2001 (3) TMI 441 - AT - Central Excise

Summary

Issues:
Valuation of goods for central excise duty assessment based on deduction of expenses on average basis. Disallowance of deduction claimed by appellant leading to duty demand.

Analysis:
The case involved manufacturers of patent and proprietary medicines who were liable to pay excise duty based on the normal price at the factory gate. The appellants, selling goods from depots handling products from multiple factories, claimed deduction of costs like freight, octroi, and taxes on an average basis from the depot price. The impugned order denied this deduction, amounting to approximately Rs. 80 lakhs, as factorywise particulars of deductible expenses were not provided.

During the appeal hearing, the appellant's counsel argued that the average deduction method for multiple factories was acceptable and cited a Supreme Court decision and a circular from the Board supporting this approach. The appellant had also submitted Chartered Accountant certificates certifying deductions based on actual costs incurred. The counsel contended that the orders contravened the Supreme Court decision and the Board's guidelines, requesting the orders to be set aside and the appeal allowed.

The valuation of goods for excise duty assessment under Section 4(1)(a) of the Central Excise Act required determining the normal price at the factory gate. The deduction of expenses, including freight and taxes, as claimed by the appellant, was legally permissible. The Supreme Court had approved claiming such deductions on an average basis, as seen in the M.R.F. Ltd. case. The Departmental Representative raised concerns about non-excisable goods being included in the deduction, but the appellant clarified that only excisable goods were considered for deduction, with no factual basis supporting the Commissioner's observation.

Consequently, the tribunal held that the disallowance of part of the deduction was incorrect, and the duty demand was unfounded. The appeal was allowed, and any consequential relief was granted to the appellants.