2015 (11) TMI 516 - AT - Central Excise

Determination of assessable value - Captive consumption - Inclusion of various expenditures - Held that - Commissioner had doubts about two components of expenditure. The Cost Accountant s certificate submitted by appellants answered her doubts. The commissioner has totally disregarded the cost accountant certificate answering her queries without assigning any reason or data. If commissioner had any doubt about it she could have got it verified herself. Without such verification the certificate cannot be discarded. Since no reason has been assigned to discard the said Cost Accountant certificate the same needs to be accepted. - Decided in favour of assessee.

Summary

Issues:
Challenge to assessable value for captive consumption declared for manufacturing crank cases by failing to include certain expenses like R&D expenses, Head Office Administrative Overheads, Interest, and Proportionate profit margins.

Analysis:
The appellants, situated at OTIS premises, manufacture crank cases through machining, supplied by another unit of the same company, Mahindra and Mahindra, for tractor manufacturing. A notice challenged the assessable value for captive consumption of the crank cases, alleging the exclusion of expenses like R&D, Head Office Administrative Overheads, Interest, and Profit margins in the calculation.

The adjudicating authority confirmed the demand, leading to an appeal before CESTAT. The CESTAT set aside the order, remanding the matter for fresh adjudication considering CAS-4 standards. The Commissioner, in the fresh adjudication, dropped the demand for Interest and Profit margin but confirmed it for R&D expenses and Head Office Administrative Overheads.

The exclusion of Head Office Administrative Overheads was rejected, stating that only those related to marketing, project management, and corporate office expenses could be excluded, not those related to manufacturing activities. The appellants failed to provide evidence that the said expenses were solely for corporate office purposes, leading to their inclusion in the assessable value. Similarly, for R&D expenses, lack of evidence linking them to the crank cases resulted in their inclusion.

During a personal hearing, the appellants submitted a Cost Accountants certificate, certifying the treatment of Interest, Head Office Administrative Overheads, and R&D expenses as per CAS-4 recommendations. The Commissioner disregarded this certificate without verification, prompting the CESTAT to accept it, as no valid reason was provided for its dismissal.

In conclusion, the CESTAT allowed the appeal, emphasizing the importance of accepting the Cost Accountant certificate in the absence of valid reasons for its rejection.