COLLECTOR OF CENTRAL EXCISE Vs. BIMETAL BEARING LTD.

JUDGEMENT

(1.) THE department is aggrieved by the order of the Collector (Appeals) by which the order passed by the Asstt. Collector was set aside and the matter remanded to the Assistant Collector.

(2.) THE assessee manufactures bimetallic bearings and bushes in the manufacture of which bimetallic strips are used. In other words, bimetallic strips in this case is an intermediate product. The assessee filed a price list in part VI of the proforma which was provisionally approved for various periods from 1 -3 -1986 to 30 -6 -1986; 1 -7 -1986 to 30 -6 -1987; 1 -7 -1987 to 30 -6 -1988; and 1 -7 -1988 to 31 -3 -1989. Assistant Collector determined the value of the intermediate product under Rule 6(b)(l) of the Central Excise (Valuation) Rules, 1975 taking into consideration the profit margin of the entire unit correlating the same to the intermediate product in the ratio of cost of production of the strips to the cost of production of final product. The appellate authority held that the profit margin in respect of the final product has no relevance to the profit margin for the intermediate product and directed the Assistant Collector to make re -assessment.

(3.) UNDER Rule 6(b)(ii) of the Rules, value has to be determined on the cost of production including profits, if any, which the assessee would have made on the sale of the product. The difficulty in the present case is that there is no market for the intermediate goods in the sense that no manufacturer sells the same and every manufacturer captively consumes the same. It is true that the profit margin for the final product cannot be merely adopted as profit margin for intermediate product. This is particularly so when the two products are totally of different nature, quality, etc. But the assessing authority has to determine the profit of margin by some method which cannot be unreasonable or arbitrary, having due regard to the nature of the two products, the cost of production for the two products, the profit margin for the final product and perhaps the cost of profit for products more or less the same to the intermediate products and by making suitable adjustment. We are not indicating that this is the only manner in which profit margin can be arrived at under Rule 6(b)(ii) of the Rules. This method can be reasonably conceived to suit appropriate situations. The appellate authority has not indicated what method, in the circumstances, would be the appropriate and suitable method. While agreeing that the profit margin of the final product cannot be merely adopted, it would not be correct to say that the assessing authority should not have had regard to such profit margin at all.