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TMI Blog2007 (2) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... s samples to physicians free of cost, for promotion of their products in the market. Duty was paid on the "physician's samples" on the basis of an assesssable value arrived at a pro-rata basis from the sale price of similar goods sold in the market. However, in view of the Board's Circular No. 642/34/2002 dated 1-7-2002, the assessee (respondents) reworked the assessable value of the "physician's samples", cleared during the above period, at 115% of cost of production and requantified the amount of duty accordingly, whereupon it was found that the duty already paid by them was higher by an amount of Rs. 30,82,302/- than the duty so quantified. The assessee filed a claim for refund of this amount of duty and produced their statement of cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Except Rule 8 all the other rules cover contingencies where sale is involved in some form or the other. Therefore, the residuary Rule 11 will have to be adopted along with the spirit of Rule 8. In other words, the assessable value would be 115% of the 'cost of production or manufacture' of the goods". Both sides agreed that the assessable value of the physician's samples would be 115% of the cost of production or manufacture of the goods. The dispute is as to how to arrive at this 115% of the cost of production. According to the respondents (assessee), it should be arrived at by "forward working" i.e., by adding factory overheads to material cost to get the cost of production and then calculating 115% thereof. In this method of computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Less: S&D 30.85 14.67 Cost of Production 205.64 98.65 115% of Cost of Production 236.49 113.45 Duty payable 37.83 18.15 Duty paid 37.83 18.13 Refund 0.00 0.02 Net Refund 0.02 3. The principles of determining cost of production for captive consumption relatable to Rule 8 of the Central Excise Valuation Rules were formulated by ICWAI and the same, referred to as "CAS-4" in trade circles, were adopted by CBEC and notified in Board's Circular No. 692/8/2005-CX dated 13-2-2003, which requires the cost of production of captively consumed intermediates to be determined strictly in accordance with CAS-4. The appellant also refers to this circular, but submits that it is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Ltd. [2006 (200) E.L.T. 353 (S.C.)] cited by learned Consultant, it was held by the apex court that cost of production of captively consumed goods was to be determined strictly in accordance with CAS-4. Their Lordships treated cost of production of such intermediates as the sum total of the direct labour cost, direct material cost, direct cost of manufacture and factory overheads of the factory producing such intermediate products. This would mean that their Lordships found CAS-4 to be an additive formula and not otherwise. To determine the elements of expenses specified in CAS-4 and to add the same to material cost is the straightforward method of arriving at the cost of production of intermediate products manufactured and capti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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