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2015 (4) TMI 816 - SUPREME COURT

2015 (4) TMI 816 - SUPREME COURT - 2015 (319) E.L.T. 216 (SC) - Valuation of goods - Captive consumption - Misdeclaration of value of goods - Non inclusion of value of administrative overheads, bonus, gratuity, interest, conversion charges and depreciation charges in the assessable value of the yarn - Held that:- While issuing the clarification as to how the Gross Profit, i.e., profit before depreciation and taxation or 'Profit before tax' or any other profit has to be arrived at, it is also cla .....

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ertising expenses, depreciation, interest, etc., would be included in the cost of production. The period with which we are concerned is prior to October, 1996, i.e., April, 1994 to September, 1996. It, therefore, cannot be said that the respondents-companies made intentional misdeclaration with the purpose to avoid payment of correct excise duty. We thus, find that the CESTAT was right in holding that extended period of limitation would not be applicable in the present case. - Decided against Re .....

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r Somiran Sharma, Adv., Mr U Banerjee, Adv., Mr K R Sasiprabhu, Adv., Mr Devan Parikh, Sr. Adv., Ms Nandini Gore, Adv., Mr Abhishek Roy, Adv., Ms Devina Sehgal, Adv., Ms Khushboo Bari, Adv., Mrs Manik Karanjawala, Adv., Mr V Lakshmikumaran, Adv., Mr M P Devanath, Adv., Mr Vivek Sharma, Adv., Ms L Charanaya, Adv., Mr Aditya Bhattacharya, Adv., Mr R Ramachandran, Adv., Mr Hemant Bajaj, Adv., Mr Ambarish Pandey, Adv., Mr Rajesh Kumar, Adv. and Mr Anandh K, Adv. ORDER Civil Appeal Nos. 5007-5024 of .....

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eclared was much lower than the value arrived at on the basis of Cost Audit Report furnished by their cost accountants. Thereafter, an investigation was held and it was further observed that the respondents had not included the value of administrative overheads, bonus, gratuity, interest, conversion charges and depreciation charges in the assessable value of the yarn. Show cause Notices were served upon the respondents in the year 1999 demanding differential duty along with interest. The notices .....

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trative and overhead expenses. Aggrieved, the respondents preferred appeals before the Customs, Excise and Service Tax Appellate Tribunal, Mumbai (hereinafter referred to as 'CESTAT'). CESTAT vide its common order dated 13.02.2004 allowed the appeals on the ground that the larger period of limitation was not invocable against the respondents herein and accordingly set aside the demands of duty on them. It was also held that the cost accountants were the experts authorized by the law to d .....

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s April, 1994 to September, 1996 whereas Show Cause Notices to all these respondent-companies were issued sometime in the year 1999 which was much beyond the period of six months stipulated in Section 11A of the Central Excise Act. The Department took the plea that the extended period of limitation contained in the proviso to sub-section (1) of Section 11A would be applicable because of the reason that there was intentional misstatement or declarations by the respondent-companies in order to eva .....

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which was filed with the Company Affairs Department, cost of bonus, interest, gratuity, etc. were to be included because of the Cost Accounting Records (Textile) Rules, 1977 and particularly Performance C thereof. (2) There was some misunderstanding about the inclusion of these costs for the purposes of attracting excise duty, not only with the respondents-assessees but within the Department as well. Therefore, error if any was clearly bona fide and not with the object of evading excise duty. Af .....

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n the other hand, when we examine the relevant provision of Cost Accounting Records (Textile) Rules, 1977, we find that these Rules specifically deal with the inclusion of overheads, yarn/cloth in grey stage for self consumption, and costs statements which are mentioned in Rule VII, XI and XIII respectively. Insofar as the overheads are concerned, Rule VII stipulates that details of administrative, selling and distribution overheads and the amounts applicable to yarn cloth and processed cloth sh .....

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also mandates giving the cost statements in Proforma B and C. Perusal of Proformae B and C shall reveal a vast difference between the two. As per Proforma B, it is the statement showing the cost of production of yarn count wise for the year ending which is to be shown. Proforma C, on the other hand, relates to cost of yarn sold during the year. Thus, for arriving at cost of yarn sold during the year in the said Proforma, cost of bonus, interest, gratuity is to be included. It would be pertinent .....

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s Proforma that the respondents-companies were required to include the cost of bonus, interest and gratuity which otherwise was not of relevance insofar as the matter of excise is concerned. We also find that earlier there was some ambiguity and it was not clear as to whether cost of labour, bonus, etc., is to be included while arriving at the cost of captive consumption of this item. This was clarified only vide circular dated 30.10.1996 issued by the Central Board of Excise and Customs, New De .....

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n. For convenience sake, we will reproduce this portion of the said circular as we are directly concerned therewith: "It is hereby clarified that for calculation of value of the goods captively consumed under Rule 6(b)(ii) the following steps are to be followed: - (i) The cost of production of the goods has to be determined so as to include inter alia, the cost of material, labour cost and overheads including administrative cost, advertising expenses, depreciation, interest, etc. (ii) Profi .....

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