2006 (11) TMI 206 - SC - Central Excise

Valuation (Central Excise) - Captive consumption - Held that - If an assessee has normally been making profit but in one particular year incurs loss due to some reasons, it cannot be inferred therefrom that the assessee would have normally sold his goods without profit or at loss. Normally speaking, no businessman would like to sell his goods without adding a reasonable margin of profit - Assistant Collector s decision on valuation of the captively consumed wrapper paper is based on the manufacturing cost of wrapping paper as per Chartered Accountant Certificate produced by the appellants and the manufacturing profit of the said paper as per the Balance-sheet of the Company for the year ending 30-6-1981. Therefore, there is no reason to interfere with the impugned order upholding the Assistant Collector s decision on valuation of wrapper paper captively consumed under Rule 6(b)(ii) of Valuation Rules - Matter remitted back - Decided in favour of Revenue.

Summary

Issues:
Appeal under Section 35-L(b) of the Central Excise Act, 1944 against a Final Order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Regional Bench at Mumbai. Tribunal upheld the order passed by the Commissioner (Appeals) based on Gabriel India Limited case. Discrepancy in the treatment of profit addition in cases of loss - Gabriel India Limited case vs. West Coast Paper Mills Ltd. case.

Analysis:
The appeal was made against the Final Order passed by the Tribunal, which upheld the decision of the Commissioner (Appeals) based on the Gabriel India Limited case. The Tribunal did not provide its own findings on the matter but relied on the decision in Gabriel India Limited, which stated that no addition towards profit should be made in case of assesses incurring losses. The case was remanded for reconsideration on the question of valuation due to the appellant's submission that notional profit should not be added.

Shri K. Radhakrishnan, representing the revenue, pointed out that the authority in original had relied on the West Coast Paper Mills Ltd. case, which stated that profit should be added to captively consumed goods by a company. The Tribunal failed to consider this decision. The West Coast Paper Mills Ltd. case emphasized that profit should be added to the cost of production, even if the assessee incurs a loss in a particular year. The normal margin of profit should be added, based on the actual profit earned in the previous year. The Tribunal in that case approved the percentage of profit margin added by the Assistant Collector.

Due to the Tribunal's failure to consider the decision in the West Coast Paper Mills Ltd. case, the appeal was accepted, the Tribunal's order was set aside, and the case was remitted for a fresh decision. The judgment highlighted the discrepancy in the treatment of profit addition in cases of loss between the Gabriel India Limited case and the West Coast Paper Mills Ltd. case. All contentions were left open, and no costs were awarded.