2006 (3) TMI 33 - AT - Central Excise

Central Excise - Valuation - Captive consumption - Abnormal cost arise due to unusual or unexpected occurrence of events such as accident, abnormal scrap, wastage and payment etc. are not to be included in the part of cost of production - Limitation - Demand

Summary

Issues:
Appeal against Order-in-Original dated 29.04.2005 for demand of duty on various grounds including non-inclusion of expenses, duty on interest, alleged gain, and Modvat availed.

Analysis:
The appellant, engaged in thread manufacturing for another company, challenged the demand for not including administration expenses in assessable value. Penalties imposed on Directors and Works Manager. The appellant's Advocate argued based on previous cases that abnormal expenses need not be included in cost calculation. The Advocate also highlighted the limitation issue citing submission of price declaration and balance sheet details. Referring to previous judgments, Advocate argued against penalties due to the company's status as a Sick Industrial Company.

The Revenue argued for upholding the Order-in-Original, emphasizing the excess expenditure due to labor issues faced by the appellant. However, the Tribunal found that as per Cost Accountant Standards, abnormal costs should not be included in the production cost. The Tribunal also noted the Revenue's failure to justify their decision against the appellant in a previous case. Consequently, the Tribunal found in favor of the appellant on both merit and limitation grounds, setting aside the penalties and allowing the appeals.

In conclusion, the Tribunal ruled that the Order-in-Original lacked merit, and the penalties imposed were unjustified. Citing Cost Accountant Standards and previous decisions, the Tribunal found in favor of the appellant due to the exclusion of abnormal costs from production cost. The Tribunal set aside the impugned order and allowed the appeals, pronouncing the operative portion in the open court after completion of the hearing.