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TMI Blog2022 (10) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... d 5th May 2015 for the period from April 2014 to 10.07.2014, for the reasons mentioned above, and for determining and demanding Central Excise duty not paid on the finished excisable goods, by FIAT for the period within and beyond one year from the relevant date. I further hold that: (b) The Assessee has been continuously been paying Central Excise duty on assessable value which was below the Manufacturing cost + profits in the case of Palio and Punto car models from entire period from March-10 to July-14 as well as some other models like Fire 1.4 (2019-10), SDE90 PC (2010- 11), Linea, Manza, Vista, SDE95 (2013-14). The differential value as computed in the two SCN's are liable to be included in the assessable value. Accordingly I hold that M/s Fiat India Automobiles limited having their factory and registered office at Plot No. B-19, M.I.D.C. Industrial Area, Ranjangaon, Taluka-Shirur, District Pune - 412220 mentioned in the Show cause notices as hereinabove discussed are liable as follows: (a) Central Excise duty amounting to Rs. 53,74,57,207/-(Rupees Fifty Three Crore Seventy Four Lakh Fifty Seven Thousand Two Hundred Seven only) on the differential value as shown in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for disagreement Auditor's conclusions with reason 1 Cost of production in few cases were higher than the assessable value Refer Annexure 1 & 2. Car Impact- Rs.17.71 crores PWT Impact Rs 4.11 crores Total Impact- Rs.21.82 crores. No The noticee is of the opinion that the COP was higher as compared to the Selling price only in the initial start up phase. i.e. 2008-09. In case of Palio there has been instance of it being in negative territory as same has been phased out from Dec, 2011. As evident subsequently all the regular products are having selling price higher compared to COP. Even though the duty was duly paid by the noticee on the basis of transaction value in all these cases, the cost of production certified by the Company and verified by us for the product referred in Annexure 1 & 2 were higher than the transaction value, it being in the initial period of operation. 2.3 Revenue observed that the Cost Auditor in Annexure -1 and Annexure -2 of his report has only compared COP with the assessable value adopted by the noticee and has hence has shown negative duty impact only where such Assessable Value of the noticee was lower than the COP. The Cost Auditor s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thousand Two Hundred & Seven Only) , should not be demanded and recovered from them under the provisions of Section 11A(4)/proviso to Section 11(A)( 1)of the Central Excise Act, 1944, for the period from March' 10 to March 14. (ii) The interest should not be demanded and recovered from them under the provisions of Section 11AA/11AB of the Central Excise Act, 1944 on the amount of Central Excise duty not paid/short paid by them; and (iii) Penalty should not be imposed under the provisions of Section 11AC of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002. 2.6 Another show cause notice dt. 5.5.2015 (read with addendum dt.3.3.2016) on same issue demanding duty amount Rs. 44,95,523/-(Forty four Lakhs Ninety Five thousand Five hundred twenty three Only) for the period 1.04.2014 to 10.07.2014. The said show cause notice also proposes to recover interest under Section 11AA of Central Excise Act,1944 and penalty under Rule25 of Central Excise Rules, 2002. 2.7 These show cause notices were adjudicated as per the impugned order referred in para 1, above. Aggrieved by the impugned order appellants have filed this appeal. 3.1 W have heard Shri V Sridhara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered where goods were sold at manufacturing loss of more than 50% having gross under-recovery of even material costs, there were continuous losses for a period of 5 years and there was expressed intent of selling at loss to penetrate the market. ➢ The appellant never intended to sell its products at exceptionally lower prices to penetrate the market. The appellant had always conducted its business in prudent manner as evident from its decision to discontinue loss- making Palio model. The appellant undertook all reasonable efforts to increase their sales volume and profits. Therefore, decision of Fiat India is not at all applicable. ➢ The Revenue did not issue show cause notices based on the report submitted by the Special Auditor. Some further working was done in which the department considered expenses pertaining to Selling & Distribution, Advertisement & Sales Promotion, Logistic, Warranty and then added notional profit of 10% to arrive at cost of production. Such cost was compared with the assessable values for different models and wherever assessable values were found to be lower, demand was raised in respect of those models/products in annexure to show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct from 14.5.2003. ➢ Therefore, decision in Fiat India's case cannot have any application for the period post 2003. ➢ Appellant correctly followed the provisions of Rule 10(a) read with Rule 9 of the Valuation Rules in respect of products manufactured and sold to TML and FGAIPL. The