2017 (2) TMI 256 - AT - Central Excise

Valuation - overhead charges - for the cost of manufacture, earlier appellant were taking overhead expenses @ 300% of labour charges and filed their price list. Subsequently in the price list dated 21.8.1990, they have added overhead charges @ 100% equivalent to the labor charges - whether the overhead charges are to be 100% or 300% of labor charges? - Held that - in the subsequent period neither the department carried out any costing verification nor the appellants have submitted any cost data but they continued to take overhead charges @ 100%. In this case, even if we go as per best judgment since the 100% overhead charges was accepted on the basis of costing done by the Cost Accountant that is more authentic and there is no change of circumstances by which it can be said that overhead charges can be different from 100% overhead charges. Since there is no supporting documents either by the department or by the appellant for their respective claim of 300% and 100% overhead charges, the 100% overhead charges arrived at by the Cost Accountant should be accepted - 100% overhead charges is correct - appeal allowed - decided in favor of appellant.

Summary

Issues: Valuation of goods based on overhead charges in a manufacturing scenario.

Analysis:
1. The case involved a dispute regarding the valuation of goods by a manufacturing company engaged in a Turnkey Project for the supply of pipes. The company initially valued the goods by considering overhead expenses at 300% of labor charges but later reduced it to 100% in their pricing.

2. The Department issued a show-cause notice demanding duty on the difference between the 300% and 100% overhead charges. The Commissioner (Appeals) upheld the demand, leading the appellants to appeal before the Appellate Tribunal.

3. The appellant argued that they had reduced the overhead charges to 100% after analysis, supported by a Chartered Accountant's certificate and the Department's audit verification. They contended that there was no evidence to support the Department's claim of 300% overhead charges.

4. The Revenue, represented by the AC (AR), reiterated the findings of the impugned order, supporting the 300% overhead charges.

5. The Tribunal carefully examined the submissions and noted that while the appellant previously took 300% overhead charges, they later switched to 100%, which was accepted based on the CA certificate and Departmental Costing Wing's analysis. However, for the subsequent period, no new cost data was submitted, but the appellant continued with 100% overhead charges.

6. The Tribunal concluded that since there was no new evidence or costing verification by either party, the 100% overhead charges determined by the Cost Accountant should be accepted. They found the Department's claim of 300% overhead charges to be incorrect, as there was no supporting documentation for it. Therefore, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.

This judgment highlights the importance of providing accurate cost data and documentation to support valuation methods in manufacturing scenarios, emphasizing the role of professional certifications and departmental verification in determining overhead charges for duty assessment.