2018 (3) TMI 257 - AT - Central Excise

Valuation of the cars manufactured and sold - acceptance of transaction value - Section 4 (1) (a) of the Central Excise Act, 1944 - Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Held that - The main elements to satisfy transaction value in terms of Section 4 (1) (a) are that such value should be for delivery at the time and place of removal; between unrelated parties and price being the sole consideration for sale and the same had not been influenced by any other consideration - The fact of the present case are that the Revenue proceeded against the appellant only on the ground that the price is not the sole consideration for sale of cars by the appellant during the material time. There is no allegation that the appellant and the buyers of the car are related persons or any consideration in money terms or non-money terms were received directly or indirectly by the appellant from such buyers. The appellant was centrally registered with large tax payer unit (LTU) during the relevant time. As such, the production clearance of the appellant in all their units should have been considered in a holistic manner - there were glaring omissions in noting certain factual details by the Original Authority. Some of the crucial submissions on facts made by the appellant were not even discussed. These are with reference to escalation in the cost due to various factors beyond the control of the appellant and also sale of same model of cars both in profit as well as in loss in the same financial year. Similarly, we also note that the appellant s plea regarding various decisions of the Apex court on valuation and provisions of Section 4 (1) (a) were also not examined with required analysis. The appellant strongly contested the finding with specific reference to amendment to Section 4 (1) w.e.f. 14/05/2003 readwith provisions of Rule 6 and the valuation rules. This also requires clear finding. Erosion of capital - Held that - net worth of the company is different from the capital of the company. There was no reduction in the share capital of the appellant during the material period. We note that the finding by the lower authority on erosion of capital appears to be not based on Standard accounting and commercial principles. Extended period of limitation - Held that - there is no reason to invoke allegation of suppression, mis- representation with an intention to evade payment of duty on the part of the appellant/assessee. There is no case for such allegation - extended period not invocabe. Appeal allowed in part.

Summary

Issues Involved:
1. Differential duty payable by the appellant/assessee on the valuation of cars sold below manufacturing cost.
2. Applicability of the Fiat India Pvt. Ltd. case decision.
3. Rejection of transaction value and re-determination of assessable value.
4. Invocation of extended period for demand and imposition of penalties.

Detailed Analysis:

Differential Duty Payable:
The case revolves around the differential duty payable by the appellant/assessee on the valuation of cars manufactured and sold below the manufacturing cost. The Department demanded differential duty based on the assertion that the transaction value declared by the appellant was below the manufacturing cost, thus necessitating re-determination of assessable value as per Section 4(1)(b) read with Rule 11 of the Valuation Rules, 2000. The Original Authority confirmed the differential duty for the normal period but did not find any deliberate suppression of facts to invoke the extended period or impose penalties.

Applicability of Fiat India Pvt. Ltd. Case:
The appellant argued that the Fiat India Pvt. Ltd. case does not apply to their situation. In the Fiat case, the Supreme Court held that selling cars at a substantial loss to penetrate the market was not a valid transaction value for excise duty purposes. The appellant contended that unlike Fiat, they sold cars at a profit in some periods and provided reasons for sporadic losses, such as currency fluctuations and natural disasters. The Tribunal noted that the Original Authority did not adequately consider these factors and the Board’s clarification that the Fiat ruling does not apply universally to all cases where the sale price is below the manufacturing cost.

Rejection of Transaction Value and Re-determination of Assessable Value:
The Original Authority rejected the transaction value and re-determined the assessable value at 110% of the manufacturing cost for cars sold below cost. The Tribunal found that the Original Authority’s reliance on the Fiat case was misplaced as it did not consider the appellant’s specific circumstances, such as the sale of cars both at profit and loss within the same financial year and external factors affecting costs. The Tribunal emphasized that mere sale below cost does not automatically invalidate the transaction value unless there is evidence of extra-commercial consideration.

Invocation of Extended Period and Imposition of Penalties:
The Revenue appealed against the Original Authority’s decision to drop the demand for the extended period and not impose penalties. The Tribunal upheld the Original Authority’s decision, noting that the issue arose from the Fiat case decision, and there was no evidence of suppression or misrepresentation by the appellant. The Tribunal directed that any demand in the denovo proceedings should be restricted to the normal period only.

Conclusion:
The Tribunal set aside the impugned orders and directed the Original Authority to re-examine all issues afresh, considering the Tribunal’s observations. The appellant should be given adequate opportunity to present their case, and findings should be recorded after due analysis. The appeal by the Revenue was dismissed, and no penalties were imposed. The Original Authority in the denovo proceedings should restrict findings to the normal period only.