TMI Blog2005 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from payment of Central Excise duty. The appellants are manufacturing IC Engines for captive use in the manufacture of exempted tractors. The appellants are not selling the IC Engines manufactured by them. The issue involved in this appeal is in respect of valuation of IC Engines which are captively consumed in the manufacture of exempted tractors. 3. The appellant raised three issues before us. The first issue is in respect of the abatement of Excise duty paid on the bought out items which are used in the manufacture of IC Engines. The second issue raised by the appellant is that cost of crank shaft was taken twice while arriving at the cost of production of the IC Engines. The third issue raised by the appellant is in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is that as per the work sheet produced by the Revenue vide letter dated 25-8-2004 the Revenue adopted two methods for arriving at the percentage of profit. One method is by taking net profit in respect of their final product and while calculating the percentage of profit, the Revenue treated expenditure on sale and administration and interest towards the expenditure and in the second method where the percentage of profit was calculated after taking into consideration the gross profit, as the sale and administration expenditure and interest is not taken as expenditure while arriving at percentage of profit. The contention is that as the Revenue was taking into consideration the total sales realisation in respect of their final product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IC Engines. The only objection of the appellant is that the Revenue while arriving at percentage of profit has taken into consideration the gross profit earned by the appellant in respect of their final product i.e. tractors for arriving at the gross profit in respect of IC Engines and the expenditure is to be excluded from the net sale prices. The Revenue while arriving at the total manufacturing cost treated as the cost of material, manufacturing and borrowing expenses, personal depreciation towards expenditure. The Revenue is not treated the cost of sales and administration and interest as expenditure. The Revenue produced a working sheet for arriving at profit percentage, one method is adopted by the Revenue by taking into consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is thus apparent that the differential duty has not been demanded on the question of wrong computation of cost of manufacture but on the question of wrong determination of margin of profit on the sale of tractors which has been included in the assessable value of the IC Engines determined under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975. In view of this position, the finding in the impugned order that "it can be said that the nearest market for their product exists only at Faridabad and consequently in terms of provisions of Section 4 of the Central Excise Act, 1944, at the relevant time, cost of freight incurred to the nearest point of sale, where the wholesale market exists, has to be included as part of the assessable va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no allegation that expenditure incurred on advertisement, printing and stationery, postage, telephone, voluntary charges, sales promotion interest and bank charges is not genuine expenditure. Such expenditure enters into cost of goods and would necessarily determine the amount receivable by the manufacturer. It is impossible to conceive of a situation where such expenditure is not taken into account for the purpose of working out profit and loss of a concern. It is not that profit or loss is not related to this expenditure. Instead, it is the total expenditure including the type of expenditure that has been disallowed which would determine the extent of loss or profit of an organisation. Such profit and loss cannot be worked out merely by c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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