TMI Blog2015 (10) TMI 1990X X X X Extracts X X X X X X X X Extracts X X X X ..... considerable expenses each year on utilities which in terms of the para 5.9 of the CS Format guidelines are to be treated as variable over heads and the cost of variable over heads is to be absorbed in costing based on the actual captive utilization while this is the cost of utilities have been absorbed by the appellant on the basis of normal capacity utilization which prima facie is not correct and on this point, the department has a case. Therefore, out of the total duty demand confirmed by the Commissioner in our prima facie view, at least, the duty demand based on the absorption of cost of utilities in the costing may be upheld. As regards, the plea of the Appellant regarding Revenue, the neutrality, prima facie we are not convinced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, direct expenses, depreciation, works over head and administrative over heads by normal capacity utilization and only raw material consumption expenses and process chemical consumption expenses had been divided by the actual capacity utilization (actual production) and the per-unit cost of the de-natured rectified spirit had been determined on this basis. However, according to the department all the expenses, i.e., raw material (molasses consumption expenses), process chemical expenses, salary and wages, utility, direct expenses, depreciation, works over head and administrative over heads must be divided by the actual capacity utilization which was much less than the production on normal capacity utilization and the per unit cost of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be absorbed in cost on the basis of the normal capacity utilization as during the period of dispute, the actual capacity utilization was much less than the normal capacity utilization; that in this regard, the utilities, that is, the expenses on account of power, water, etc are also to be treated as fixed over heads; that the appellant have treated the expenses on account of principal raw material consumption and process chemicals as variable expenses and have absorbed the same in the costing on the basis of the actual capacity utilization and that the Commissioner's order treating even the fixed over heads like salaries and wages, direct expenses, depreciation works over heads and utilities as variable cost and absorbing the same for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaded that during 2011-2012 when their cost accountant changed and a new accountant joined, the expenses on account of utilities, salaries and wages utilities direct expenses depreciation works over heads and administrative over heads were treated as variable over heads and were absorbed by dividing the same by actual capacity utilization. 4.1. Shri Khanna also pointed out to para 6 of the show cause notice which refers to an e-mail dated 16/12/2011 of Shri Vivek Saxena, an employee of the appellant company working at Gorakhpur unit at that time and according to which price at which the Denatured rectified spirit was being cleared for captive consumption is under valued and is much lower than the cost on which the Denature rectified spir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified spirit are: (a) principal raw material consumption (molasses consumption) (b) Consumption of other processed chemicals (c) salaries and wages (d) utilities like electricity, water, etc. (e) Direct Expenses (f) Depreciation (g) Works over heads (h) Administrative over heads. 6.1. The appellant in the present case have absorbed the raw material consumption expenses and process chemical consumption expenses on the basis of the actual production, which during the period of dispute, was one-fourth of the production on normal capacity utilization. The other expenses, i.e., expenses on account of salary and wages, utilities, direct expenses, depreciation, works over heads and administrative over heads have been tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect expenses, depreciation, works over heads and administrative over heads are to be absorbed in cost on the basis of the normal capacity utilization, as in the present case the actual production was much lower than the production based on the normal capacity utilization and prima facie, this is what the appellant had done. However, we find that there are considerable expenses each year on utilities which in terms of the para 5.9 of the CS Format guidelines are to be treated as variable over heads and the cost of variable over heads is to be absorbed in costing based on the actual captive utilization while this is the cost of utilities have been absorbed by the appellant on the basis of normal capacity utilization which prima facie is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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