price at which the goods have been sold by TML / FGAIPL to unrelated person (dealer) alone is relevant for determining the assessable value as per Section 4(1)(b) of the Act. ➢ TML holds 50% of the shareholding in the appellant and therefore, the appellant and TML are interconnected undertakings under the same management. Further, FGAIPL is a 100% subsidiary of FGA and FGA also holds 50% shareholding of the appellant. Therefore, the appellant and FGAIPL are also inter-connected undertakings under the same management. Therefore, the Appellant and TML / FGAIPL are related to each other. These facts are not in dispute. Thus, the appellant is required to determine the assessable value of the goods under Valuation Rules prescribed under Section 4(1)(b) of the Act. ➢ In view of Rule 10(a), where the parties are interconnected undertakings and are also related with each othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019 to 2010), SDE90 PC(2010 - 11) Linea, Manza, Vista, SDE95(2013-14). ➢ In the case of Palio cars, the email of the CEO of the company dated December 2011 states that Palio cars will not be sold from 2012 onwards, this does not justify the transaction value being below the cost of manufacturing + profit from 2008 to 22 December 2011 i.e for the period prior to the decision taken by the company to stop selling Palio cars, in fact, after December 2011 there was no sale of Palio cars from the financial year 2012-13 to July 2014, implying that all the Palio cars were sold below the cost of manufacturing cost + profit prior to the decision to phase out the cars. ➢ In the case of Punto models, the price was kept lower to compete with identical cars in the same segment. ➢ For cases other than Palio and Punto car no defence has been put forth indicating the reason for transaction value being below manufacturing cost + profits. ➢ Profitability in 2012-13 was achieved by writing off losses of Rs 300 crores. The 300 crore loss has resulted in the erosion of the capital of the company. ➢ Adjudicating authority elaborately relied upon The Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... del cars, transaction value was less than cost of production in Palio cars. In the pricing of Punto petrol models, transaction value was lower than cost of production for competition in the market. The Company is in profit and there was no capital erosion at operating level. Hence as per Board Circular dated 15.01.14, the Fiat judgment cannot be made applicable to them. Board Circulars are binding on the Department as confirmed in legal decisions in the case of Ranadey Micronutrients, UCO Bank, Dhiren Chemical Industries and Ambuja Cement. In light of the amendment carried out in Section 4 of the Central Excise Act, 1944the money value of additional consideration has to flow from buyer to seller and if the money value of the consideration cannot be ascertained, the same cannot be included in the assessable value. Hence the decision in FIAT case would not be applicable for the period post 2003. I have perused the submissions, Board Circular, case laws and relevant Sections cited by the assessee. The assessee has stated that in the initial start-up phase, the various parts required in manufacturing of the cars were not manufactured/ procured indigenously but were imported. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MV/FGAIPL to pay cost of unabsorbed fixed overheads for the reserved capacity of TMY/FGAIPL (1.e difference between reserved/committed volumes to the actual takeoff during the year). For this purpose, Take or Pay mechanism related to Cars and Power trains has been specified in the agreement. Thus it is obligatory on the part of TML and FGAIPL to either utilize in full the fixed capacity reserved for it by FIAL or the cost related to the unutilized portion is recovered as cost of Car/Power train actually cleared. From the above it is clearly evident that a substantial portion of FIAL's income is on account of mark-up charges of Tata/FIAT Brand Cars and TOP charges. The question of incurring business loss on these counts does not arise. However I also find that in the case of FIAT brand cars, the assessee has continuously incurred losses on the Punto and Palio variants. The fact they have sold these cars at price below the cost of production for the entire period covered in these SCN's indicates that they could never have made a profit from these cars. Even though the assessee has tried to project that they are a profit making business entity, I have found discrepancies i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sell Palio in 2012, but simultaneously also wants confirmation from Commercial that no more Palio would be sold. This indicates that there was no finality to the decision of not selling Palio from 2012 onwards. Even assuming otherwise, that the call was taken by the company management in December-11 to stop selling Palio Cars from 2012 onwards, the impact on prices should have been from 2012 onwards where the Company could have justified selling Palio cars at lower price in order to clear the inventory, post the decision to stop selling Palio cars from 2012 onwards. CBEC Circular No. 979/03/2014-Cx dated 15.01.2014 inter alia states "2.1 Further, in paragraph 50, the Hon'ble Supreme Court has cited two instances