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2006 (10) TMI 7 - SC - Central ExciseCentral Excise Valuation in case of Captive consumption to be assessed on the basis of prescribed Rules-Any demand without correct valuation is not sustainable-Cost of production will have to be determined based on the actual cost of production at the factory of production alone and not the cost of production of textile units-Matter remanded
Issues:
Determining short levy of excise duty on goods manufactured in one factory and consumed in others, cost of production calculation, applicability of recent judgment on costing principles, remand for fresh decision, consideration of notional profit, invocation of extended period under Section 11A. Analysis: 1. Short Levy of Excise Duty: The main issue in the appeal was whether there was any short levy of excise duty on goods manufactured in one factory and consumed in others by the respondent-assessee. The respondent claimed to have paid duty in excess of the amount due. The Court emphasized the need to determine the cost of production and notional profit before deciding on any shortfall in the duty paid during the disputed period. 2. Cost of Production Calculation: The Court clarified that the cost of production under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 should be based on the actual cost of production at the factory of production alone, not considering the costs of production in all units of the respondent. This interpretation was supported by a recent judgment in the case of Commissioner of Central Excise v. Cadbury India Ltd. 3. Remand for Fresh Decision: Since the alleged short levy of duty was not considered in fixing the cost of production of the consumed goods as required by law, the Court decided to remand the matter back to the original authority. The impugned orders of the Tribunal were set aside, and the jurisdictional Commissioner of Central Excise was instructed to make a fresh decision considering the costing principles laid down in the Cadbury India Ltd. case. 4. Consideration of Notional Profit: The Court allowed the respondent to argue for a notional profit of less than 10%, failing which a 10% notional profit should be added to the costs of production to determine the correct assessable value and any short levy under Section 11A of the Central Excise Act, 1944. 5. Extended Period under Section 11A: The Court kept open the issue of the invocation of the extended period under the proviso to Section 11A to be decided in the remand proceedings. Both parties were given the liberty to produce further material necessary for the remand proceedings. Overall, the judgment focused on the correct determination of the cost of production, consideration of notional profit, and the need for a fresh decision by the jurisdictional Commissioner of Central Excise based on the principles established in relevant case law.
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