CESTAT confirms Valuation of Adjudicating Authority in Finalisation of Provisional Assessment using CAS-4 principle, Sets aside Re-adjudication [Read Order]

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (ITAT) has set aside the re-adjudication and has confirmed the valuation of adjudicating authority in finalisation of provisional assessment using CAS-4 principle.

ITC Ltd Munger were manufacturers of cigarettes and Packaging Materials like Shells, Slides, Printed Sheets, Gold Printed Sheets, Hinged Lid Packets (HLPs) and Cardboard Outers (CBOs). These packaging materials were cleared by them to their cigarette factories for captive consumption in the manufacture of cigarettes.

Valuation of the aforesaid goods had been the subject matter of dispute over several years. Due to dispute in valuation, the assessment during the disputed period was made provisionally and pursuant to the directions issued under various orders from time to time, the provisional assessments for the period 1982-83 to 2004-05 were taken up by the Deputy Commissioner of Central Excise, for finalisation. The Deputy Commissioner had passed an Order-in-Original dated 12.12.2007, wherein he had finalised the provisional assessments upto 2004-05 and upon finalisation, directed the Appellant to pay an amount as differential duty.

However, on appeal to the Commissioner (Appeals) regarding the valuation issue, the matter was remanded to the adjudicating authority for fresh adjudication. Aggrieved against the remanding of the matter on valuation issue, the Appellant has filed the present appeal before this Tribunal.

The Revenue has not accepted the method of valuation adopted by the Adjudicating authority in the Order-in-Original dated 12.12.2007 and observed that, as per CAS 4, cost of production shall consist of material consumed, direct Wages and Salaries, direct expenses on works overhead, quality control cost, research and development cost, packing cost, administrative overheads related to production

The Deputy Commissioner while deciding the cost of production as per CAS-4 principles, examined documents pertaining to different years on test basis supplied by ITC Ltd., Munger and observed that broad principles of CAS-4 have been followed. However, certain elements of unabsorbed overhead have not been considered by the Deputy Commissioner for arriving at the cost of production. It is not correct to exclude unabsorbed overheads

J. P. Khaitan, on behalf of the assessee submitted that this had been done without even an iota of evidence produced by the Department to show any error in the Appellant’s workings. He further contended that the Appellate functions are restricted to remedying defects in the order of the lower authority and not an invitation to throw.

He further contended that the Commissioner (Appeals) failed to appreciate that neither the Authority who constituted the Special Team nor the Reviewing Commissioner had pointed out any lacunae in the Report of the Special Team. The Appellant submitted that the impugned order having exceeded the scope of the appeal by the Department was liable to be set aside.

Mukhopadhyay, on behalf of the revenue submitted that while computing the cost of production it was not correct to exclude the unabsorbed overheads.

The two-member Bench of Ashok Jindal, (Judicial Member) and K. Anpazhakan (Technical Member) observed that observe that the Deputy Commissioner has decided the cost of production as per CAS-4 principles after examining various documents pertaining to different years on test basis supplied by the Appellant. He had categorically observed that broad principles of CAS-4 have been followed to determine the cost of production.  It was also observed by the special team that the cost incurred against the expenditure under “unabsorbed overheads” has not been considered while calculating the cost of production. We observe that this observation of the Special Team which is the basis of this appeal by the department has not been supported by any evidence.

When all the figures supplied by the Appellant were duly certified by an independent Cost Accountant and were further scrutinised by a Special Team constituted by the Chief Commissioner, it was not open to the Commissioner (Appeals) to doubt the correctness of the figures.

The Bench observe that the Order-in-Original passed by the Deputy Commissioner has taken into account all such elements at the time of finalisation of provisional assessment. The Bench set aside the re-adjudication holding that the method of valuation adopted by the adjudicating authority was as per the principles enshrined in CAS-4 and it not warrant any intervention.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

M/s ITC Ltd. vs Commissioner of Central Excise , 2023 TAXSCAN (CESTAT) 1291 , Shri J. P. Khaitan, Shri Agnibesh Sengupta & Shri Asit Kr. Hazra , Shri S. Mukhopadhyay