1988 (2) TMI 215 - AT - Central Excise

Summary

Issues Involved:
1. Whether depreciation and development rebate should be deducted in computing normal profits for arriving at the value of goods captively consumed.
2. Whether the acetylene gas manufactured and captively consumed by the appellant is excisable.
3. The appropriate method for determining the assessable value of captively consumed goods.

Issue-wise Detailed Analysis:

1. Deduction of Depreciation and Development Rebate in Computing Normal Profits:
The main issue in appeal Nos. 666/81A and 2324/83A was whether depreciation and development rebate should be deducted when computing the normal profits for arriving at the value of goods captively consumed by the appellants. The appellants argued that the depreciation is part of the cost of seeking profits and should be deducted. The Assistant Collector initially included the depreciation and development rebate in the margin of profit, which was contested by the appellants. The Tribunal observed that the Appellate Collector's previous order had become final as it was not appealed against, and the Assistant Collector should have adhered to it. The Tribunal concluded that the Assistant Collector should re-examine the matter and recompute the margin of profit on the metal containers manufactured by the appellant without linking it to the end product, based on the margin of profit calculated by a Chartered Accountant acceptable to the revenue authorities in accordance with accountancy principles.

2. Excisability of Acetylene Gas:
In appeal No. 1993/83A, the appellants contended that the acetylene gas manufactured and captively consumed by them was not excisable as it did not conform to the specific standards contemplated for acetylene gas known in the trade and sold in the market. The Tribunal rejected this argument, holding that acetylene gas manufactured and captively consumed by the appellant in the manufacture of trichloroethylene/perchloroethylene is indeed acetylene gas and thus subject to Central Excise duty under Tariff Item 14-H(iv).

3. Method for Determining Assessable Value of Captively Consumed Goods:
The Tribunal addressed the method for determining the assessable value of captively consumed goods in both sets of appeals. The Assistant Collector had added the margin of profit earned on the end product to the cost of the captively consumed goods, which was contested by the appellants. The Tribunal held that the margin of profit should be added on the goods manufactured and captively consumed by the appellant, not on the end product. The Tribunal directed the Assistant Collector to recalculate the margin of profit based on the manufacturing cost filed by a Chartered Accountant in accordance with accountancy principles, and to add the margin of profit on the goods captively consumed, viz., acetylene gas, and not on the end product.

Conclusion:
The Tribunal set aside the impugned orders in all the appeals and remanded the matters to the Assistant Collector for re-adjudication. The Assistant Collector was instructed to recompute the margin of profit on the captively consumed goods without linking it to the end product and to complete the re-adjudication within six months. The Tribunal emphasized that the Assistant Collector should not be bound by any previous orders in these proceedings. The appeals were allowed by way of remand, and the revenue authorities were directed to give consequential effect to the Tribunal's order.