2009 (1) TMI 471 - AT - Central Excise

Summary

Issues involved: Determination of assessable value for excisable goods u/s Section 4 of the Central Excise Act, 1944 read with Rule 173-C of the Central Excise Rules, 1944 based on inclusion of profit element in the normal price declaration.

Summary:
The Appellate Tribunal CESTAT, New Delhi, in the case involving the manufacturer of cotton yarn and cellulosic & non-cellulosic yarn, addressed the issue of determining the assessable value for excisable goods. The manufacturer was required to file price declarations declaring the 'normal price' of the yarns as per Section 4 of the Central Excise Act, 1944. The Revenue contended that the manufacturer had not included the profit element while arriving at the normal value, leading to short payment of Central Excise Duty. The Tribunal noted that the profit element, even if not actually earned, should be included in the assessable value as per legal precedents. The case was remitted to the adjudicating authority for the manufacturer to justify that the notional profit of less than 2.43% should be included in the cost of production; failure to do so would allow the Revenue to add 2.43% to the cost of production for determining the assessable value.

The Tribunal referred to the decision of the Larger Bench in the case of Raymonds Ltd. v. Commissioner of Central Excise, Aurangabad, and highlighted that notional profit should be considered while determining the value under Rule 6(b)(ii) of the Valuation Rules. The Tribunal emphasized that the profit that the assessee would have normally earned on the sale of such goods must be taken into account for arriving at the assessable value. The Tribunal set aside the previous order and remitted the case for the manufacturer to demonstrate that the notional profit of less than 2.43% should be included in the cost of production. If the manufacturer fails to justify this, the Revenue is permitted to add 2.43% to the cost of production for determining the assessable value of the goods.

In conclusion, the appeals were allowed by way of remand, providing an opportunity for the manufacturer to address the inclusion of the profit element in the assessable value determination process.