2005 (10) TMI 17 - AT - Central Excise

Central Excise IC Engine (1) IC engine used to produce tractors (2) Sale of tractors (3) Assessable value of IC engine (4) Contract between Revenue and Assessee (5) Duty paid on components used in producing of IC engine

Summary

Issues involved:
Valuation of IC Engines captively consumed in the manufacture of exempted tractors.

Analysis:

1. Abatement of Excise Duty on bought out items:
The appellant raised concerns regarding the abatement of Excise duty paid on bought out items used in manufacturing IC Engines. After a meeting between the appellant's counsel and Assistant Director (Cost), it was agreed that the appellants are entitled to abatement subject to verifying the payment of Central Excise duty on bought out components. The matter was remanded to the adjudicating authority for further examination based on evidence provided by the appellant.

2. Double counting of cost of crank shaft:
The appellant conceded that they are not pursuing this issue, indicating a withdrawal of their claim regarding the double counting of the cost of the crankshaft in the production of IC Engines.

3. Addition of profit percentage in IC Engine valuation:
The dispute revolved around the methodology for adding profit percentage in the assessable value of IC Engines. The appellant argued that all expenditures should be considered, relying on a Tribunal decision in the Ficher Tractors case. The Revenue contended that the percentage of profit should be based on the net cost of sales, excluding sales and administration expenses. Citing previous rulings, the Tribunal emphasized that selling and distribution expenses should be included in the valuation of IC Engines consumed internally. The decision highlighted the distinction between the cost of manufacture and the determination of profit margins, emphasizing the need to consider all relevant expenditures.

4. Conclusion and Penalty:
The Tribunal ruled in favor of the appellant, directing the adjudicating authority to redetermine the assessable value of IC Engines by considering sales and administration expenses as part of the expenditure. The penalty imposed on the appellant was set aside, considering the valuation figures from the balance sheet. The judgment emphasized the importance of including all relevant expenses in determining the profit percentage for IC Engines consumed internally, aligning with established principles and previous legal precedents.

This comprehensive analysis of the judgment highlights the key issues raised by the appellant, the arguments presented by both parties, and the Tribunal's decision regarding the valuation of IC Engines used in the manufacture of exempted tractors.