2011 (2) TMI 1050 - AT - Central Excise

Valuation - Captive consumption - case of the Revenue that the advertising cost, interest, marketing distribution expenses and other administrative expenses are required to be included in the cost of the production of the said intermediary product - Held that - As respondent had taken the cost of production as per the cost accounting records and cost audit records required to be statutorily maintained by them as directed by Bureau of Industrial Cost & Pricing (BICP) - in the case of Cadbury India Ltd. (2006 (8) TMI 2 - SUPREME COURT OF INDIA) has laid down the law that the cost of production should be cost at the place where the product is manufactured and captively consumed, judgement of apex court squarely covers the issue in favour of the assessee - appeal filed by the Revenue is devoid of merits and is rejected, Cross Objection stands disposed of.

Summary

Issues:
Valuation of captively consumed goods under Central Excise (Valuation) Rules post-2000.

Analysis:
The appeal involved a dispute regarding the valuation of captively consumed goods by a manufacturer of drugs and pharmaceuticals for the period January 2001 to December 2001. The Revenue contended that certain expenses like advertising cost, interest, marketing distribution expenses, and administrative expenses should be included in the cost of production of the intermediary product. The Revenue relied on a circular issued in 2003, emphasizing the application of CAS-4 for captively consumed goods. However, the respondent argued that the cost of production was correctly declared based on cost accounting records and cost audit records maintained as per the directives of the Bureau of Industrial Cost & Pricing (BICP). The respondent also cited a Supreme Court judgment in the case of CCE Pune vs. Cadbury India Ltd., which supported their position on the valuation of captively consumed goods.

The Tribunal examined the provisions of Rule 8 of the Central Excise (Valuation) Rules applicable post-2000, which required the valuation of captively consumed products based on cost of production plus a 15% enhancement. It was noted that the respondent had followed the cost accounting and cost audit records mandated by the BICP. Referring to the Supreme Court judgment in the Cadbury India Ltd. case, the Tribunal emphasized that the cost of production should be determined at the place where the product is manufactured and consumed captively. The Tribunal found that the apex court's decision supported the respondent's approach to valuation. Consequently, the Tribunal held that the appeal by the Revenue lacked merit, and the impugned order, which favored the respondent, was upheld. The Cross Objection filed by the respondent was also disposed of as infructuous.