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2023 (6) TMI 753 - AT - Central ExciseValuation - Captive Consumption of goods - expenses to be included in the cost of production to arrive at the assessable value of goods (Iron castings) for paying excise duty while clearing them to their sister units, or not - Determination of Cost Plus 10% (110% of cost of production) - Rule 8 - Machine Shop Expenses - Notional Power Cost Expenses - Material Transfer Expenses - Deferred Revenue Expenses - Administrative Overheads - Abnormal Idle Capacity - violation of principles of natural justice - revenue neutrality - time limitation. Material transfer expenses - HELD THAT - The list furnished along with the documents are perused. The list is very long and detailed scrutiny is required to verify what are the items cleared as such and what are the non-duty paid items, if at all the contention of the appellant is to be considered - it is thus opined that this issue of material transfer of Rs.14438300/- requires to be remanded to the adjudicating authority. Deferred Revenue Expenses - HELD THAT - On perusal of OIO for the year 2014-2015, it is seen that the appellant had furnished documents which were scrutinized and the demand was dropped by adjudicating authority in de novo proceedings. The appellant has to therefore produce documents to reconcile the demand on such expenses - this issue for the period 2008-2013, 2013-14 and 2015-16 (except 2014-15) has to be remanded to the adjudicating authority for de novo consideration. Administrative Overheads - HELD THAT - It has to be understood that credit is availed on the basis of the law contained in CCR 2004. If the activity falls within the definition of input services , the manufacturer will be eligible to avail credit. Repair and Maintenance of office works, courier services, marketing and promotion services etc. are eligible for credit. However, para 5.7 of CAS-4 states that expenses in the nature of marketing and corporate office expenses are not to be included. This means that expenses under administrative overheads which are directly and exclusively used for manufacturing activity only have to be included in the cost of production - the demand raised by including the administrative overheads in the assessable value cannot sustain and requires to be set aside. Abnormal Idle Capacity - HELD THAT - The table furnished by the appellant establishes that the actual production during the disputed period is much less than the capacity. It is also seen that for a few months the unit was closed. The authorities below have not considered these facts. After appreciating the provisions of CAS-4 as well as decision in ITC Ltd. 2014 (7) TMI 696 - CESTAT CHENNAI it is held that the abnormal idle capacity claimed by the appellant has to be considered. The demand raised by not considering the claim of abnormal idle capacity cannot sustain and requires to be set aside. Violation of principles of natural justice - HELD THAT - It is seen that appellant had failed to furnish CAS4 statement before the department. However complex may be the manufacturing activity of the appellant, they cannot deviate from the provisions of law and principles laid by the Department for calculation of assessable value when goods are cleared to sister units on stock transfer basis. The department therefore cannot be found fault for deputing a person to verify the correctness of the value adopted by the appellant for discharging duty when goods are stock transferred to their sister units. There are no merit in the argument put forward by the appellant on this ground. Revenue Neutrality - HELD THAT - It is correct that the appellant will be eligible to avail credit on the duty paid on the goods cleared by the appellant s foundry division. Eligibility of credit by the appellant s other unit does not take away the responsibility of the appellant to pay duty. Further, the issue which is recurring in these appeals involves valuation of the goods cleared from their unit to sister units on various heads that are claimed to be not includable in the cost of production by the appellant. The issue being of recurrent nature needs to be addressed so that there is no revenue loss in future clearances made by the appellant to the sister units and so the argument of revenue neutrality cannot be accepted on the basis of the facts of this case. Time Limitation - HELD THAT - The appellant has not furnished full details to the department.They had deviated from filing CAS-4 statements and had adopted their own method contending that the filing of CAS-4 would be humungous due to volume of materials, clearances involved. We are not therefore able to persuade ourselves to hold that the SCNs are time barred. The issue in regard to demand, interest and penalty raised in respect of Material Transfer Expenses and Deferred Revenue Expenses is remanded to the adjudicating authority for de novo consideration - The demand in respect of Machine Shop Expenses, Notional Power Cost Expenses, Administrative Overheads and Abnormal Idle Capacity is set aside. The impugned orders are modified accordingly. Appeal disposed off.
Issues Involved:
1. Machine Shop Expenses 2. Notional Power Cost Expenses 3. Material Transfer Expenses 4. Deferred Revenue Expenses 5. Administrative Overheads 6. Abnormal Idle Capacity Summary: 1. Machine Shop Expenses: The Commissioner (Appeals) set aside the demand for the periods 2013-2014 and 2014-2015, and the adjudicating authority dropped the demand for 2015-2016. The Tribunal set aside the demand for 2008-2013, aligning with the department's acceptance for subsequent periods. 2. Notional Power Cost Expenses: Similar to Machine Shop Expenses, the demands for 2013-2014 and 2014-2015 were set aside by the Commissioner (Appeals), and the adjudicating authority dropped the demand for 2015-2016. The Tribunal set aside the demand for 2008-2013. 3. Material Transfer Expenses: The demand for 2008-2009 was confirmed. The Tribunal noted the need for detailed scrutiny to verify the items cleared and remanded the issue to the adjudicating authority for de novo consideration. 4. Deferred Revenue Expenses: The Commissioner (Appeals) remanded the issue for 2014-2015, and the adjudicating authority dropped the demand. For other periods, the Tribunal remanded the issue for de novo consideration, requiring reconciliation of accounts. 5. Administrative Overheads: The Tribunal held that expenses not related to manufacturing activities, such as corporate office expenses, should be excluded from the cost of production. The demand raised by including these expenses was set aside. 6. Abnormal Idle Capacity: The Tribunal, citing CAS-4 and relevant case law, held that abnormal idle capacity due to lack of orders should not form part of the cost of production. The demand raised without considering this was set aside. Other Considerations: The Tribunal addressed arguments regarding the special audit's authority and revenue neutrality but found no merit in these contentions. The Tribunal did not accept the argument of limitation, noting the appellant's failure to furnish full details and deviation from filing CAS-4 statements. Conclusion: The Tribunal remanded the issues of Material Transfer Expenses and Deferred Revenue Expenses for de novo consideration and set aside the demands related to Machine Shop Expenses, Notional Power Cost Expenses, Administrative Overheads, and Abnormal Idle Capacity. The appeals were disposed of accordingly.
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