appellant emphasized that profit margin determination for captively consumed goods should consider actual profits made in a given year, not a notional basis. The appellant presented balance sheets showing losses, supporting their stance that no profit margin should be added.The Revenue, represented by the SDR, reiterated the lower authorities' findings, asserting that even in the presence of losses, a profit should be added on a notional basis. The Tribunal, after considering the arguments, distinguished the facts from a previous case and noted the consistent losses incurred by the appellant. Referring to the Supreme Court judgment in a related matter, the Tribunal concluded that no notional profits should be added since the appellant had not made profits for several years. Consequently, the Tribunal granted a complete waiver of the pre-deposit of the duty and interest, staying the recovery during the appeal's pendency.This judgment clarifies the principles governing the valuation of captively consumed goods for excise duty purposes, emphasizing the importance of considering actual profits rather than notional margins, especially in cases where the taxpayer has been consistently incurring losses.