2003 (9) TMI 650 - AT - Central Excise

Summary

Issues:
- Appeal against Commissioner (Appeals) order allowing manufacturer's appeal regarding demands on steel billets conversion into rods and bars on 'job work' basis.
- Dispute over inclusion of actual power charges in costing and rejection of manufacturer's plea to compute production cost based on BIFR methodology.
- Justification of costs for power considering low production and high power costs under Electricity Board Tariffs.
- Contention on considering actual power charges in costing and rejecting the adoption of BIFR parameters.
- Application of Supreme Court's formula for valuation of goods manufactured on 'job work' basis.
- Evaluation of whether all actual costs, including electricity costs, should be included in manufacturing product costs.
- Consideration of ICWA's Cost Accounting Standards Board's circular on 'Standard Cost' definitions and concepts.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Bangalore involved a dispute arising from the Commissioner (Appeals) decision that favored the manufacturer regarding demands on steel billets conversion into rods and bars on a 'job work' basis. The lower authority had confirmed the demands, citing the manufacturer's exclusion of actual power charges in the cost sheets. The adjudicating authority rejected the manufacturer's plea to compute production cost based on the BIFR methodology, emphasizing the inclusion of full power charges for costing purposes. The Commissioner (Appeals) justified the inclusion of high power costs due to low production under Electricity Board Tariffs, allowing the manufacturer's appeal.

The Revenue, in its appeal, contended that actual power charges paid to the Electricity Board should be considered in costing, highlighting discrepancies in the costs declared by the assessee. The Revenue also opposed the manufacturer's attempt to adopt BIFR parameters, arguing that it was not permissible under the law. After hearing both sides, the Tribunal found that the Supreme Court's formula, as in the case of M/s. Ujagar Prints, should be applied for valuation of goods manufactured on a 'job work' basis. The Tribunal emphasized the need to include all actual costs, specifically electricity costs, in the manufacturing product costs.

The Tribunal determined that the order of the Commissioner (Appeals) could not be upheld, as there was no evidence presented that any costs other than actual electricity costs were being added by the Department. The Tribunal rejected the reliance on 'Standard Cost' definitions and concepts from ICWA's Cost Accounting Standards Board's circular, emphasizing the inclusion of all actual expenses in manufacturing costs. Consequently, the Revenue's appeal was allowed, setting aside the Commissioner (Appeals) order in favor of the manufacturer.