TMI Blog2015 (11) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... aking price cannot be accepted as the normal price of the goods and that too when it is spread over a period of more than five years i.e. w.e.f. January, 2008 and it has to be inferred that the consideration could only be to compete with other manufacturers who are also engaged in the manufacture of the similar goods falling under the same Chapter Heading of CETA, 1985, the existence of extra commercial consideration while fixing the price would not be the ‘normal price’. No prudent businessman would continuously suffer huge loss only to compete market. - there is neither admission by Appellant that they lowered the price to level below the cost of production to penetrate the market nor there any evidence on record to support this allegation. If the Department’s stand is that lower price below the cost of product was to compete with the other manufacturer of comparable cars, that price as discussed above, cannot be held to be influenced by any extra commercial consideration. When the price is fixed keeping in mind the factors of the supply and demand, and also the price on which the competitors are selling the comparable product, the price determined may sometimes be more than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an the price at which the cars were being sold through their dealers to the ultimate customers. Selling of the cars at a price below the cost of production appeared to indicate existence extra commercial consideration while fixing of the price of the cars. In view of this, the investigating officers took the view that the transaction value at which the duty was being paid is not the real transaction value and the same has to be rejected and the transaction value has to be determined in accordance with the provisions of Central Excise Valuation (Determination of price of excisable goods), Rules, 2000 (hereinafter referred to as the valuation Rules ). Accordingly, investigating officers determined the transaction value of these models of the cars during the period of dispute mentioned above on the basis of the cost of production and 10% profit margin. In arriving at this decision, the investigating officers also took note of the fact that the appellant company is making losses during the last several years and loss making price of any goods cannot be accepted as normal price and that, too when it is spread over the period of more than 5 years. The assessable value of 110% of the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o November, 2012 on the ground that during this period, the sale price of the cars was influenced by the considerations other than the price, as the cars had been sold at the price below the manufacturing cost to compete in the market and on this ground, the Commissioner by impugned order has rejected the transaction value on which the duty was paid and has determined the transaction value by invoking Section 4(1)(b) of the Act read with Rule 11 of the Valuation Rules as 110% of the cost of production, that the Commissioner has confirmed the duty demand of ₹ 95,61,79,874/- only for the normal limitation period from Jan. 2012 to November, 2012, that the Commissioner has relied upon the Apex Court s judgment in the case of Fiat India Ltd. reported in 2012 (283) ELT 161 (SC) and has also held that the ratio of this judgment is applicable to the facts of this case and that the appellants case is not covered by the Board s Circular NO.979/3/2014-CX dated 15.1.2014 regarding the interpretation of the Apex Court s judgment in the case of Fiat India Ltd. (supra), that the ratio of the Apex Court s judgement in the case of Fiat India Ltd. (supra) is not applicable to the facts of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... just because the sale price of the goods, declared as normal price , was below the cost of production, it cannot be alleged that the sale price was not the normal price , that the Apex Court in its judgment in the case of Fiat India Ltd. (supra), has not over-ruled its earlier judgment in the case of Guru Nanak Refrigeration Corporation (supra) and has only observed that the judgment in the case of Guru Nanak Refrigeration Corporation (supra) would not be applicable to the facts of the case of M/s. Fiat India Ltd. (supra), that there is no evidence produced by the department to show that during the period of dispute, the appellant s company s market share has increased, that the loss in respect of the various models during the period of dispute varies from 0.63% to 40% while during the same period, the same models had also been sold at profits ranging from 1.75% to 32.99%, that these facts are not denied by the department and from these facts it is clear that this is not the case where the appellant company constantly, year after year, was selling the goods at a price much below the cost price with a view to penetrate the market, as was in the case of M/s. Fiat India Ltd. (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um and has distinguished its earlier judgment on the basis of the facts of this case, that it has further been clarified that the Apex Court in para 50 of its judgment in case of Fiat India Limited has cited two instances where a manufacturer may sell the goods at a price lower than the cost of manufacture and yet the declared value can be considered as normal price and these instances are when the company wants to switch over its business or where a manufacture has goods which could not be sold within the reasonable time and the Apex Court has further held that these examples are not exhaustive