Customs, Excise and Gold Tribunal - Delhi
J.K. Synthetics Ltd. vs Commissioner Of Central Excise, Jaipur on 5 February, 2002
Equivalent citations: 2002(141)ELT755(TRI-DEL)
ORDER
C.N.B. Nair, Member (T)]
1. All these appeals relate to the same issue, valuation of Polyamide Chips manufactured by the appellants and captively consumed by them in the manufacture of Nylon yarn of 21 OD.
2. The assessable value of the polyamide chips had been approved based on its cost of production without allowing the exclusion of various elements like profits, administrative overheads and Modvat credit on inputs. This issue came earlier before this Tribunal and the Tribunal remanded the matter for reconsideration in the light of the judgment of the Apex Court in the case of Dai Ichi Karkaria ltd. v. CCE, Pune [1996 (81) E.L.T. 676]. In the remand proceedings, the lower authorities granted relief in respect of Modvat credit on inputs. In the present appeals, the assessee persists with their claim for relief in respect of the other items. Penalties imposed in the impugned orders are also a cause for the present appeal.
3. When the appeals were taken up together for hearing, the learned Counsel for the appellant submitted that the assessee was justified in their claim for exclusion of administrative overheads from the cost of production in the light of the decision of this Tribunal in the case of Hindustan Tyres Pvt. Ltd. v. CCE, Bombay [1988 (34) E.L.T. 324]. With regard to interest, the learned Counsel submitted that since the goods in question are not sold the question of interest on account of storage etc. did not arise. He also submitted that addition of element towards profit also was not justified in respect of captively consumed goods. With regard to penalty, the learned Counsel submitted that the penalties imposed in the impugned orders did not bear relation to the amounts of duty involved in each of the orders. He also submitted that instead of further reducing the penalty in view of the relief granted with regard to duty demand, penalty has been only increased in the remand proceedings by the lower authorities. The Id. Counsel also submitted that the assessee is in great loss and they are before the B.I.F.R. It is his submission that this fact also was required to be considered while fixing the quantum of penalties. As against the aforesaid submissions of the appellant, the Id. DR submitted that the relief as permissible under law and on the facts of the case with regard to inclusion/ exclusion of various elements of expenditure while working out cost of production of polyamide chips, has already been allowed by the lower authorities. He pointed out that elements like interest, profit and administrative overheads, as attributable to the product under costing, are rightly to form part of the cost of production. He submitted that the appellants' own Cost Accountant had included these elements while working out the cost of production, The Central Excise Authorities have not made any addition whatsoever. These elements form a part of cost of production according to the generally accepted principles of costing. The Id. SDK also pointed out that the decision of the Tribunal in Hindustan Tyres Pvt. Ltd. case does not support exclusion of administrative overheads from cost of production.
4. Expenditure towards interest and administrative overheads form a part of cost of manufacture. Profit arising in the production of goods also forms a part of the value of goods manufactured. Rule 6(b)(ii) of Central Excise Valuation Rules specifically states that assessable value of captively consumed goods should include cost of production or manufacture "including profits, if any, which the assesses would have normally earned on the sale of such goods."
5. The decision of this Tribunal in Hindustan Tyres only states that administrative overheads clearly allocable to other two activities (manufacture of solid tyres and re-treading of old tyres) cannot go into the costing of camel back, goods under captive consumption. The order held that administrative overhead expenses which are not connected with the manufacture of camel back sheets cannot be included in computing the cost of manufacture. Therefore, the Id. DR is right in his submission that the decision of this Tribunal in Hindustan Tyres Pvt. Ltd. case is no authority for holding that administrative overheads allocable to the goods under costing need not figure in the cost of production. Further, in the present case, the Central Excise Authorities have only accepted the cost of these elements as worked out by the appellants' own Cost Accountant and submitted by them. In these circumstances, we fail to find any merit in the appellants' submission regarding exclusion of elements like profit, interest and administrative overheads from the cost of production.
6. On the question of penalty, we find merit in the appellants' grievance. The appellant was required to be given appropriate relief consequent to the reduction of duty demand. However, this has not taken place. Further, from Appeal E/1730/2001 it is seen that penalty amount has been increased in the remand proceedings. This was clearly not permissible. When the matter had been remanded for a fresh decision pursuant to an appeal filed by the assessee, it was not legally permissible to pass an order enhancing the penalty placing the appellant in a more disadvantageous position than he was under the first order. Yet another anomaly in these orders is that penalties bear no relation to the duty demands involved. In appeal E/1206/2001 duty confirmed is about Rs. 41 lakhs and penalty imposed is Rs. 10 lakhs, in Appeal E/2080/2001 net duty confirmed is about Rs. 14 lakhs and penalty imposed is Rs. 5 lakhs, while in appeal 1730/2001-A duty amount confirmed is Rs. 27 lakhs and penalty imposed is Rs. 30 lakhs. Further, the appellants' financial position was also required to be considered while fixing the penalty amount.
7. As already noted, the issue in all these appeals is the same, i.e. valuation of polyamide chips manufactured and captively consumed by the appellant. The impugned orders relate to duty demand on this issue for different periods. Therefore, taking into account all the relevant facts and circumstances of the case, we fix a consolidated penalty of Rs. 10 lakhs in regard to all the three appeals.
8. In the result, the duty demands made in all the three impugned orders are confirmed and penalties are modified and consolidated at Rs. 10 lakhs. Appeals are disposed of accordingly.