Custom, Excise & Service Tax Tribunal
Super Cassettes Industries Limited vs C.C.Ex. & Cus & S.Tax, Noida on 27 February, 2013
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-III Date of hearing: 27.2.2013 Stay Application No.4832 of 2012 and Central Excise Appeal No.3830 of 2012 Arising out of the order in original No.23/Commissioner/Noida/2012-13 dated 4.9.2003 passed by the Commissioner of Central Excise, Customs and Service Tax, Noida. For Approval and Signature: Honble Mrs. Archana Wadhwa, Judicial Member Honble Mr. Sahab Singh, Technical Member 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? yes Super Cassettes Industries Limited .. Appellant Vs. C.C.Ex. & Cus & S.Tax, Noida .. Respondent
Appearance:
Shri B.L. Narasimhan, Advocate for the appellant /applicant Shri Devender Singh, A.R.(Jt.CDR) for the Revenue Coram: Honble Mrs. Archana Wadhwa, Judicial Member Honble Mr. Sahab Singh, Technical Member Final Order No.55774/2013 dated 27/2/2013 Per Mrs. Archana Wadhwa:
After dispensing with the condition of pre-deposit we proceed to decide the appeal itself inasmuch as we find that the disputed issue requires factual verification which can only be done at the level of the original adjudicating authority.
2. The dispute relates to the valuation of the appellants final product. The appellant was clearing the said goods on the basis of 110% of the cost of production. According to the Revenue, the said cost of production dos not stand correctly calculated & arrived at by them in terms of CAS 4. Accordingly, proceedings were initiated culminating into the impugned order passed by the Commissioner.
3. We find that there is no quarrel about legal position that the cost of production has to be determined in terms of the principle laid down in CAS 4. However, the appellant contested the calculation by submitting as under:
2.14.3 Therefore, from the above it is clear that there are a number of anomalies in the calculation sheet provided by the Audit Party. The above are merely examples of mistakes in the calculation sheet prepared by the ld. special auditors. It is submitted that the audit party has apportioned the expenses without ensuring conformity with the principles indicated in CAS 4.
2.14.4 Further, there are a number of works overheads, which are not calculated as per the method prescribed under CAS -4 standards, which are as follows:
- Description
- Insurance Charges
- Watch and Ward charges
- Bus Hire Charges It is further contended that a number of works overheads like depreciation insurance charges, watch and ward charges and bus hire charges are also not calculated as per prescribed method under CAS -4.
2.14.5 As per the CAS -4, the fixed production overheads and other similar item of fixed costs such as quality control cost, research and development costs, administrative overheads relating to manufacturing are to be absorbed in the production cost on the basis of the normal capacity or actual capacity utilization of the plant whichever is higher.
2.14.6 The department has simply divided these fixed overheads between the excisable and non-excisable and non-excisable and to calculate the actual cost of these fixed overheads to be loaded in the value of the goods, the department has followed the CAS -4 method. They have firstly divided fixed overheads by the normal production capacity of the machine (being higher one) to work out the cost per unit and then multiplied the same by the capacity utilized to load the cost proportionately into the goods produced, according to the principles laid down by the ICWA of India in respect of the allocation of fixed expenses in CAS -4.
2.14.7 In view of the above , it is contended that the costing method adopted by the department is not in accordance to the principles laid down in the CAS -4 standards. Therefore, the observations made in the audit report are totally incorrect. It is further important to note that the department has also not provided any alternative calculation as per CAS -4 method. As explained earlier, the audit party has simply distributed the expenses shown in the profit and loss A/c between the excisable goods and non-excisable goods manufactured by the noticees .The above methodology is not as per the CAS-4 method as shown in the earlier paragraphs.
4. The adjudicating authority has not specifically dealt with the above submissions raised by the applicant as regards the correct calculation of the cost of production. The adjudicating authority has observed as under:
4.5.7 It may be seen here that the applicable Central Excise duty has to be paid based on the assessable value of each item, calculated on the basis of cost of production, in accordance with the provisions of CAS -4. It is therefore, necessary that cost of production of each category of product cleared from the factory is established. As per the report of the cost auditor, the party could not submit the certificate of cost of production for each product. Hence, it can safely be concluded that the party had not determined the cost of production of each and every product cleared from the factory and I hold accordingly.
4. As is seen from above, the Commissioner did not consider the appellant plea as regards the distribution overhead expenses etc. and every principle laid down in CAS-4 and has simply observed that assessable value has been calculated in accordance with the provisions of CAS-4. We find that para 5.9 of CAS -4 lays down as under:
5.9 Absorption of overheads Overheads shall be analysed into variable overheads and fixed overheads.
Variable Overheads are the items which change with the change in volume of production, such as cost of utilities etc. Fixed overheads are the items whose value do not change with the change in volume of production such as salaries , rent etc. The variable production overheads shall be absorbed in production cost based on actual capacity utilization.
The fixed production overheads and other similar item of fixed costs such as quality control cost, research and development costs, administrative overheads relating to manufacturing shall be absorbed in the production cost on the basis of the normal capacity or actual capacity utilization of the plant , whichever is higher. The appellants contention is that the overhead expenses stand distributed on the basis of actual production whereas the normal capacity was much of the higher side as the distribution should have been on the basis of the normal capacity. Similarly, some other minor discrepancy in calculating the assessable value stands pointed out by the ld. Advocate.
5. We find that the above submission of the appellant to be correct. On going through the detailed reply filed by the appellant and the impugned order passed by the Commissioner, we find that the various discrepancies pointed out by the appellant in determining the cost of production in terms of CAS -4 stand referred to but not decided by the Commissioner. As such, we deem it fit to set aside the impugned order and remand the matter for adverting to the said submission of the appellant and to calculate the cost of production in terms of principles laid down in CAS -4.
6. We make it clear that we have not gone through the submissions as regards the limitation etc. and the appellants are at liberty to raise the same before the adjudicating authority.
7. The Stay petition and the appeal get disposed of in above manner.
(Archana Wadhwa) Judicial Member (Sahab Singh) Technical Member scd/ 5