1987 (12) TMI 158 - AT - Customs

Summary

Issues Involved:
1. Inclusion of expenses in the cost of production for camel back.
2. Administrative overheads in the cost of production.
3. Assessment stage and inclusion of post-assessment costs.
4. Deduction of cutting waste costs.

Detailed Analysis:

1. Inclusion of expenses in the cost of production for camel back:
The appellant, Hindustan Tyres Pvt. Ltd., contended that expenses incurred towards labor for cutting camel back into strips, rent payable on the premises used for manufacturing sheets, and administration expenses should not be included in the price list. The Assistant Collector and the Collector of Central Excise (Appeals) held that these expenses must be included in the cost of production. The Tribunal referenced Section 4(1)(b) of the Central Excises and Salt Act, 1944, and Rule 6(b) of the Central Excise (Valuation) Rules, 1975, which dictate that the value of excisable goods should include all costs of production and a reasonable profit margin.

2. Administrative overheads in the cost of production:
The appellant argued that administrative overheads should not be added to the cost of production. The Tribunal noted that administrative overheads clearly allocable to other activities (manufacture of solid tyres and retreading of old tyres) should not be included in the costing of camel back. The Tribunal concluded that administrative overhead expenses not connected with the manufacture of camel back sheets should not be included in computing the cost of production.

3. Assessment stage and inclusion of post-assessment costs:
The Tribunal observed that since the assessment was at the sheet stage, post-assessment costs, such as cutting strips out of sheets, should not be included. The Tribunal held that if the revenue authorities wanted to shift the assessment stage to strips, then logically, the cutting wastage should also be taken into account. The Tribunal referenced the Supreme Court's judgment in the case of Assistant Collector of Central Excise and Others v. Madras Rubber Factory Ltd. and others, which held that expenses incurred up to the date of delivery at the factory gate are liable to be included in the assessable value.

4. Deduction of cutting waste costs:
The appellant raised the issue of deducting the cost of waste generated from cutting sheets into strips for the first time before the Tribunal. The respondent objected to this new issue being raised at this stage. The Tribunal overruled the objection, referencing the Kerala High Court's decision in CAT v. India Sea Foods, which allowed new grounds to be raised if there was material already on record. The Tribunal concluded that there is no justification for adding the cutting expenses from sheet to strip for computing the cost of camel back.

Conclusion:
The Tribunal allowed the appeal, directing that administrative overhead expenses not connected with the manufacture of camel back sheets should not be included in computing the cost of production. The Tribunal also held that post-assessment costs, such as cutting strips out of sheets, should not be included in the assessable value. The revenue authorities were directed to give consequential effect to this order.