2003 (1) TMI 361 - AT - Central Excise

Summary

Issues: Valuation of medicines manufactured on contract basis for a joint venture company.

In this case, the main issue revolves around the valuation of medicines manufactured by the appellant for a joint venture company. The dispute arises from the method of valuation used, specifically regarding the inclusion of overall profit earned by the manufacturer in the assessable value. The appellant argues that each item should be assessed at its normal price without considering the profit or loss from other items. They rely on a Larger Bench decision that emphasized the irrelevance of profit or loss in the manufacture of other goods for determining assessable value. On the other hand, the impugned order revised the assessable value by adding the overall profit earned by the appellant from its entire operations, which the appellant contests as contrary to excise valuation laws. The disagreement stems from whether the contract price, which includes a detailed formula covering all cost elements and profit margin, should be accepted as the normal price of the goods for excise valuation purposes.

The Tribunal's analysis delves into the legal framework governing excise valuation, emphasizing that the price of the goods under assessment alone is relevant for determining excise duty, not the profit from other goods. Section 4 of the Central Excise Act mandates that the value of excisable goods for charging duty should be the normal price at which such goods are ordinarily sold by the assessee. The Tribunal highlights that the contracted price, agreed upon based on a detailed formula covering all cost elements and profit margin, should be accepted as the normal price of the goods in question. The decision in a previous case involving captively consumed goods supports the view that profit or loss from other goods should not influence the valuation of a specific item. Therefore, the Tribunal concludes that the addition of overall profit to the negotiated sale price for assessing value is contrary to legal provisions and sets aside the impugned order. Consequently, the differential duty demanded and penalties imposed based on the erroneous valuation cannot be upheld, leading to the allowance of the appeals.