1995 (9) TMI 138 - AT - Central Excise

Summary

Issues:
1. Whether margin of profit is to be added to goods captively consumed and to what extent.

Analysis:
The judgment involved six appeals filed by the party and cross objections by the Department, all concerning the common issue of adding margin of profit to goods captively consumed. The Assistant Collector had initially increased the margin of profit from 5% to 10% based on Section 4(i)(b) and Central Excise Rules. However, the Collector (Appeals) later deemed this arbitrary and directed the addition of 6.97% profit earned on the finished product, Stable Bleaching Powder, as shown in the Balance Sheet. The appellants did not contest the addition of profit but disputed the uniform application of 6.97% for all years, arguing it should vary based on actual profits shown in Profit and Loss Accounts.

Shri T.R. Malik for the Revenue supported the Assistant Collector's decision, citing Rule 6(b) of the Valuation Rules, 1975, and relevant case law to justify adding a notional profit to captively consumed goods. The Tribunal observed that while profit addition was justified, the dispute centered on the computation of profit percentage. Rule 6(b)(i) and (ii) of the Valuation Rules mandate considering the value of comparable goods or the cost of production, including profits normally earned if goods are not sold but used in production.

The Tribunal emphasized that the value of goods captively consumed should be based on the profit earned on the finished product, as per Rule 6(b)(ii). The appellants had provided profit margins for Stable Bleaching Powder over four years, with varying percentages. The Assistant Collector's decision to add a flat 10% profit was deemed unsound, as Rule 6(b)(ii) requires consideration of actual profits. The Collector (Appeals) was correct in linking captively consumed goods' value to the profit earned on the finished product but erred in applying a fixed percentage for all years. The Tribunal concurred with the appellants that profit addition should align with the actual profit shown in the Balance Sheet for the respective period. Consequently, the appeals and cross objections were resolved in favor of this view.