2013 (5) TMI 165

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....the appellant's final product. The appellant was clearing the said goods on the basis of 110% of the cost of production. According to the Revenue, the said cost of production dos not stand correctly calculated & arrived at by them in terms of CAS- 4. Accordingly, proceedings were initiated culminating into the impugned order passed by the Commissioner. 3. We find that there is no quarrel about legal position that the cost of production has to be determined in terms of the principle laid down in CAS-4. However, the appellant contested the calculation by submitting as under: 2.14.3 Therefore, from the above it is clear that there are a number of anomalies in the calculation sheet provided by the Audit Party. The above are merely example....

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....portionately into the goods produced, according to the principles laid down by the ICWA of India in respect of the allocation of fixed expenses in CAS -4. 2.14.7 In view of the above, it is contended that the costing method adopted by the department is not in accordance to the principles laid down in the CAS -4 standards. Therefore, the observations made in the audit report are totally incorrect. It is further important to note that the department has also not provided any alternative calculation as per CAS -4 method. As explained earlier, the audit party has simply distributed the expenses shown in the profit and loss A/c between the excisable goods and non-excisable goods manufactured by the notices .The above methodology is not as per....

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....items whose values do not change with the change in volume of production such as salaries, rent etc. The variable production overheads shall be absorbed in production cost based on actual capacity utilization. The fixed production overheads and other similar item of fixed costs such as quality control cost, research and development costs, administrative overheads relating to manufacturing shall be absorbed in the production cost on the basis of the normal capacity or actual capacity utilization of the plant, whichever is higher. The appellant's contention is that the overhead expenses stand distributed on the basis of actual production whereas the normal capacity was much of the higher side as the distribution should have been on the ....