2016 (6) TMI 716 - AT - Central Excise

Valuation of processed grey fabrics for excise duty - period of dispute is March, 2000 to December, 2000 - Held that - The Revenue built their case against Respondents based on balance sheet for the year 1997-98. On this ground alone, the proceedings against the Respondents have to fail. The Respondents have submitted detailed work sheet with costing details. The various components for arriving at cost of grey and cost towards process - loss, processing/packing charges have been specified. The cost of yarn is said to be based on prevailing market rate. The Original Authority held that the costing should have done only on actuals. However, while arriving at the figures for purported undervaluation the Revenue relied on Profit & Loss Account and Balance Sheet of second Respondent for cost of grey fabrics. Further, addition to the cost thus arrived was made towards freight, tax, insurance, commission, etc. again based on the said Balance Sheet. We find such exercise to arrive at assessable value for the impugned period is without any legal basis and arbitrary. We find that during the relevant period, there was no statutory requirement or Board s guidelines regarding submission of CAS-4 Certificate. The standards were incorporated through the Circular dated 13.02.2003 of the Board for future guidelines.

Summary

Issues: Valuation of processed grey fabrics for excise duty; Allocation of manufacturing and other expenses; Consideration of allied expenses; Submission of CAS-4 certificates; Examination of costing details; Reliance on Profit & Loss Account and Balance Sheet for valuation; Statutory requirements for submission of CAS-4 Certificate.

In this case, the main issue revolved around the valuation of processed grey fabrics for excise duty payment, specifically concerning the allocation of manufacturing and other expenses. The Revenue contended that the expenses were not properly allocated, resulting in a short levy of duty. The Respondents, engaged in the manufacture of processed man-made fabrics, were involved in a dispute regarding the valuation. The lower appellate authority examined the issue in detail, focusing on the period from March 2000 to December 2000. The Revenue's case was built on the balance sheet for the year 1997-98, which was deemed insufficient to support the proceedings. The Respondents provided a detailed worksheet with costing details, specifying the components for determining the cost of grey fabrics and processing charges based on prevailing market rates.

The Revenue argued that the Respondents failed to consider allied expenses and produce CAS-4 certificates, as required by the principles laid down by the Hon'ble Supreme Court in Ujagar Prints. The Revenue also relied on the Profit & Loss Account and Balance Sheet of the second Respondent for determining the cost of grey fabrics, adding expenses such as freight, tax, insurance, and commission based on the Balance Sheet. However, the Tribunal found this approach arbitrary and without a legal basis. It was noted that during the relevant period, there were no statutory requirements or guidelines for the submission of CAS-4 certificates, which were later introduced through a circular by the Board in 2003 for future compliance.

Upon careful consideration, the Tribunal upheld the lower appellate authority's decision, finding no grounds to interfere with the findings. The appeals by the Revenue were dismissed, concluding that the valuation of processed grey fabrics for excise duty lacked a sustainable legal basis, and the Revenue's reliance on the Balance Sheet for cost determination was deemed arbitrary and unsupported.