2015 (11) TMI 605 - SC - Central Excise

Court upholds Tribunal decision on excise duty cost calculation, dismisses Department's appeal

The Court affirmed the Tribunal's decision that disputed cost elements should not be included in the cost of production calculation for excise duty ... Valuation of goods - Undervaluation - determination of cost of production as per CAS-4 - inclusion of interest expenditure, depreciation and profit margin - Clearance of goods to sister concern - Captive consumption - Held that:- The impugned order of the Tribunal shall reflect that the Tribunal has kept in mind the Costing Accounting Standard – 4 (CAS-4) as adopted by the Department itself. On that basis, it has come to the conclusion that the three elements of cost which were sought to be included by the Department could not be the factors which would be taken into consideration for arriving at the cost of production. After going through the reasons given by the Tribunal in support of the conclusions, we find no error therein. - Decided against Revenue. Issues Involved:Alleged under valuation of Linear Alkyl Benzene (LAB) for excise duty payment based on costing method prescribed by Valuation Rules, 2000.Detailed Analysis:The issue in the present appeal revolves around the alleged under valuation of Linear Alkyl Benzene (LAB) by the respondent for excise duty payment. LAB is an intermediary product used for manufacturing Nirma Detergent products. The respondent has been paying excise duty on LAB, but the dispute arises regarding the valuation method for excise duty payment. Both parties agree to use Rule 8 of the Valuation Rules, 2000, which prescribes the cost method for valuation.The Department issued five show-cause notices to the respondent, alleging that the costing method used resulted in under valuation and lesser duty payment. The respondent objected to the inclusion of certain cost elements in the Department's formula, leading to the dispute over the cost calculation.The Tribunal, in its judgment, found that three elements of cost proposed by the Department should not be included in the cost of production calculation. It also held that the first show-cause notice was time-barred for the other four notices. The Tribunal considered Costing Accounting Standard - 4 (CAS-4) adopted by the Department and concluded that the disputed cost elements should not factor into the cost of production.The Department's senior counsel challenged the Tribunal's decision, arguing for a fresh examination of the demand in light of the four show-cause notices. However, the Court disagreed with this contention and upheld the Tribunal's decision. The Court found no error in the Tribunal's reasoning based on CAS-4 and dismissed the appeal.In conclusion, the Court dismissed the appeal, affirming the Tribunal's decision that the disputed cost elements should not be included in the cost of production calculation for excise duty payment.