2004 (9) TMI 528 - AT - Central Excise

Summary

Issues: Valuation of costs in processing of MMF, Incorrect declaration of shrinkage percentage, Demand notices issued by the department, Reckoning actual shrinkage percentage, Duty short paid, Appeals against demand notices.

The judgment revolves around the valuation of costs in the processing of MMF, where the department challenged the valuations adopted by the assessee. The breakdown of costs included various components such as transportation, transit insurance, octroi, interest on receivable, and processing shrinkage. The department disputed the declared shrinkage percentage of 6% as it was found to be inaccurate, with actual shrinkage ranging up to 8%. Consequently, demand notices were issued to the assessee, proposing the consideration of actual shrinkage for valuation purposes instead of the declared 6%. The duty was then calculated based on the 6% shrinkage, leading to a shortfall in payment, which was subsequently demanded and confirmed, forming the basis of the appeals.

During the proceedings, it was acknowledged that the clerk of the assessee had erred in providing the breakdown of costs, particularly in attributing 2% to octroi, which was not applicable in the region where the assessee operated. The absence of octroi in the area was undisputed by the Revenue. Upon recalculating and adjusting for the actual shrinkage of around 8% by including the erroneously declared 2% for octroi, it was determined that no further addition to the value was warranted. As the 2% for octroi was not a valid cost element, the demands based on the initial calculation were deemed unsustainable. Consequently, the orders were overturned, and the appeals lodged by the assessee were granted, absolving them from the additional duty payment.

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