2015 (11) TMI 1580 - AT - Central Excise

Valuation - Synthetic Organic dyes captively used in the manufacture of formulation of dyes - addition of profit margin for arriving at assessable value based upon the provisional balance sheet - adjudicating authority has not followed the board circular no. 258/92-96-cs 13-10-1996 while fixing the assessable value - Held that - I observe that profit before tax on sales of previous year has to be considered while working out the percentage of profit to be added to cost of production in the instant case, since the figures of profit before tax for the relevant year are available from balance sheets for the relevant years, I propose to take the figures of the relevant year for computation of profit margin instead of taking previous year s profit, as directed in the said circulars. The Dept adopted the method of working out assessable value/margin of profit as follows cost of concentrated dyes excise duty on concentrated dyes cost of formulation cost of manufacture of formulated dyes; selling price of formulated dyes - cost of manufacture of formulated dyes manufacturing profit of formulated dyes. In this connection, I am inclined to agree with the notice s contention that the assessable value/cost of production of concentrated dyes ought not to be worked out on the basis of selling price of formulated dyes. In grounds of appeal, revenue has not come with any evidence which is contrary to the findings of the adjuicating authority. Therefore, the adjudicating authority was correct in coming to such a conclusion as in the impugned order and we hold that the impugned order is correct to the extent contested before us by the revenue is correct and does not require any interference. - Decided in favour of Revenue

Summary

Issues involved: Valuation of Synthetic Organic dyes used in the manufacture of formulation of dyes for the period 1981-1983, application of profit margin, allocation of expenses, assessable value calculation, CENVAT credit eligibility.

Analysis:

1. Valuation of Synthetic Organic dyes: The appeal pertains to the valuation of Synthetic Organic dyes used in the manufacture of formulation of dyes during the period of 1981-1983. The central issue revolves around the methodology used for determining the assessable value of these dyes, specifically in relation to the application of profit margin and allocation of expenses.

2. Application of Profit Margin: The Revenue contended that the adjudicating authority should have added a profit margin to arrive at the assessable value based on a provisional balance sheet. The Revenue referred to a circular by CBSC for guidance on this matter. However, the adjudicating authority correctly addressed this issue in the Order-in-Original, citing the methodology prescribed in the circulars and determining the profit margin based on the figures of the relevant year, not the previous year.

3. Allocation of Expenses: The Revenue argued for the allocation of expenses as indicated in the show cause notice. The adjudicating authority, in paragraph 11.6 of the Order-in-Original, disagreed with the Revenue's approach of working out the assessable value/cost of production of concentrated dyes based on the selling price of formulated dyes. The authority emphasized the correct method involving the cost of concentrated dyes, excise duty, cost of formulation, and manufacturing profit of formulated dyes.

4. Assessable Value Calculation: The adjudicating authority meticulously analyzed the month-wise cost of production for the year 1982, relying on data submitted by the notice and monthly RT 12 returns. By applying a profit margin of 13.99% for the period Aug to Dec 1982, the authority calculated the revised assessable value and the resulting differential duty, demonstrating a detailed and thorough approach to valuation.

5. CENVAT Credit Eligibility: The respondent, represented by counsel, asserted that any excess duty calculated and payable could be offset by availing CENVAT credit in their own units in India. This aspect was crucial in considering the financial implications and compliance options available to the respondent in light of the valuation dispute.

6. Judicial Decision: The appellate tribunal, after considering the submissions from both sides and examining the records, upheld the findings of the adjudicating authority. The tribunal found no evidence presented by the Revenue that contradicted the factual findings and conclusions reached by the authority. Therefore, the impugned order was deemed correct, and the appeal by the Revenue was allowed with consequential relief, if any, indicating a thorough and reasoned decision based on the legal and factual analysis presented during the proceedings.