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2015 (10) TMI 1990 - CESTAT NEW DELHI

2015 (10) TMI 1990 - CESTAT NEW DELHI - 2015 (330) E.L.T. 269 (Tri. - Del.) - Valuation of goods - Captive consumption - duty to be levied on the basis of 110% of the cost of production - Determination of assessable value - Clearances of de-natured rectified spirit - Held that:- prima facie, the expenses on account of salaries and wages, direct 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 .....

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orbed 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 with this plea. In view of the above disc .....

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lasses. The appellant company has another unit in Kashipur which manufactures Ethylene glycol. The dispute is in respect of the clearances of de-natured rectified spirit by the Gorakhpur unit of the appellant to their Kashipur Unit during the period from December, 2012 to March, 2012. In respect of these clearances which are to be treated as clearance for captive consumption, the appellant Gorakhpur Unit was discharging duty liability on the value determined under Rule 8 of the Central Excise Va .....

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ive 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 he .....

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imposed penalty of equal amount on them under section 11AC. Against this order of the Commissioner, this appeal has been filed along with stay application. 2. Heard both the sides in respect of the stay application. 3. Shri S.C. Kamra, Advocate, ld. Counsel for the appellant, pleaded that the appellant have determined the cost of production in the CAS-IV format read with the guidelines in respect of the cost accounting standards for determining cost of production of the goods for captive consum .....

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ion; that based on these costing guidelines, the expenses on account of salaries and wages, direct expenses, depreciation, works over heads and administrative over heads have to 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; tha .....

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ual capacity utilization is not correct. He therefore, pleaded that the impugned order is not correct, as the same is contrary to the principles of costing. Besides this, he also pleaded that whatever duty was payable by the Gorakhpur unit its CENVAT Credit was available to the Kashipur Unit and as such it is a Revenue's neutral situation and for this reason also, there is no justification for this huge duty demand. Shri Kamra, therefore, pleaded that the appellant have strong prima facie ca .....

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eads and the same are to be absorbed in the production cost based on the actual capacity utilization; that the expenses on account of utilities during 2008-2009 were about 15.19 crore; that the appellant have, therefore, wrongly absorbed the expenses on account of utilities on the basis of normal capacity utilization which was four times higher than the actual capacity utilization during the period of dispute. He also pleaded that during 2011-2012 when their cost accountant changed and a new acc .....

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rice 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 spirit should have been transferred to Kashipur Unit and existence of this communication which was to other officers, has been accepted by the appellant company. Shri Khana, therefore, pleaded that this is a case of deliberate evasion of duty and accordingly, it was pleaded that this is not the case for waiver from the requirement .....

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the de-natured rectified spirit manufactured and cleared by the Gorakhpur unit, who is appellant in this case, was to be determined on the basis of 110% of the cost of production under Rule 8 of the Central Excise Valuation Rules, 2000. There is also no dispute that in terms of the Board's Circular No. 692/8/2003CX dated 13/3/2003, the cost of production was to be determined strictly in accordance with the CAS-IV Format Standard developed by the Institute of Cost Works Accountant of India (I .....

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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 treated as fixed expenses and the same have been absorbed in the costing by dividing the same by the production on .....

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r heads; that while variable over heads are the items of expense with the change with the volume of production such as the cost of utilities, raw material, etc., the fixed over heads are those whose value does not change with the volume of production, such as salaries, rent, etc and according to this para 5.9 while variable production over heads shall be absorbed in production cost based on actual capacity utilization, i.e., on the basis of actual production, the fixed production over heads and .....

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