1995 (12) TMI 131 - AT - Central Excise

Tribunal Upholds Revenue's Indirect Cost Calculation Approach in Sulphuric Acid Valuation Dispute

The tribunal upheld the Revenue's approach to calculating indirect costs based on actual production figures rather than normal production capacity in a ... Valuation of captive consumption Issues:1. Valuation of Sulphuric Acid produced by a company for captive use in the production of Titanium Dioxide.2. Dispute regarding the indirect costs calculation method used by the company and the Revenue.3. Deduction of the cost of steam generated as a by-product in the manufacturing process of Sulphuric Acid.Analysis:1. The case involved a dispute over the valuation of Sulphuric Acid produced by a company for captive use in the production of Titanium Dioxide. The company declared direct and indirect costs for the Sulphuric Acid production, with disagreements arising over the method of calculating indirect costs. The Revenue divided total costs by actual production, while the company argued for division by normal production capacity. The tribunal upheld the Revenue's approach, stating that costs should be based on actual production figures.2. The indirect costs calculation method was a point of contention between the company and the Revenue. The company divided total costs by normal production capacity, while the Revenue used actual production figures. The tribunal ruled in favor of the Revenue, emphasizing that costs should be based on actual production rather than notional figures. The tribunal also noted that the margin of profit had already been reduced by the original adjudicating authority.3. The dispute regarding the deduction of the cost of steam generated as a by-product in the manufacturing process of Sulphuric Acid was addressed by the tribunal. The Collector of Central Excise (Appeals) had allowed abatement for the steam used for heating illmenite or subsequent processes but not for the production of Sulphuric Acid itself. The tribunal upheld the Collector's decision, rejecting the Revenue's appeal and affirming the abatement for steam used in specific processes post-Sulphuric Acid production.In conclusion, the tribunal rejected both appeals related to the valuation of Sulphuric Acid and the deduction of steam costs, upholding the Revenue's approach to indirect costs calculation and the Collector's decision on abatement for steam usage.