where a manufacturer may sell goods at a price lower than the cost of manufacture and profit and yet the declared value con be considered as normal price. These instances are when the company wants to switch over its business or where a manufacturer has goods which could not be sold within a reasonable time. The Hon'ble Court has further held that these examples ore not exhaustive. Therefore, mere sale of goods below the manufacturing cost and profit cannot be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost should be deducted before arriving at PBT. In the instant case, I find that, instead, it has been added to PBT to arrive at EBIT. I further find that in financial year 2012-13, post the organizational restructuring, wherein Fiat separated the manufacturing company from the marketing company, they wrote off losses of about Rs 300 crore in Fiat India and therefore the company posted a profit of Rs 269 crore in the six months ending March of 2013. The relevant extract from the Notes forming part of financial statements for 2012-13 is as follows : As on 30th Sept 2012 (Rs in million) Note 3 iii) Statement of profit and loss (Deficit) Opening Balance (11,272.75) Less: Capital Reduction (refer note 31) 3000.00 Add: Profit/Loss for the period (646.61) Closing Balance (8919.36) Note 31: In the previous period ending September 30, 2012, the shareholders of the company at the extra-ordinary general meeting held on 23 July 2012, passed a resolution pursuant to the provisions of Section 100 to 105 read with Section 78 and other applicable provisions of the Company Act 1956 for the reduction of the paid up equity share capital of the company by adjusting the debit bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing cost and profit. At paragraph 66 in the FIAT judgment the Hon'ble Court has declined to hold its earlier judgment in case of Collector of Central Excise, New Delhi v. Guru Nanak Refrigeration Corpn (2003 (153) E.L.T. 249 (5.C.}] per-incuriam, distinguishing it on the basis of the facts of the case, though the transaction value in case of M/s. Guru Nanak Refrigeration Coron was less than the manufacturing cost and profit. The Hon'ble Supreme Court has cautioned against drawing general conclusions and inferences quoting the truism stated by Lord Halsbury that "a case is only on authority for what it actually decides and not for what may seem to follow logically from 2.1 Further, in paragraph 50, the Hon'ble Supreme Court has cited two instances where a manufacturer may sell goods at a price lower than the cost of manufacture and profit and yet the declared value can be considered as normal price. These instances are when the company wants to switch over its business or where o manufacturer has goods which could not be sold within a reasonable time. The Hon'ble Court has further held that these examples ore not exhaustive. Therefore, mere sale of goods below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by writing-off losses of Rs 300 cm f. The Rs 300 cr loss has resulted in erosion of Capital of the Company. I thus find that the issue at hand is identical to the case of Fiat India, Mumbai and due care has been taken by the Department to conduct verification in terms of CBEC Circular dated 15.01.2014. The company is actually in loss and there has been erosion of capital. Hence the SCN is not contrary to the terms of the CBEC Circular and the case laws cited by the noticee in this regard are not applicable to the present case at hand I now come to the part where the noticee has stated that in light of the amendment carried out in Section 4 of the Central Excise Act, 1944 (Explanation dated 14.05.2003), the decision of the Fiats case would not be applicable post 2003. I find this defence unacceptable. Contrary to what the noticee claims, I find that the explanation in Section 4 was inserted in 2003, which is much before the Supreme Court's decision in the case of Fiat India in 2012. The explanation in Section 4 is as follows: Explanation: For the removal of doubt, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s case (supra) this Court has stated that under sub-section (1)(a) of Section 4 of the Act, the 'normal price' would be the price which must be the sole consideration for the sale of goods and there cannot be any other consideration except the price for the sale of goods and it is only under such situation Sub Section (1)(a) of Section 4 would come into play. In the show cause notices issued, the Revenue doubts the normal price of the wholesale trade of the assessees. They specifically allege, which is not disputed by the assessees, that the 'loss making price' continuously for a period of more than five years while selling more than 29000 cars, cannot be the normal price. It is true that in notices issued, the Revenue does not allege that the buyer is a related person, nor do they allege element of flow back directly from the buyer to the seller, but certainly, they allege that the price was not the sole consideration and the circumstance that no prudent businessman would continuously suffer huge loss only to penetrate the market and compete with other manufacturer of more or less similar cars. A prudent businessman or woman and in the present case, a company is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is