2010 (8) TMI 269 - AT - Central Excise

Valuation - Commissioner (Appeals) held that the department proceeded to include the overall profit as disclosed from the balance sheet in relation to manufacture of all the items by the respondent whereas for the purpose of valuation of the woven fabrics the profit earned on the sale of woven fabric only was required to be considered - adjudicating authority had proceeded to add notional profit @ 10% even after taking note of the fact that the Superintendent had reported that the respondents had submitted the copy of the cost sheet and the profit & loss account of the audited balance sheet disclosing sale details and on examination thereof it was revealed that the respondents had incurred losses for the ear 1999-2000 to the tune of Rs. 1.09 crores - assessment having been finalized by adding notional profit @ 10% and the profit element having been considered with reference to the sale of woven fabric - no fault in the order of the assessment Appeal dismissed

Summary

Issues: Challenge to assessment order based on inclusion of notional profit in the cost of captively consumed goods; Applicability of decision in Raymonds Limited case to the present case.

Issue 1: Challenge to assessment order based on inclusion of notional profit in the cost of captively consumed goods

The appellant challenged the order passed by the Commissioner (Appeals) regarding the assessment of lead and zinc concentrate cleared from the factory during a specific period. The challenge was on the ground that the assessable value of the captively consumed goods should have included the projected profit in the cost of production method, which was shown as 15.24% in the respondent's corporate balance sheet for the financial year 1998-99. The appellant argued that the projected profit was ignored by both the authorities. Additionally, the appellant contended that the decision in the Raymonds Limited case was not applicable to their case as they mainly manufactured lead and zinc, unlike Raymonds who manufactured a variety of products. The Commissioner (Appeals) held that the department included overall profit from the balance sheet related to all items manufactured by the respondent, whereas only the profit from the sale of woven fabric needed to be considered for the valuation of the specific goods in question.

Issue 2: Applicability of decision in Raymonds Limited case to the present case

The Commissioner (Appeals) referred to the Raymonds Limited case where the Tribunal observed that the inclusion of profit made in the previous year was in conformity with the Circular of the Central Board of Excise & Customs. The Tribunal set aside the adjudication order in the Raymonds case based on the inclusion of profit from the previous year. In the present case, the adjudicating authority added notional profit at 10% despite the fact that the respondent had incurred losses for the relevant period. The Commissioner (Appeals) found no fault in the assessment order, stating that the profit element was considered concerning the sale of woven fabric. The Commissioner emphasized that since the appellant admitted manufacturing other products besides lead and zinc, the argument of distinguishing the Raymonds case did not hold. The appeal was dismissed based on the application of the Raymonds case's ratio to the present case.

In conclusion, the judgment upheld the assessment order based on the inclusion of notional profit in the cost of captively consumed goods and the applicability of the decision in the Raymonds Limited case to the present case. The Tribunal found no grounds for interference and dismissed the appeal accordingly.