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TMI BlogCost of Production for Captive ConsumptionX X X X Extracts X X X X X X X X Extracts X X X X ..... of removal or clearance from the place of manufacture even if such removal does not amount to sale. Assessable value of goods used for captive consumption is based on cost of production. According to the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, the assessable value of goods used for captive consumption is 115% (110% w.e.f. 5-8-2003) of cost of production of such goods, and as may be prescribed by the Government from time to time. 2. Objective 2.1 The purpose of this standard is to bring uniformity in the principles and methods used for determining the cost of production of excisable goods used for captive consumption. 2.2 The cost statement prepared based on standard will be used for determination of assessable value of excisable goods used for captive consumption. 2.3 The standard and its disclosure requirement will provide better transparency in the valuation of excisable goods used for captive consumption. 3. Scope 3.1 The standard is to be followed for determining the cost of production to arrive at an assessable value of excisable goods used for captive consumption. 3.2 Cost of production will include various cost components. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as gratuity and superannuation (iv) Medical benefits (v) Subsidised food (vi) Leave with pay and holiday payment (vii) Leave encashment (viii) Other allowances such as children's education allowance, conveyance allowance which are payable to employees in the normal course of business etc. 5.3 Direct Expenses - Direct expenses are the expenses other than direct material cost and direct employees costs which can be identified with the product. Direct expenses include : (i) Cost of utilities such as fuel, power, water, steam etc. (ii) Royalty based on production (iii) Technical Assistance/know-how fees (iv) Amortized cost of moulds, patterns, patents etc. (v) Job charges (vi) Hire charges for tools and equipment (vii) Charges for a particular product designing etc. 5.4 Works Overheads - Works overheads are the indirect costs incurred in the production process. Works overheads include the following expenses: (i) Consumable stores and spares (ii) Depreciation of plant and machinery, factory building etc. (iii) Lease rent of production assets (iv) Repair and maintenance of plant and machinery, factory building etc. (v) Indirect employees cost connected with pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at cost on the basis of stages of completion as per the cost accounting principles. Similarly, stock of finished goods shall be valued at cost. Opening and closing stock of work-in-progress shall be adjusted for calculation of cost of goods produced and similarly opening and closing stock of finished goods shall be adjusted for calculation of goods despatched. In case the cost of a shorter period is to be determined, where the figures of opening and closing stock are not readily available, the adjustment of figures of opening and closing stock may be ignored. 5.11 Treatment of Joint Products and By-Products - A production process may result in more than one product being produced simultaneously. In case joint products are produced, joint costs are allocated between the products on a rational and consistent basis. In case by-products are produced, the net realisable value of by-products is credited to the cost of production of the main product. For allocation of joint cost to joint products, the sales values of products at the split off point i.e., when the products become separately identifiable may become the basis. Some other basis may be adopted. For example, in case of petr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... events, such as heavy break down of plants, accident, market condition restricting sales below normal level, abnormal idle capacity, abnormal process loss, abnormal scrap and wastage, payments like VRS, retrenchment compensation, lay-off wages etc. The abnormal cost shall not form the part of cost of production. Cost Sheet 6. The cost sheet should be prepared in the format as par Appendix - 1 or as near thereto as possible. The manufacturer will be required to maintain cost records and other books of account in a manner, which would facilitate preparation and verification of the cost of production. For manufacturers covered under the ambit of section 209(1)(d) of the Companies Act, 1956, i.e., where Cost Accounting Records are statutorily required to be maintained, the Cost Accountant certifying the cost of production for captive consumption shall verify the correctness of the cost from these records. However, for manufacturers not covered under section 209(1)(d) of the Companies Act, 1956, it is desirable that they also maintain cost accounting records in line with the records so prescribed as to facilitate determination and certification of cost of production. Disclosure 7. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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