incorrect and not sustainable. They have further sought to explain the meaning of the term 'consideration' as per the Indian Contract Act and cited decisions in the case of Dass Gopal Krishnan Vs State of Punjab & Ors (1967) 3 SCR 557; CCE Vs Mazgaon Dock Ltd - 2005 (187) ELT 3 (SC) and CCE V$ Bisleri International Pvt Ltd - 2005 (186) ELT 257 (SC). I find that the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs Fiat India Private Limited -2012 (283) E.L.T. 161 (S.C.) has dealt at length on the term 'consideration'. The relevant portion of the order is reproduced below: 53. Now what requires to be considered is what is the meaning of the expression 'sole consideration'. Consideration means something which is of value in the eyes of law, moving from the plaintiff, either of benefit to the plaintiff or of detriment to the defendant. In other words, it may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, toss or responsibility, given, suffered or undertaken by the other, as observed in the case of Currie v. Misa, (1875) LR 10 Ex. 153. 54. Webster's Thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uyer to seller. It is any valuable benefit derived by seller. In the instant case, the value is in terms of market share gained by the noticee which was achieved by considerably deflating the price at which the cars were cleared. The value of this consideration has been quantified in money terms by way of the Cost Audit Report. The case of Dass Gopal Krishnan Vs State of Punjab & Ors (1967) 3 SCR 557 referred by noticee dealt with the East Punjab General Sales Tax Act, 1948 (46 of 1948 and whether the term "valuable consideration" was in conflict with the Sale of Goods Act, 1930 and Central Sales Tax Act, 1956. The order discussed the term 'purchase as meaning acquisition of goods for sale for cash or deferred payment or other valuable consideration. Sale and purchase are different perspectives of same transaction and the price is defined in the sale of Goods Act as "money consideration" and the expression 'cash', 'deferred payment' and 'other valuable consideration' are consistently used as monetary consideration. I find that this case was also referred to in the Fiat India Pvt Ltd case. After due deliberations, the Supreme Court observed "58. Fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same has been commented upon by the Hon'ble Supreme Court in the Fiat case, the relevant portion of which is as follows : 66. in our considered view, either the decision of Guru Nanak's case (supra) or the decision in Bisleri's case (supra) would assist the assessee in any manner whatsoever. We say so for the reason, that, in Guru Nanak's case, the department had accepted the price declared by the assessee and the narration of the facts both by the Tribunal and this Court would reveal that it was one time transaction and lastly, this Court itself has specifically observed that the view that they have taken, is primarily based on the facts and circumstances of the case. In the instant cases, the department never accepted the declared value. It is for this reason, provisional assessments were completed instead of accepting declared price by the assessee under Rule 9B of the Rules inter alia holding that during the enquiry, the assessees had admitted that they did not have any basis to arrive at the assessable value but they are selling their goods at loss price' only to penetrate the market. Secondly, as we have already noticed that for nearly five years the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld at price below the cost of manufacturing + profits, with intention to gain market share. The Hon'ble Supreme Court in the Fiat case has opined that : 59. To attract Section 4(1)(a) of the Act what is required is to determine the 'normal price' of on excisable article which price will be the price at which it is ordinarily sold to a buyer in the course of wholesale trade. It is for the Excise authorities to show that the price charged to such selling agent or distributor is a concessional or specially low price or a price charged to show favour or gain in return extra-commercial advantage. If it is shown that the price charged to such a sole selling agent or distributor is lower than the real value of the goods which will mean the manufacturing cost plus manufacturing profit, the Excise authorities con refuse to accept that price. From my earlier findings is Paras A, B and C above, it is now clearly established that the provisions of Section 4(1)(b) of the Central Excise Act, 1944 are applicable in this case. I thus find that in such circumstances, the Valuation Rules apply and the cost of production method or any other method is permissible for determination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a levy on goods manufactured or produced, the value of the excisable article must be limited to the manufacturing cost plus the manufacturing profit. The Court further was of the opinion, that a broad-based standard of reference may be adopted for the purpose of determining the measure of levy. Any standard which maintains a manner with the essential character of levy could be regarded as a valid basis for assessing the measure of levy. This Court in this decision also distinguished the view expressed in A.K. Roy & