2017 (3) TMI 610 - AT - Central Excise

Valuation - the actual profit came 13.99% against notional profit of 10% declared by them - whether the actual profit needs to be included in assessable value or the notional profit? - Held that - department can not resort to pick and choose and has to apply law uniformity - reliance was placed in the case of Chackolas Spinning And Weaving Mills Ltd. Versus Commissioner of Central Excise, Cochin 2015 (7) TMI 892 - SUPREME COURT , where it was held that the notional profits could be taken into consideration and added while arriving at the value of captive material - appeal allowed - decided in favor of appellant.

Summary

Issues:
Calculation of duty based on actual profit vs. notional profit under Rule 6(b)(ii) of Central Excise Valuation Rules, 1975.

Analysis:
The case involved the appellants, manufacturers of concentrated dyes, who paid duty at the intermediate stage on concentrated dyes based on cost of manufacturing and notional profit of 10%. However, demand notices were issued for the years 1981-1984, requiring actual profit based on previous year balance sheets instead of notional profit. The Commissioner dropped the demand for 1981, 1983, and 1984 but confirmed it for 1982 due to actual profit exceeding the declared 10%. The duty confirmed was ?1,45,571/- with a penalty of ?1.5 lakhs. The appellants appealed to the Tribunal challenging the demand.

The appellants argued that the Commissioner did not add actual profit for 1983 & 1984 when it was below 10%, yet added notional profit of 10%. They contended that the department should apply the law uniformly and not selectively. They consistently declared a notional profit of 10%, citing a Supreme Court decision that supported the adequacy of a 10% notional profit.

The Tribunal noted that while notional profit was added when actual profit was below 10% for previous periods, for August to December 1982, actual profit was considered. Referring to the Supreme Court's ruling in a similar case, the Tribunal emphasized that Rule 6(b)(ii) applied when excisable goods were not sold but used internally. The Court upheld the Department's addition of notional profit as reasonable, as per the CESTAT's decision. Consequently, the Tribunal found the demand unsustainable and allowed the appeal.

In conclusion, the Tribunal ruled that only notional profit should be added as per the Supreme Court's decision, making the demand invalid. The judgment was pronounced on 28.02.2017.