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TMI Blog1998 (7) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... st of production as provided under Rule 6(b)(ii) of Central Excise (Valuation) Rules would be net profit, as claimed by the appellant or gross profit as held by the authorities below. 2. Arguing the case of the appellant Shri Shakdher, learned Counsel submitted that as the relevant sub-rule namely 6(b)(ii) of the Valuation Rules provides for the inclusion of profit if any that the assessee would have normally earned on the sale of such goods, the term profit could only be the net profit and that Gross Profit is not a profit earned by the manufacturer as there will be several deductions to arrive at the profit which accrues which is earned. In support of his plea that the reference to profit in the said Rule is to net profit and not gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded will be the gross profit or the net profit referable to the captively consumed goods. This issue was however, considered in the decisions relating to West Coast Paper Mills Ltd. cited by the Departmental Representative and Sumitan Electro Powers (P) Ltd. cited by the appellant s Counsel. While in the former case (West Coast Paper Mills) the Tribunal upheld the decision of the lower authorities in adding the gross profit as reflected in the Balance sheet to arrive at the assessable value, in the other case also (Sumitan Electro Powers) which was cited by the learned Counsel for the appellant, the decision of the Tribunal was to add the gross profit. This case is considered further subsequently. In the other case (Dhrangadhra Chemical W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould prove that normally the profit could have been higher. This would imply that if the profit was, in fact, higher than 10% that should have been applied. The further observations that assessment could be kept provisional would only subserve such a step viz. enhancing the margin of profit in the event profit was higher than 10%. It was the appellant who had filed the appeal before the Collector (Appeals) aggrieved with the order of the Assistant Collector applying the gross profit when the appellant had declared 10% as the margin of profit. When the Collector (Appeals) also decided in favour of gross profit and indicated the adoption of a higher profit margin than 10% declared by the appellant, if the margin was actually more than that le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... percentage of 6.5% should be taken into account for determining the assessable value. 6. We have taken note of the plea that adding gross profit will result in adding the indirect cost twice over. We find that such a contention was also raised before the Tribunal in the Sumitan Electro Powers case when it was held that if the gross profit includes the overhead cost element, such gross profit cannot be applied in determining the assessable value by adding it to the cost of production. In that particular case it was found by the Tribunal that overhead element had already been included in the cost of production and hence it was held that in such a case gross profit arrived at before deducting overhead cost element cannot be added to the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not included in the expenditure and hence the adoption of the gross profit does not involve the addition of any amount which is included in the expenditure and hence there is no double accounting of any item as submitted by the appellant. 7. The method of valuation of captively consumed goods in terms of Rule 6(b)(ii) of Valuation Rules is to arrive at the assessable value of such goods in the absence of the sale price of such goods. Where such sale price is available that would reflect or include the cost of production and the profit element. Thus the sale price is the aggregate of expenditure viz. cost of production and the profit. As the sale price of captively consumed goods is not available, the same is to be arrived at by addi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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