LexCOMMISSIONER OF CENTRAL EXCISE, PUNE versus M/S. CADBURY INDIA LTD.
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• COMMISSIONER OF CENTRAL EXCISE, PUNE v. MIS. CADBURY INDIA LTD. AUGUST I, 2006 [ASHOK BHAN AND MARKANDEY KATJU, JJ.] Central Excise (Valuation) Rules, 1975; Rule 6(b)(ii)/Circular No.6921 812003-CX dated 13.2.2003 issued by the Central Board of Excise and Customs: Valuation-Goods/milk products captively consumed in manufacturing of final product/chocolate-Expenditure incurred on-Factory expenses- Inclusion in the cost of production-Held: Products in question captively consumed by the a~sessee in his factories-These are neither marketable nor A B c did the assessee sell them-Principles of Accountancy as recognized by the D Central Board of Excise and Customs could be followed for determining the cost of production-Direct Labour Cost/material cost/overhead expenses in producing the intermediate products could only be included in the cost of production of the final product-Revenue is not permitted to rake view to the contrary-Hence, factory expenses incurred on these products could not be included in the cost for the purpose of valuation. E The question, which arose for determination before this Court in these appeals was as to whether the expenditure incurred in manufacturing of certain products of milk which are captively consumed in the factories of the assessee in the manufacture of chocolate, the final product, and no F part of which are sold by the respondent, could be included in the cost of production in terms of Rule 6(b)(ii) of the Central Excise (Valuation) Rules for the purpose of valuation. Dismissing the appeals, the Court HELD: 1.1. According to settled principles of accountancy only the G elements that have actually gone into the manufacture/production of the intermediates i.e. sum total of the direct labor cost, direct material cost, direct cost of manufacture and the factory overheads of the factory producing such intermediate products are included in the cost of 207 H 208 SUPREME COURT REPORTS [2006] SUPP. 4 S.C.R. A production. (210-F-G( CCE v. Dai !chi Karkaria ltd, ( 1999( 7 SCC 448, relied on. 1.2. The cost accounting principles as laid down by the Institute of Cost and Works Accountants of India (ICWAI) have been recognized by B the Central Board of Excise and Customs vide Circular No.692/8/2003 - CX dated 13.2.2003. The circular requires the department to determine the cost of production of captively consumed goods strictly in accordance with these principles. (211-H; 212-A( BMF Be/tings ltd v. CCE: (2005) 184 E.L.T. 158 (Tri. - Bang.); ITC C v. CCE, (190) ELT 119; Teja Engineeringv. CCE, (2006) 193ELT100 (Tri- Chennai); Ashima Denims v. CCE. (2005) 191 ELT 318 (Tri-Mumbai); and Arti Industries v. CCE, (2005) 186 ELT 208 (Tri-Chennai), referred to. 1.3. In the present case thr intermediate products are captively D consumed in the assessee's own factory. These intermediate products are not sold nor are marketable. Hence question of including the factory expenses in producing the final product in their valuation as was sought to be added by the Revenue, does not arise. (212-D( CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2947-2948 E of 2001. F From the Final Order No. C-1/3430-31/WZB/2000 dated 28.9.2000/ 24. I 0.2000 of the Customs, Excisee & Gold (Control) Appellate Tribunal, West Regional Bench at Mumbai in appeal No. E/102 l/'2000-MUM. WITH C.A. Nos. 1856-1857/2002, 5232-5233/2003, 1425/2005 and 2878-2879/ 2005. Harish Chander, Binu Tamta, T.S. Murthy, R. Sudhinder and B.K. G Prasad for the Appellant. Joseph Vellapally, Ashok H. Desai, D.B. Shroff, Pratap Venugopal, E. Venu Kumarr for (K.J. John & Co.), U.A. Rana, P.K. Thakur (Gagrat & Co.), Bhavesh Panjwani, P.H. Parekh, Sameer Parii<j, Arun Francis (for P.H. Parekh & Co.), C.N. Sree Kumar, V. Lakshmikumaran, Alok Yadav and Rajesh H Kumar for the Respondents. - COMMISSIONER OF CENTRAL EXCISE, PUNE "· CADBURY INDIA LTD. [MARKANDEY KA TIU,J.] 2 Q9 The Judgment of the Court was delivered by A MARKANDEY KATJU, J. Civil Appeals Nos. 2947-2948/2001 have been filed against the impugned final order dated 28.9.2000 passed by the Customs Excise and Gold (Control) Appellate Tribunal, West Regional Bench at Mumbai in Appeal No. E/1021, 1022/2000-MUN. Heard learned counsel for the parties. B The question involved in these appeals is about the valuation of milk crumbs, refined milk chocolate and four other products manufactured by the respondent - M/s. Cadbury India Li
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