2018 (3) TMI 1537 - AT - Central Excise

Valuation - transfer from one unit to another - Department has taken the stand that valuation as per CAS-4 Standards cannot be adopted for earlier period - Held that - the Apex Court in the case of Cadbury s 2006 (8) TMI 2 - SUPREME COURT OF INDIA has held that such principles can be adopted even for the earlier period - valuation determined on the basis of CAS-4 standards, adopted by the appellant for payment of duty for this period, is in order and demand made in the impugned order for differential duty cannot be sustained and is set aside - demand set aside. Valuation - margin of profit - impugned order holds that the profit margin is required to be adopted - Held that - reliance placed in the case of CCE, AURANGABAD Versus RAYMONDS LTD. 2006 (10) TMI 7 - SUPREME COURT OF INDIA , where it was held that Cost of production will have to be determined based on the actual cost of production at the factory of production alone and not the cost of production of textile units - demand upheld. Appeal allowed in part.

Summary

Issues: Valuation of goods cleared from DSM unit to Bondel unit; Application of CAS-4 standards for valuation; Profit margin determination for the period 01/07/1998 to 31/08/2002.

Valuation of goods cleared from DSM unit to Bondel unit:
The appeal was filed against Order-in-Appeal No. 60/KOL-V/2011 dated 15/07/2011 concerning the valuation of goods transferred from the DSM unit to the Bondel unit for manufacturing final products. The dispute arose regarding the assessable value determined based on CAS-4 standards for the period 1994-1995 to 1995-1996. The Revenue objected to using CAS-4 standards for clearances before 1/7/2000. However, the tribunal referred to a Supreme Court decision allowing the adoption of CAS-4 standards even for earlier periods. Consequently, the tribunal held that the valuation based on CAS-4 standards for duty payment during the specified period was appropriate, and the demand for differential duty was set aside.

Application of CAS-4 standards for valuation:
For the subsequent period from 01/07/1998 to 31/08/2002, the Department disputed the valuation method adopted by the appellant, arguing that profit should be added to the cost of materials determined by cost construction. The appellant contended that CAS-4 standards could be applied for captive consumption, citing a Supreme Court decision. The tribunal noted that the Commissioner (Appeals) followed a Supreme Court decision regarding the profit margin determination. The tribunal upheld the decision, stating that the profit margin should be added to the cost of production as per the Supreme Court's directive, and no interference was warranted in this part of the impugned order.

Profit margin determination for the period 01/07/1998 to 31/08/2002:
The dispute for this period revolved around the profit margin adopted for the valuation of goods. The Revenue did not contest the assessable value but raised concerns about the profit margin applied. Different profit margins were used for different periods. Referring to a Supreme Court decision, the tribunal upheld the Commissioner (Appeals) decision on the profit margin determination. The tribunal agreed with the Supreme Court's directive on the profit margin calculation and found no reason to interfere with this aspect of the impugned order, thereby partially allowing the appeal.