2009 (1) TMI 707 - AT - Central Excise

Summary

Issues Involved:

1. Inclusion of specific cost elements in the valuation of goods.
2. Acceptance of Cost Accountant's certificate.
3. Revenue neutrality of the duty paid.

Detailed Analysis:

1. Inclusion of Specific Cost Elements in the Valuation of Goods:

The appellants contested the inclusion of various cost elements by the Commissioner (A) in the valuation of High Carbon Ferro Chrome (HCFC) for duty purposes. The disputed elements were:

- Gratuity: The appellants argued that gratuity, being a retirement benefit, is already accounted for under "Benefits to Employees" and should not be included again in the cost of production.

- Selling and Packing Expenses: The appellants contended that expenses for outward movement of goods should not be added to the cost of production as the cost should be determined at the factory gate, not beyond it.

- Exchange Rate: Fluctuations in exchange rates were deemed irrelevant to the cost of production for domestic clearances.

- Preliminary Expenses Written Off: These were argued to be non-recurring costs that should not impact the current year's cost of production.

- Interest to Jindal Strips Ltd., Hisar: The interest element was not reflected in the balance sheet and was only part of MIS statements, thus should not be included.

- Charity and Donations: These were categorized as head office expenses unrelated to the cost of production.

The tribunal found merit in the appellants' arguments, noting that the values adopted by the appellants were even higher than those calculated as per CAS4 standards. The tribunal concluded that these elements should not have been added to the cost of production.

2. Acceptance of Cost Accountant's Certificate:

The appellants relied on the cost analysis certificate issued by a qualified Cost Accountant. The learned departmental representative argued that the Commissioner is not bound to accept the certificate if found defective. However, the tribunal observed that the Cost Accountant had followed the established principles of costing, and the values adopted by the appellants were higher than those per CAS4. Thus, the tribunal upheld the validity of the Cost Accountant's certificate over the Commissioner's additions.

3. Revenue Neutrality of the Duty Paid:

The appellants argued that the entire exercise was revenue neutral since the goods were cleared to their sister unit, which would claim Cenvat credit for the duty paid. The tribunal agreed with this perspective, noting that the duty paid by the appellant's factory would be offset by the sister unit's Cenvat credit, rendering the exercise revenue neutral.

Conclusion:

The tribunal allowed the appeals, rejecting the Commissioner's additions to the cost of production and accepting the Cost Accountant's certificate. The tribunal emphasized the revenue-neutral nature of the transactions and provided consequential relief to the appellants.

(Pronounced in open Court on 20-1-2009)