1997 (10) TMI 186 - AT - Central Excise

Summary

Issues:
- Dispute over assessable value of concentrated dye stuff captively consumed in the manufacture of formulations
- Application of Rule 6(b)(ii) of the Valuation Rules
- Effect of refund received by the appellant on the assessable value
- Interpretation of profit determination for captively consumed goods

Analysis:
1. The appeal was filed against the order-in-appeal upholding the redetermination of the assessable value of concentrated dye stuff captively consumed by the appellants in the manufacture of formulations. The dispute revolved around the stage at which the product should be treated as excisable, with the Department claiming duty payable at the formulation stage and the appellant asserting duty payable at the concentrate stage. The High Court ruled in favor of the appellant, resulting in a refund of Rs. 1,41,15,748.49 received in 1984. The Department subsequently reworked the assessable value by adding the refund amount to the profit applied for the respective years, leading to the present appeal.

2. The appellant's counsel argued that the refund received in 1984 should not be included in the profit for the period of 1974 to 1979. Referring to relevant provisions of the Income Tax Act, it was contended that the refund should not be deemed as profit for the earlier period. However, the Department contended that the refund contributed to the appellant's profit and should be included in determining the assessable value as per Rule 6(b)(ii) of the Valuation Rules.

3. The Department cited Tribunal decisions where refunds were included in redetermining assessable value, emphasizing that the refund contributed to profit and should be considered in valuation. The appellant's counsel distinguished the cases cited, arguing that the refund did not constitute the normal profit earned during the relevant assessment period.

4. The Tribunal analyzed the situation and ruled that while refunds impact assessable value under the Central Excises Act, the determination of assessable value for captively consumed goods under Rule 6(b)(ii) should adhere to the express provisions therein. The appellant's disclosed profit of 10% for assessable value determination was different from the profit before tax used by the Department. The refund received in 1984 was not deemed a normal profit earned on the sale of goods in the earlier period, as it was not reflective of profits during the relevant years.

5. The Tribunal concluded that the Department's inclusion of the refund in the profit earned by the appellants for determining assessable value was incorrect. The refund received in 1984 was not part of the normal profit earned on the sale of goods in the earlier period, as profits from those sales were already reflected in the balance sheets of those years. Therefore, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.