1995 (8) TMI 137 - AT - Central Excise

Summary

Issues: Determination of value of wrapper paper for assessment to Central Excise duty based on captively consumed goods under Valuation Rules.

The judgment revolves around the determination of the value of wrapper paper, captively consumed by the manufacturers for assessment to Central Excise duty. The appellants sought approval of a specific price per metric ton under Rule 6(b)(ii) of Valuation Rules, 1975, without including the margin of profit. The Assistant Collector issued a show cause notice proposing to include the margin of profit based on the actual cost of production of the previous year. The dispute arose regarding the inclusion of gross profit in the cost of production. The Collector (Appeals) concluded that the law requires the inclusion of profit normally earned on the sale of goods, which in this case is the gross profit, not net profit. The total profit, i.e., gross profit before tax, was considered for valuation under Central Excise law, as per Rule 6(b)(ii). The decision was based on the Balance-sheet for the relevant year and the cost of production provided by the appellants, leading to the approval of the Assistant Collector's valuation.

The appellants argued that as per Rule 6(b)(ii), only profits on the goods should be added, which would mean ascertained profit if any. They contended that since there was no sale of wrapper paper when captively consumed, no profit should be added, especially when they suffered a loss during the relevant period. The Departmental Representative argued that the lower authorities correctly followed the valuation requirements under Rule 6(b)(ii) and relied on the Chartered Accountant Certificate and Balance-sheet provided by the appellants to determine the assessable value.

The Tribunal analyzed Rule 6(b) of Valuation Rules, emphasizing that the value of captively consumed goods should be determined based on the cost of production, including profits that the assessee would have normally earned on the sale of such goods. It was clarified that even if an assessee incurs a loss in a particular year, it cannot be assumed that the goods would have been sold without profit. The normal margin of profit is required to be added to the cost of production, as established in previous case law. The decision to include the manufacturing cost and profit based on the Chartered Accountant Certificate and Balance-sheet for the relevant year was upheld, concluding that there was no reason to interfere with the Assistant Collector's valuation decision under Rule 6(b)(ii) of Valuation Rules. Consequently, the appeal was rejected.