2016 (8) TMI 975 - AT - Central Excise

Tribunal orders fresh cost assessment based on CAS-4, urges collaboration for accurate determination

The Tribunal remanded the case for a fresh assessment, emphasizing the need for a detailed determination of costs based on CAS-4 principles. It ... Correct cost of engines - manufacture of automotive IC engine - cost audit report submitted by the appellant was on the basis of CAS-4 and certified by their Cost Accountant - Held that:- no details for arriving at a different cost than the one submitted by the assessee stand given by the authorities below apart from making wide and blanket observations. We have also gone through the illustrations of CAS-2 for taking up the normal production which allows the average of 3 greater production during the last 5 years. However, the appellate authority has observed that this cannot be adopted inasmuch as the CAS-2 does not talk about duty. We are of the view that the cost of engine has to be arrived at afresh in terms of principles of CAS-4 for which purpose, the assessee as also the Revenue would sit together and would give details by arriving at a particular cost to each other. We are also told that there is a system of appointing the Revenue's own Cost Accountant who possibly can also be engaged by adjudicating authority so as to arrive at the correct cost of the engines. - Appeal allowed by way of remand Issues:1. Assessment of Central Excise duty based on cost audit report.2. Interpretation of CAS-4 provisions for determining normal production.3. Rejection of refund claim by lower authorities.4. Lack of details provided by authorities for arriving at a different cost.5. Need for fresh determination of engine cost based on CAS-4 principles.Analysis:1. The appellants, engaged in manufacturing automotive IC engines, cleared products to sister concerns for tractor manufacturing. The assessment for a specific period was provisional due to unascertainable costs until the annual audit report. A cost audit report was submitted, claiming an excess Central Excise duty payment of Rs. 12,73,582. Revenue, scrutinizing the report, found discrepancies in determining engine cost and granted a refund of Rs. 5,84,145 instead of the claimed amount.2. The appeal challenged the order-in-original, upheld by the Commissioner (Appeals). The advocate highlighted CAS-4 and CAS-2 provisions, arguing for the adoption of the average of greater productions of the last 5 years to determine normal production. The lower authorities, however, used actual capacity utilization, deviating from CAS-2's illustration, leading to an incorrect valuation.3. The Revenue contended that besides normal IC engines, the appellants manufactured various sizes, specifications, and spare parts not considered in cost calculation. Consequently, the lower authorities rightly rejected the claimed cost, determining a different value and partially rejecting the refund claim.4. The advocate emphasized that spare parts were accounted for, questioning the lack of detailed justification by authorities for the altered cost determination. The Tribunal concurred, noting the absence of specifics in arriving at a different cost and the need for a comprehensive reassessment based on CAS-4 principles.5. After reviewing submissions and orders, the Tribunal agreed with the advocate, emphasizing the necessity for detailed cost determination according to CAS-4 principles. The matter was remanded to the original adjudicating authority for a fresh assessment, suggesting collaboration between the assessee and Revenue, possibly involving a Cost Accountant, to ascertain the correct engine cost promptly due to the case's age.