TaxTMI 
TaxTMI 
2005 (10) TMI 17
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.... selling the IC Engines manufactured by them. The issue involved in this appeal is in respect of valuation of IC Engines which are captively consumed in the manufacture of exempted tractors. 3. The appellant raised three issues before us. The first issue is in respect of the abatement of Excise duty paid on the bought out items which are used in the manufacture of IC Engines. The second issue raised by the appellant is that cost of crank shaft was taken twice while arriving at the cost of production of the IC Engines. The third issue raised by the appellant is in respect of the percentage of profit to be added while arriving at the value of the IC Engines manufactured by the appellant. On the direction of the Tribunal, the matter was refer....
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....ethod is by taking net profit in respect of their final product and while calculating the percentage of profit, the Revenue treated expenditure on sale and administration and interest towards the expenditure and in the second method where the percentage of profit was calculated after taking into consideration the gross profit, as the sale and administration expenditure and interest is not taken as expenditure while arriving at percentage of profit. The contention is that as the Revenue was taking into consideration the total sales realisation in respect of their final product for arriving at the value of IC Engines, therefore, all the expenditures are to be taken into consideration. The appellant relied upon the decision of the Tribunal in ....
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....pellant in respect of their final product i.e. tractors for arriving at the gross profit in respect of IC Engines and the expenditure is to be excluded from the net sale prices. The Revenue while arriving at the total manufacturing cost treated as the cost of material, manufacturing and borrowing expenses, personal depreciation towards expenditure. The Revenue is not treated the cost of sales and administration and interest as expenditure. The Revenue produced a working sheet for arriving at profit percentage, one method is adopted by the Revenue by taking into consideration net profit on the sale of their final product and while arriving at the percentage of profit, the cost of sale and administration and interest was treated as expenditur....
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....f margin of profit on the sale of tractors which has been included in the assessable value of the IC Engines determined under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975. In view of this position, the finding in the impugned order that "it can be said that the nearest market for their product exists only at Faridabad and consequently in terms of provisions of Section 4 of the Central Excise Act, 1944, at the relevant time, cost of freight incurred to the nearest point of sale, where the wholesale market exists, has to be included as part of the assessable value" is beyond the scope of the show-cause notice. Further, it is not the case of the Revenue that IC Engines are sold at Faridabad and once IC Engines are not sold at Fa....
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....enuine expenditure. Such expenditure enters into cost of goods and would necessarily determine the amount receivable by the manufacturer. It is impossible to conceive of a situation where such expenditure is not taken into account for the purpose of working out profit and loss of a concern. It is not that profit or loss is not related to this expenditure. Instead, it is the total expenditure including the type of expenditure that has been disallowed which would determine the extent of loss or profit of an organisation. Such profit and loss cannot be worked out merely by confining oneself to expenditure on actual manufacture but a comprehensive view of the matter has to be taken to arrive at gross notional profit. The profit shown in the acc....