CA Bimal Jain
Nirma Ltd. & Ors. (the Respondent) was engaged in the manufacture of Linear Alkyl Benzene (LAB) which was cleared by the Respondent to its sister units located in different places and was also used captively in the same factory where the said LAB is manufactured. The Respondent was paying Excise duty as per Rule 8 of the Excise Valuation Rules. The Department has demanded the differential duty by alleging that costing as done by the Respondent was not in accordance with the method of costing and it resulted in undervaluation and thus, paid lesser amount of duty.
The Department sought to include following three elements of cost for arriving at the cost of production:
- Interest expenditure;
- Depreciation; and
- Profit margin
The Hon’ble Supreme Court has held that in accordance with the Costing Accounting Standard – 4 (CAS-4), interest expenditure, depreciation and profit margin not be taken into consideration for arriving at the cost of production for the payment of Excise duty.
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