Cost of Production not declared under CAS-4 for Excise Duty, methodology adopted requires Verification: CESTAT Remands Matter [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, remanded a matter wherein the methodology adopted for calculating the cost of production was not declared under CAS-4 for determination of excise duty and required verification.

The facts of the case are that the appellant, M/s. Tractor and Farm Equipment (TAFE) Ltd, had stock-transferred lead oxide to their other unit M/s. TAFE, Power Source Division-II at Maraimalai Nagar from September 2003 to March 2008.

The appellant had adopted their own method of cost construction and arrived at a value at 110% of such cost and did not follow CAS-4 for arriving at the assessable value of goods stock-transferred.

Revenue was of the view that the appellant had contravened the provisions of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 read with Section 4 of Central Excise Act, 1944. A show cause notice (SCN) was issued proposing a demand under proviso to Section 11A (1) along with interest under Section 11AB and penalty under Section 11AC read with Rule 25 of the Central Excise Rules, 2002 (CER).

The said proposals were confirmed by the Adjudicating Authority on 30.03.2017. The appellant appealed their case to the Commissioner (Appeals) contending that they had filed the CAS-4 certificate and the cost of a product cannot be arrived at as required under Rule 8 of the Central Excise Valuation Rules, 2000 at the time of clearance of the goods. It was submitted that Rule 8 prescribes that when the excisable goods are not sold but used for consumption in the production or manufacture of other articles, the value shall become 110% of the cost of production of such goods.

After the Commissioner (Appeals) rejected the appeal, the appellant appeared before the CESTAT. The counsel for the appellant submitted that the full commercial value attributable to the automotive batteries had been subjected to Central Excise Duty resulting in no possibility of any undervaluation.

It was also submitted that the departmental officers were aware of the method being adopted since inception. The departmental representative submitted that since the cost of production had not been declared as per the mandated CAS-4, the methodology adopted cannot be accepted.

The tribunal observed that since CAS-4 was not followed, the methodology cannot be held to be reliable. However, the bench of M. Ajit Kumar (Technical Member) and P. Dinesha (Judicial Member) set aside the order and remitted the matter back to the file of the Adjudicating Authority for de novo adjudication.

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