2000 (9) TMI 607 - AT - Central Excise

Tribunal rules notional profit should not inflate assessable value

The Tribunal allowed the appeal by M/s. Steelage Industries Ltd., holding that notional profit should not be added to determine the assessable value of ... Valuation of goods captively consumed - cost of production including profit, if any - notional profit - assessable value - burden of rebuttal - Rule 6(b)(ii) of the Central Excise (Valuation) RulesValuation of goods captively consumed - Rule 6(b)(ii) of the Central Excise (Valuation) Rules - notional profit - cost of production including profit, if any - burden of rebuttal - assessable value - Whether a notional profit of 10% is to be added to the cost of production for determining the assessable value of goods captively consumed under Rule 6(b)(ii) where the assessee contends it earned no profit in the relevant period. - HELD THAT: - Rule 6(b)(ii) requires that where excisable goods are used or consumed and not sold, valuation is to be based on the cost of production 'including profits, if any, which the assessee would have normally earned on the sale of such goods.' The determinative legal test is whether profit is established to have been earned; the rule contemplates inclusion of profit only if there is profit. The Department sought to apply a notional profit @ 10% on the premise that manufacturers normally earn profit, but it did not rebut the assessee's specific contention that no profit was earned in the year 1984-85 for which the price list applied. In the absence of evidence to the contrary, the statutory phrase 'if any' operates to preclude the addition of a notional profit. Consequently the addition of a notional 10% profit could not be sustained on the facts before the Tribunal.The notional profit of 10% is not to be added; in view of the absence of proof of profit for 1984-85, the assessable value must exclude any notional profit. The impugned order is set aside and the appeal is allowed.Final Conclusion: On the facts for 1984-85 the Tribunal held that Rule 6(b)(ii) permits inclusion of profit only 'if any'; because the Department failed to rebut the assessee's claim of no profit, a notional 10% profit could not be added and the appeal was allowed. The appeal by M/s. Steelage Industries Ltd. questioned whether 10% notional profit should be added to determine assessable value of goods captively consumed. The Tribunal ruled that if no profit was earned during the relevant period, notional profit should not be included in the manufacturing cost for valuation. The appeal was allowed.