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TMI Blog2011 (7) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-2000, they were transferring the zinc and lead concentrate to their various smelting units and at the time of clearance of the concentrates, they were paying excise duty on the same on the assessable value determined under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 on the basis of cost of production of the goods plus profit margin. The department's allegation is that in determining the assessable value on the basis of the cost of production, the appellant did not include the element of interest on loans and loss of materials. According to the department, if these elements are also included, revised cost works out to Rs. 6245.50 per M.T. instead of cost of Rs. 6204/- per M.T. adopted by them. It is on this basis that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular dated 13-2-2003 regarding the costing of the goods cleared for captive use, the same is to be determined by applying CAS-4, that this Circular of the Board has retrospective application, that in this regard, reliance is placed on the judgment of the Tribunal in the case of Nirma Ltd. v. C.C.E., reported in 2006 (200) E.L.T. 213 and of Hon'ble Supreme Court's judgment in the of C.C.E., Pune v. Cadbury India Limited reported in 2006 (200) E.L.T. 353 (S.C.), and that demand is time-barred, as there was no suppression or wilful misstatement on the part of the appellant and hence only normal period is applicable, as, as per the observations of the Commissioner (Appeals) in para-8 of the impugned order-in-appeal, the assessable value has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no dispute that the assessable value of the goods was to be determined in accordance with the provisions of Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 based on the cost of production. The point of dispute is as to whether the cost of interest and cost of loss of raw materials was to be included in the cost of ore concentrates. 8. Coming to the first question of interest cost, in terms of the Board's Circular No. 6/29/2002-CX.I, dated 13-2-2003, the cost of the goods cleared for captive consumption must be determined in accordance with the general principles of costing and accordingly for this purpose, CAS-4 Standard is to be adopted. As per CAS-4, for determining the cost of goods, the interest cost is not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessee would have normally earned on the sale of such goods;" 10. According to settled principles of accountancy only the elements that have actually gone into the manufacture/production of these intermediates i.e. sum total of the direct labor cost, direct material cost, direct cost of manufacture and the factory overheads of the factory producing such intermediate products are included in the cost of production. The appellant produced along with the reply to the Show Cause Notice the following authoritative texts: Wheldon's Cost Accounting and Costing Methods, Cost Accounting methods by B.K. Bhar, Principles of Cost Accounting by N.K. Prasad, Glossary of Management Accounting Terms by ICWAI. 11. In C.C.E. v. Dai I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing such assets into existence and to put them in a working condition. That rule of accountancy had to be adopted for determining the "actual cost" of the assets in the absence of any statutory definition or other indication to the contrary." 12. Subsequent to the filing of these appeals, the Institute of Cost and Works Accountants of India (ICWAI) has laid down the principles of determining cost of production for captive consumption and formulated the standards for costing: CAS-4. According to CAS-4 the definition of "cost of production" is as under : Cost of Production : Cost of Production "4.1. shall consist of Material consumed, Direct wages and salaries, Direct expenses. Works overheads, Quality Control cost, Research and Develo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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