and mere sale of goods below the manufacturing cost and profit cannot be taken as the sole basis for rejecting the transactions value, that in this case, mere sale of the goods at below the manufacturing cost and profit has been taken as the sole basis for rejecting the transaction value, that when the Commissioner in the impugned order itself states that the appellant company sold the goods at the price below the manufacturing cost and profit in order to compete with other manufacturers manufacturing similar cars, it cannot be said that the appellant lowered then sale price due to extra co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marking price, which cannot be accepted as normal price, as such, loss making price was influenced by extra commercial consideration for competing in the market with other manufacturer who also manufactured similar cars. He, therefore, pleaded that the appellant have not been able to establish prima facie case in their favour. 4. We have considered the submissions from both the sides and perused the records. 5. During the period of dispute, in terms of the provisions of Section 4(1)(a) of the Act, where the duty of excise is chargeable on any excisable good with reference to their value, then, on each removal of the goods, such value of the goods shall, in a case where the goods are sold by the assessee for delivery at the time and place of removal, the assessee and the buyers of the goods are not related and the price is sole consideration for sale, be the transaction value. According to clause (b) of Section 4(1), in any other case, including the case where the goods are not sold, the transaction value is to be determined in such manner as prescribed. In this regard, the Central Government has framed Central Excise Valuation (Determination of price of excisable goods) Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner s findings and observations in para 5.6, 5.8 and 5.13.1 which are reproduced below:- 5.6 A plain reading of Section 4(1)(a) of the Act ibid reveals that the valuation of excisable goods chargeable to duty of excise on ad-valorem basis would be based upon the concept of transaction value provided (i) where the goods are sold for delivery at the time and place of delivery; (ii) the buyer is not a related person, and (iii) the price is the sole consideration. Now I have to consider the actual meaning of sole consideration as used in Section 4 (1)(a) of the Act. It is a fact on records that the Notice has been selling their cars at a lower price than the manufacturing cost in order to compete in the market. The Notice has contended that the reason for selling their cars at a lower price than the manufacturing cost is to compete in the market; that the intention of the Notice to compete in the market cannot be treated as extra commercial consideration as it does not flow from the buyer to the seller and the whole transaction is bona fide. 5.7 I find that the Noticee has been selling their cars below the cost of production. The loss making price cannot be accepted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions penetrate the market and compete with other manufactures of similar goods cannot be equated as, while fixing price of the goods manufactured keeping in view the price at which comparable goods are being sold in the market by competitors is a commercial compulsion and such price cannot be said to be influenced by extra commercial consideration, lowering the price to penetrate the market by increasing the market share and for this purpose, selling the goods for years at a stretch at price below the cost of production is something different and it is the latter which has been held in case of Fiat India Limited (supra) to be extra commercial consideration. 6.2 Similarly, in para 5.13.1 of the impugned order, the Commissioner has observed that further, I find that the noticee has been selling their cars below the cost of production in order to penetrate in the market. The loss making price cannot be accepted as the normal price of the goods and that too when it is spread over a period of more than five years i.e. w.e.f. January, 2008 and it has to be inferred that the consideration could only be to compete with other manufacturers who are also engaged in the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en influenced by extra commercial consideration. 8. The case of M/s. Fiat India Ltd. on which the department has relied upon, is totally different. In that case, throughout during the period of dispute, the manufacturer had sold the cars at a price which was less than half of the cost of production and the manufacturer s stand admittedly was that the cars were being sold as such a price in order to penetrate the market. It is in such circumstances, the Apex Court has held that the price was not the sole consideration for sale. But this is not so in this case. When the Department s stand is that the lower price was in order to compete with other manufacturer of similar cars, it cannot be said to be influenced by extra commercial consideration. In view of these circumstances, we are of the prima facie view that the Apex Court s judgment in the case of Fiat India Ltd.(supra) is not applicable to the facts of this case. In these circumstances, directing the appellant to pre-deposit the entire duty demand confirmed along with interest for compliance with the provisions of Section 35 F would certainly cause undue hardship. Therefore, the requirement of pre-deposit of duty demand, and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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