2015 (5) TMI 163 - AT - Central Excise

Valuation of goods - Held that - It is not appropriate on the part of the Revenue to take the material cost as per certificate dated 7.8.2000 and take the other cost/overheads on the basis of certificate dated 30.9.2001. In our view, the certificate dated 30.9.2001 represents the correct cost of production and we find that the said cost of production is less than the Assessable value on which the respondent had paid duty. - Decided against Revenue.

Summary

Issues:
- Appeal against Commissioner (Appeals) order regarding excise duty valuation based on different cost certificates.

Analysis:

1. Background of the Case:
The case involved the appellant, the Revenue, appealing against the order of the Commissioner (Appeals) regarding the valuation of excise duty on the manufacturing of a diesel engine model FL-400. The dispute period was from 1.7.2000 to 31.8.2001. The respondents were clearing the product to a related party, M/s. Piaggio Greaves Ltd., Baramati, and were paying duty based on a value determined using the Central Excise Act, 1944, and the Central Excise Valuation Rules, 2000.

2. Discrepancy in Cost Certificates:
The core issue revolved around the discrepancy in the cost certificates used for determining the duty payable. Initially, the duty was paid based on a Cost Accountant's certificate dated 7.8.2000. However, it later came to light that another cost audit report dated 30.9.2001 showed different amounts for material cost and other costs/overheads. The material cost and other costs/overheads varied significantly between the two certificates, leading to a demand notice being issued based on the earlier certificate.

3. Respondent's Contentions:
The respondents argued that the material cost reduction was due to a shift from imported to indigenous materials during the production period. They also contended that the cost audit report from 30.9.2001 represented the actual costs for the entire period, resulting in a lower total cost of production compared to the duty paid. Moreover, they highlighted that the earlier certificate was an estimation based on the situation at that time, while the cost auditor's report reflected actual costs.

4. Tribunal's Decision:
Upon reviewing the Commissioner (Appeals) order, the Tribunal found that it was inappropriate for the Revenue to rely on the material cost from the certificate dated 7.8.2000 and the other cost/overheads from the certificate dated 30.9.2001. The Tribunal determined that the cost of production from the later certificate accurately represented the actual costs and was lower than the assessable value used for duty payment. Consequently, the Tribunal dismissed the Revenue's appeal, citing the lack of merit in their arguments.

5. Conclusion:
The Tribunal's decision emphasized the importance of using accurate and actual cost data for excise duty valuation, rejecting the Revenue's reliance on inconsistent cost certificates. By upholding the respondents' contentions and considering the cost audit report as more representative of the total production cost, the Tribunal ruled in favor of the respondents and dismissed the Revenue's appeal.