2018 (5) TMI 473 - AT - Central Excise

Valuation - inclusion of value of scrap in assessable value - CENVAT credit availed on the entire input/raw materials consumed - Held that - When the appellants have availed Cenvat credit on the entire input/raw materials consumed, their contention that the value of that part of the raw material which remains as remnant parts from the steel sheet has to be deducted cannot be accepted - The Cost Auditor has deducted the value of the scrap recovered. Therefore there are no grounds to interfere with the impugned order - appeal dismissed.

Summary

Issues:
Determining cost of production for lifts and components; Provisional assessment request; Appointment of Cost Auditor; Calculation of duty payable; Differential duty demand; Appeal against differential duty demand; Treatment of remnant parts in cost of production; CAS-4 method application; Cenvat credit utilization; Legal basis for cost of production calculation.

Analysis:
The appellants, engaged in manufacturing lifts and components, sought provisional assessment due to inability to ascertain overhead charges at clearance. The provisional value was based on input materials, labor charges, and 10% overhead charges. An independent Cost Auditor was appointed by the department to determine the cost of production. The Cost Auditor's report highlighted issues like volume of components and quantitative reconciliation, leading to a consolidated CAS-4 Certificate for cost calculation. The appellants were found liable for paying differential duty as per the Cost Auditor's findings, which they failed to pay, resulting in SCNs for duty demand and interest.

The appellants argued that remnant parts from steel sheets, treated as waste, were not considered in the cost calculation by the Cost Auditor. They contended that the actual cost of production should be applied, not a notional value. The Cost Auditor, however, applied CAS-4 method, including all materials consumed and deducting the value of waste and scrap. The department supported the Cost Auditor's approach, stating that Cenvat credit on all raw materials used justified the cost calculation method.

The Tribunal noted the disagreement regarding the treatment of remnant parts in cost calculation. The Cost Auditor's method, as per CAS-4, included all materials consumed and deducted the value of scrap. Since the appellants availed Cenvat credit on all input materials, their argument to deduct the value of remnant parts was rejected. The Tribunal found no legal basis to interfere with the impugned order, dismissing the appeals.

In conclusion, the Tribunal upheld the differential duty demand based on the Cost Auditor's findings and the CAS-4 method application. The dispute over the treatment of remnant parts in cost calculation was resolved in favor of the department's approach, considering the Cenvat credit utilization. The appeals were dismissed, and the impugned order was upheld.