2011 (2) TMI 1085 - AT - Central Excise

Assessable value of captively consumed goods - applicability of CAS 4 - whetehr CAS 4 provisions will not apply prior to 1.3.2003?- Held that - As in case of M/s. Cadbury India Ltd. (2000 (9) TMI 176 - CEGAT, MUMBAI) wherein held that the provisions of CAS 4 will apply not only prospectively but also for the period prior to its issue since it only lays down the principle of computing the cost of production in the case of captive consumption also confirmed by SC IN 2006 (8) TMI 2 - SUPREME COURT OF INDIA - appeal filed by the department in the said case was dismissed.

Summary

Issues:
Departmental appeal against under-valuation of captively consumed products. Interpretation of Circulars and Accounting Standards for determining assessable value. Applicability of CAS 4 guidelines retrospectively.

Analysis:
The case involved a departmental appeal against the under-valuation of captively consumed products by a manufacturer. The dispute centered around the determination of assessable value based on Circulars and Accounting Standards. The manufacturer, M/s. Mahindra & Mahindra Ltd., cleared parts of motor vehicles to its own units, and the assessable value was calculated using cost plus profit methods. The department alleged under-valuation due to the exclusion of expenses like corporate head office, advertising, marketing, and financial costs. A show-cause notice was issued invoking an extended period under the Central Excise Act, 1944.

The Commissioner of Central Excise, Nasik, adjudicated the case and referred to Accounting Standards 2 (AS 2) and CAS 4 guidelines for determining the cost of production. The Commissioner concluded that certain expenses like head office administrative expenses, selling and distribution costs, and interest were not includable in the assessable value for captively consumed goods. However, research and development charges were considered includable based on a Chartered Accountant Certificate. Consequently, the Commissioner dropped the demand, penalty charges, and recovery of interest.

The department's appeal argued that a Circular dated 13.2.2003 should apply prospectively, and expenses like head office administrative expenses should be included in the assessable value. On the other hand, the manufacturer contended that CAS 4 provisions should apply retrospectively, citing a previous case where CAS 4 was considered applicable even for periods before its issue. The Tribunal upheld the order-in-original, rejecting the department's appeal based on the precedent that CAS 4 principles apply retrospectively, as established by previous judicial decisions.