TMI Blog2012 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... s is reasonable and needs acceptance. Since for the purpose of valuation under rule 8 of the Central excise Valuation Rules, the cost of production is required to be taken, this cost of production cannot be equated to the conversion charges charged by the appellants in respect of goods supplied to TISCO. Accordingly, conversion charges shown in debit note/invoices issued to TISCO cannot be taken as a conversion cost and taken as a basis for the purpose of assessments of wire rods cleared to sister units - Decided against the Revenue. - E/1026/2006-Mum - A/309/12/EB/C-II - Dated:- 26-4-2012 - Mr. S S Kang, Mr. Sahab Singh, JJ. For Appellant: Shri Gajendra Jain, Adv. For Respondent: Shri V.K.Singh, Additional Commissioner (A.R) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid on wire rods cleared by them to their own units inasmuch as they had, while working out the transfer price to their own unit based on the cost of production, taken lower conversion cost as compared to the higher conversion cost charged by them to M/s TISCO, Jamshedpur. Thus, the appellant in their costing statement have declared their lower conversion cost' in respect of clearances to their own units at Tarapur Borivali, whereas they have billed higher rate of conversion cost to M/s TISCO, Jamshedpur. In order to evade the Central Excise duty the appellants appeared to have chosen to issue debit notes instead of regular billing through invoice. Accordingly, a show cause notice dt. 8.8.2005 was issued to the appellants demanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s recovered form TISCO, Jamshedpur as cost of production which is not correct. Job charges charged by them from TISCO for converting the billets supplied by TISCO into wire rods on job work basis cannot be the basis of demand of duty as job charges recovered by them from TISCO Jamshedpur not only included the conversion cost but also the profit element. The department's contention to compare the job charges with the cost of conversion is wholly incorrect. He submitted that in terms of Rule 8 it is only the cost of production which is to be taken into consideration and thereafter 15% of the cost of production is added as profit to arrive at the assessable value. Since the job charges already included the amount of profit in respect of cleara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5. The learned Additional Commissioner (A.R) appearing for the Revenue submitted there is settled legal position regarding the method of valuation to be adopted in the case of appellant, who are supplying the goods to their sister units. The assessments in the appellant's case are to be made in terms of Rule 8 of the Valuation Rules, 2000. He submitted that according to the appellant difference between conversion charges declared for the goods supplied to the TISCO Jamshedpur and those applied for computing the declared value of the goods in respect of interplant transfer is on account of profit element added in the conversion charges in case of supplied to TISCO, Jamshedpur. He submitted that the appellants were directed to substantiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be 115% of the cost of production or manufacture of such goods . It is the contention of the Revenue that appellant has undervalued the cost of production inasmuch as one of the cost component i.e the conversion cost was under declared by them leading to undervaluation of the said goods as they were showing the higher conversion cost in respect of goods sent to TISCO Jamshedpur. 7. We find that the show cause notice was issued on the basis of Invoice no. 94344 dt. 31.07.2003, Invoice no. 42329 dt. 15.10.2001, Invoice no. 45525 dated 04.03.2002 and Invoice no. 9474 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusive of conversion cost + profit element. This explanation given by the appellants is reasonable and needs acceptance. The finding of the Commissioner in para 25 of the order that the debit notes issued by the appellants are showing the conversion cost actually charged is not correct as the amount in the debit note is shown as the conversion charges. Since for the purpose of valuation under rule 8 of the Central excise Valuation Rules, the cost of production is required to be taken, this cost of production cannot be equated to the conversion charges charged by the appellants in respect of goods supplied to TISCO, Jamshedpur. Accordingly, we hold that the conversion charges shown in debit note/invoices issued to TISCO, Jamshedpur cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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