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TMI Blog2013 (11) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... w-cause notice dated 28.11.2007 was issued proposing demand of duty of Rs.17,10,57,618/- along with interest and penalty for contravention of Rule 8 of Valuation Rules, 2000. The demand of duty was for the period 2001-02 to 2003-04. The Commissioner confirmed the demand of entire amount of duty and imposed penalty of equal amount along with interest. 2. The learned Senior Counsel submits that the major amount of demand of duty involved is in respect of Debit Notes raised by the Badrachalam Unit. It is submitted that Badrachalam Unit manufactured Paper and Paper Boards and sold directly to the customer and a portion transferred to them i.e., inter unit transfer, on payment of duty under Rule 8 of the Valuation Rules, 2000. The Badrachalam Unit in the case of inter unit transfer raised Debit Notes in the name of Inter Divisional Service Charges [IDSC] or Intra Company Notional Charges [ICNC]. These Debit Notes indicate the difference between the price at which such goods were sold to the outside customers and the invoice price adopted for transferring of such goods to the applicant-Unit. Debit Notes were prepared on the basis of cost on the principles of notional prices as per Accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Bench to paragraph 15 of the adjudication order to show that they have already paid Rs.12.24 crores excess against the finalisation of three assessment orders. It is a case of inter-Unit transfer, revenue neutral and no loss of revenue. 3. The learned Authorised Representative (Commissioner) submits that four issues are involved in the present case, as follows: (i) The amount of Debit Notes [IDSC & (ICNC)] issued by the Badrachalam Unit would be included by the applicant, while arriving at the cost of production as per CAS-4 standards and the demand is about Rs.13.1 crores . (ii) There is a demand of about Rs.2.7 crores on the ground that the applicant while determining the value had not taken into consideration the entire amount of invoice value of Badrachalam Unit insofar as 15%/10% was excluded. (iii) An amount of Rs.1.25 crores (approx.) was demanded on unabsorbed overheads, not included in the cost of production, which is treated as abnormal production cost (iv) About Rs.7 lakhs was demanded, being the difference in valuation of closing stock, owing to the method adopted in calculation the closing stock by fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the applicant to their other Units. The contention of the learned Senior Counsel is that they have paid the duty on the basis of Rule 8 of Valuation Rules, 2000, following the CAS-4 standards as clarified by the Board's Circular No.692/8/2003-CX, dated 13-Feb-2003. After introduction of Valuation Rules, 2000 with effect from 01.07.2000 Board in the above-mentioned Circular dated 13.02.2003, clarified that for valuing the goods for captive consumption, Rule 8 of the Valuation Rules would apply. It has further been clarified that the cost of production of captively consumed goods will be done strictly in accordance with CAS-4 standards issued by the Institute of Cost and Works Accountants of India ([ICWAI]. For the purpose of proper appreciation of the case, Rule 8 and relevant portion of CAS-4 are reproduced below: "RULE 8. 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 [one hundred and ten per cent] of the cost of production or manufacture of such goods." "CAS-4: 4.1 Cost of production: Cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Non-recurring Cost: Abnormal and non-recurring cost arising due to unusual or unexpected occurrence of events, such as heavy breakdown 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." 6. In the above perspective, it may be examined as to whether the Debit Notes raised by the Badrachalam Unit would form part of the assessable value in the hands of the applicant The objective of CAS-4 is to bring uniformity in the principles and methods used for determining the cost of production of excisable goods meant for captive consumption. CAS-4 is for the purpose of determining the cost of production to arrive at an assessable value of excisable goods meant for captive consumption. It is categorically mentioned in para 5.1 of CAS-4 as above, that cost of material consumed shall consist of material consumed and other expenditure directly attributable to procurement. On the other hand, AS-17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the value charged in the invoices raised by the Badrachalam Unit. It is contended by the learned Senior Counsel that the applicant is a Public Limited Co., maintaining the cost accounting records required under the Companies Act, 1956. As per Accounting Standards AS-17, they have issued the Debit Notes to evaluate the operational efficiencies of their various Units/Divisions on notional basis. In our, prima facie view, such notional amount cannot be actual cost. 10. Regarding the demand of duty on the other issue, namely, the applicant while computing the assessable value considered 100% of the cost of production of Badrachalam Unit and not invoice value, which was 115%/110% of cost of production. Rule 8 of the Valuation Rules, 2000 provides that value is to be determined on the 115%/110% of cost of production and, therefore, 15%/10% is notional margin. Both the sides placed the case laws. The learned Senior Counsel relied on Chennai Bench in the case of Eveready Industries (supra) and the learned Authorised Representative for the Revenue on the decision of the Mumbai Bench in the case of Tata Iron and Steel Co. Ltd (supra). Each case depends on its own facts and a single signi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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