The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), noted that the IDSC debit notes form part of cost of paper and paper board, constituting cost of production.
The appellant in the present appeal is M/s. ITC Limited.
The point for consideration before the Commissioner was whether or not the IDSC debit notes would form part of the cost of paper and paper board received from their Bhadrachalam Unit.
The Counsel for the appellant L. Maithili appeared for the appellant and stated that the appellant, at its Packing and Printing Unit, manufactures packaging materials. These packaging materials are made out of paper and paper board manufactured at the appellant’s paper unit at Bhadrachalam.
The Counsel further submitted that the demand for differential duty arose out of a dispute as regards valuation of the packaging materials manufactured in the Chennai Unit of the appellant and substantially transferred to its cigarette factories, where the same were used for the manufacture of cigarettes, and also to the appellant’s units engaged in other business which used the same in the manufacture of their respective goods like food, agarbathi, clothes.
The Tribunal in its Final Order No 40094/2023 28/02/2023 observed that “In the case of Inter-unit transfer of goods for captive consumption, the actual cost of production (100% of the cost of production), of the raw material procured from the Bhadrachalam unit of the appellant [excluding the notional loading under Rule 8 – 15% / 10%] is the cost of raw material in the hands of the Chennai unit, for determining the cost of production of packaging material manufactured by the Chennai unit.”
The Tribunal also noted that the percentage of loading on such cost of production, mandated by provisions of Rule 8 for remittance of excise duty by the Bhadrachalam unit cannot not however be considered as comprised in the cost of the raw material consumed for manufacture of packaging material and thus constituting the cost of production at the Chennai unit.
The Tribunal of Sulekha Beevi C.S., Member (Judicial) and M. Ajit Kumar, Member (Technical) concluded that “It has not been brought to our notice that the said Final Order, which pertains to the past period, has been either varied, modified or set aside as of date. Hence, we find no reason to deviate from the same for demands pertaining to the subsequent period.”
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