Commissioner, Central Excise, ... vs M/S. Devidayal Electronics & Wires Ltd

[Arising out of Order-in- Appeal No. AT/M-III/128/2004 dtd. 12/10/2004 passed by the Commissioner of Central Excise (Appeals), Mumbai-III]

For approval and signature:

Honble Mr. P.K. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities?

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Commissioner, Central Excise, Mumbai-III : Appellants

VS

M/s. Devidayal Electronics & Wires Ltd. : Respondent

Appearance

Shri. V. K. Shastri, Asst. Commissioner(A.R.) for the Appellants None for the Respondent

CORAM:

Honble Mr. P.K. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 4/3/2015 Date of decision 4/3/2015

ORDER NO.

Per : P.K. Jain

The appeal filed by the Revenue against order passed by the Commissioner(Appeals). Brief facts of the case are that the respondent is manufacturing insulating varnishes captively consumed the same in the manufacture of Enameled Winding Wires. The dispute is relating to the value of insulating varnishes. This value is based upon cost construction method. Initially, demand were issued on the three counts. The original authority after considering the submission of the respondent dropped the demand on all the three counts. Revenue filed appeal against the said order before the Commissioner (Appeals) on only one count viz. relating to quantum of overheads to be taken while arriving at the cost of production. On the said count, original authority observed as under:

3. The Honble Mumbai High Court in their own case reported at 1984(16) ELT-30(BOM) already held that the varnish producing section is a separate industrial unit and the pro-rata benefit should be given to the varnish manufactured by them. The department had even issued a separate License for manufacture of Insulting Varnish. In view of the said Order of Mumbai High Court treating the varnish manufacturing Section as a separate industrial unit, the allegation of non-inclusion of overheads such as works overheads and administrative overheads etc. for the whole of their Company including those of their Wire manufacturing Section in the assessable value of captively consumed varnishes cannot be sustained.

2. The Commissioner(Appeals) after considering the submission made by Revenue dismissed the appeal of the Revenue. The Commissioner (Appeals) in his order has observed as under:

The show cause notice alleged under valuation and proposed revision of assessable value by addition of overheads at the rate of Rs. 6.29 per kgs to the landed cost of raw material and gross margin of profit. There is no explanation as to how this figure of Rs. 6.29 had been arrived at and how the figures furnished by the respondents were wrong. It is recorded in the impugned order itself that in response to the request of the respondents regarding explanation about proposed addition of Rs. 6.29 per kg., the department vide letter dated 6.9.2002 informed that it was not possible to clarify the figure and calculation shown in Annexure B beyond what has been said in the Show Cause Notice. Annexture B of the notice shows that assessable value was proposed to be re-fixed as (i) landed cost of raw material plus (ii) overheads @ Rs. 6.29 per kg. plus (iii) gross margin of profit.

3. Revenue is in appeal against the said order of the Commissioner(Appeals). Revenue has filed appeal on the following ground:

Commissioner(Appeals) has not taken into consideration that the overheads such as works overheads and administrative overheads etc. for the whole of their company including those of their Wire manufacturing section is not to be included in the assessable value of captively consumed varnishes in as much as the Administrative expenses such as payment to staff looking after the company as a whole has to be apportioned appropriately to the cost of the varnish section since the payment to staff of the company have a direct influence on the cost of manufacturing of varnishes. As per Board Circular No. 258/92/96-CX dt. 30/10/96,  the cost of production has to be determined so as to include interalia the cost of material, labour cost and overheads including administrative cost, advertisement expenses, depreciation etc. The Commissioner(Appeals) also not taken into consideration the fact that the original adjudicating authority has simply accepted the submissions given by the assessee with regard to the overhead expenses and profit margins without verifying the same from an independent authority like the Assistant Director(Cost).

4. We have gone through the Order-in-Appeal and as observed by the Commissioner(Appeals) there is no explanation as how this figure of Rs. 6.29 per kg had been arrived and how the figures furnished by the respondent were wrong. If anything was to be verified by Asstt. Director(Cost), the same should have been done atleast by now. Even in the appeal filed, Revenue has not given any explanation. Accordingly, we did not find any merit in the appeal and same is dismissed.

(Operative part pronounced in the court)

Ramesh Nair Member (Judicial) P.K. Jain Member (Technical)

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