2005 (2) TMI 319 - AT - Central Excise

Summary

Issues: Valuation of goods under Central Excise Act with Central Excise Valuation Rules

In this case, the issue revolved around the valuation of goods under the Central Excise Act in conjunction with the Central Excise Valuation Rules. The appellant, a manufacturer of para Nitro Chloro Benzene, dispatched goods to its sister concern as an intermediate product for the manufacture of finished products. The dispute arose regarding the determination of the value of the product, specifically whether certain expenses such as interest, financial charges, office expenditure, and selling and distribution expenditure should be added to the cost of production. The period in question was July 2000 to September 2002.

The appellant contended that the Commissioner did not consider the principles outlined in Cost Accounting Standard 4 (CAS 4) while determining the value using the cost construction method. The appellant argued that CAS4, which came into effect in 2003, should have been applied retroactively to their case, even though the disputed period was prior to 2003. The Commissioner, however, held that CAS4 was not applicable to the appellant's case as it came into operation after the period in dispute.

The Tribunal found the Commissioner's contention to be incorrect, emphasizing that CAS4 establishes costing principles that should be applied regardless of the timing of their introduction. The Tribunal noted that the correct costing principles must be followed, irrespective of whether the goods were manufactured before or after the issuance of relevant circulars. Consequently, the matter was remanded to the adjudicating authority with directions to apply the correct costing principles as per CAS while determining the cost of production.

Ultimately, the appeal was allowed by way of remand, ensuring that the correct principles of costing, as laid down in CAS, are applied to determine the cost of production of the goods in question.