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2014 (12) TMI 113 - AT - Central ExciseValuation of goods - Captive consumption - dispute is about how to determine the cost of production - valuation of the HDPE pipes cleared for captive consumption for use in the manufacture of parts of Sprinkler Irrigation System (HDPE Coupled pipes). - Held that - The value of the goods for the purpose of assessment of duty and the cost of production are different. In this case, while the assessable value of the goods is cost of production plus manufacturer s profit during period till 30-6-2000 and 115%/110% of the cost of production during period w.e.f. 1-7-2000, the cost of production is that which has to be determined in accordance with the principles of costing i.e. CAS-4 standard of ICWAI and for determining the cost of production, Apex Court s judgment in case of UOI & Ors. etc. etc. v. Bombay Tyre International Ltd. etc. etc. (1983 (10) TMI 51 - SUPREME COURT OF INDIA) has no application. In view of this, the Commissioner s order with regard to the issue of valuation is also incorrect and the matter has to be remanded for de novo adjudication - matter remanded back - Decided in favour of assessee.
Issues Involved:
1. Classification of HDPE pipes. 2. Valuation of HDPE pipes for captive consumption. 3. Inclusion of specific expenses in the cost of production. 4. Applicability of CAS-4 Standard for determining the cost of production. 5. Commissioner's refusal to consider classification issue. Issue-Wise Detailed Analysis: 1. Classification of HDPE Pipes: The appellant contended that the HDPE pipes manufactured for captive consumption, specifically designed for use in Sprinkler Irrigation Systems, should be classified under heading 8424, which carries a nil rate of duty. The Commissioner, however, did not consider this plea, stating that the show cause notice was issued solely on the valuation issue and not on classification. The Tribunal found this approach incorrect, emphasizing that if the goods are classifiable under heading 8424 and chargeable to nil duty, the question of undervaluation becomes irrelevant. Therefore, the Commissioner should have considered and given a finding on the classification issue. 2. Valuation of HDPE Pipes for Captive Consumption: The dispute centered on the method of determining the cost of production for HDPE pipes cleared for captive consumption. Both parties agreed that the assessable value should be based on the cost of production plus profit, as per Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975, and Rule 8 of the Central Excise Valuation Rules, 2000. However, the disagreement was on the inclusion of specific expenses in the cost of production. 3. Inclusion of Specific Expenses in the Cost of Production: The department alleged that the appellant did not correctly determine the cost of production by excluding financial expenses, administrative expenses, depreciation, handling, and distribution expenses. The appellant argued that these expenses should not be included in the cost of production as per the principles of costing and CAS-4 Standard of ICWAI. The Tribunal noted that the Commissioner did not properly address whether the cost adopted by the appellant was in accordance with CAS-4 Standard. 4. Applicability of CAS-4 Standard for Determining the Cost of Production: The Tribunal highlighted that the cost of production should be determined based on CAS-4 Standard, as directed by the Board's Circular No. 692/8/2003-CX and upheld by the Supreme Court in the case of CCE, Pune v. Cadbury India Ltd. The Commissioner failed to assess if the appellant's cost determination adhered to CAS-4 Standard, making the valuation determination incorrect. 5. Commissioner's Refusal to Consider Classification Issue: The Tribunal found the Commissioner's refusal to consider the classification issue erroneous. It stated that even if the show cause notice focused on undervaluation, the classification of the goods could render the duty demand irrelevant if the goods were indeed classifiable under a heading with a nil rate of duty. Conclusion: The Tribunal set aside the impugned order and remanded the matter to the Commissioner for de novo adjudication. The Commissioner was directed to consider the appellant's plea regarding the classification of the goods under heading 8424 and whether they are chargeable to nil duty. Additionally, the Commissioner was instructed to reassess the valuation issue, ensuring the cost of production determination aligns with CAS-4 Standard. The appeal was disposed of with these directions.
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