2018 (3) TMI 97 - AT - Central Excise

Valuation - deduction of notional profit where value of bought out items is included - Department was of the view that the appellant was required to pay duty on the price arrived at after deducting the landed cost of the bought out items and post removal expenses i.e. transportation, insurance, packing, forwarding, stacking, loading and unloading charges - Held that - Since this material is not manufactured by the appellant but only supplied alongwith pipes, we are of the view that there is no mandate for including the value of such joining material - Since there is no justification in the first place, to include the make of bought out item, there can be no objection to the notional profit being deducted from the assessable value. Valuation - Includibility - cost of packing and loading charges - Held that - the split up of various elements of cost are not available on record. Hence, for purposes of re-quantification on the basis of above observation, we remand the matter to the adjudicating authority after setting aside the impugned order who shall redecide the issue denovo. Appeal allowed by way of remand.

Summary

Issues: Valuation of goods for excise duty payment

Analysis:
The appeal was filed against an Order-in-Appeal passed by the Commissioner regarding the valuation of goods for excise duty payment. The appellant, engaged in manufacturing asbestos pipes, supplied them along with jointing material to the Public Health Engineering Department of the State Government. The dispute arose when the audit party observed that the appellant was not correctly valuing the goods for excise duty payment. The Department contended that certain costs like transportation, insurance, packing, etc., should be included in the valuation. Both authorities below confirmed the duty demand, interest, and penalty. The appellant challenged this decision, leading to the present appeal.

During the hearing, the appellant argued that the value of bought-out goods should not be included for excise duty payment, as they were only supplying AC Pressure pipes and purchasing jointing material externally. On the other hand, the Revenue justified the inclusion of various charges and a notional profit in the valuation. The Tribunal noted that the dispute revolved around the valuation of goods for excise duty payment. It was observed that the jointing material was purchased externally and supplied along with the pipes, indicating no requirement to include its value. However, the appellant had included this value but deducted a notional profit. The Tribunal found no justification for including the value of bought-out items initially, allowing the deduction of notional profit from the assessable value.

Furthermore, the dispute involved other components of valuation such as packing, stacking, and loading charges. The Tribunal highlighted that under Section 4 of the Central Excise Act, transportation expenses and insurance could be excluded from the price for duty payment, but packing and loading charges must be included. However, due to the unavailability of a breakdown of cost elements in the records, the matter was remanded to the adjudicating authority for re-quantification. The impugned order was set aside, and the authority was directed to re-decide the issue afresh, including the quantification of penalty after determining the value of goods upon hearing both parties.

In conclusion, the appeal was allowed by way of remand, emphasizing the need for a re-evaluation of the valuation of goods for excise duty payment, considering the specific components involved and ensuring a fair determination of the value.