Tribunal upholds Collector's decision on profit margin for Fireless Locomotive

COLLECTOR OF CENTRAL EXCISE, RAJKOT Versus TATA CHEMICALS LTD.

COLLECTOR OF CENTRAL EXCISE, RAJKOT Versus TATA CHEMICALS LTD. - 1998 (98) E.L.T. 478 (Tribunal) Issues:
1. Determination of notional profit margin for an intermediate product based on the profit margin of the final product.
2. Whether the gross profit or net profit of the final product should be considered in determining the notional profit margin of the intermediate product.

Analysis:
1. The case involved the determination of the notional profit margin for a Fireless Locomotive, an intermediate product, based on the profit margin of the final product, Soda Ash. The respondent had initially filed a price list suggesting a 10% profit margin for the Fireless Locomotive, which was approved provisionally. However, a show cause notice was issued proposing a higher notional profit margin of 21.51% based on the gross profit of the final product. The Assistant Collector confirmed the demand, which was later partially upheld by the Collector (Appeals) at 17.70%. The appeal challenged the decision, arguing that the net profit of the final product, 12.95%, should be considered for determining the notional profit margin of the intermediate product.

2. The appellant contended that the gross profit of the final product should be added as the notional profit margin, citing various Tribunal decisions. On the other hand, the respondent argued that due to the dissimilarities between the Fireless Locomotive and Soda Ash, the profit margin of the final product should not be directly applied to the intermediate product. The respondent agreed to a 12.95% profit margin, even though the initial price list suggested 10%. The Tribunal acknowledged the differences between the two products and emphasized the need for adjustments in determining the notional profit margin for the Fireless Locomotive. The Tribunal concluded that a substantial reduction from the gross profit of 17.70% was necessary, supporting the Collector (Appeals)'s decision to consider the net profit of 12.95% as a justifiable notional profit margin for the intermediate product.

3. In the final judgment, the Tribunal dismissed the appeal and cross-objection, affirming the Collector (Appeals)'s decision to consider the net profit of the final product as the notional profit margin for the Fireless Locomotive. The Tribunal emphasized the lack of similarity between the two products and the need for adjustments in determining the appropriate profit margin for the intermediate product. The Tribunal concluded that a remand was unnecessary and supported the 12.95% profit margin as a justifiable figure in the given circumstances.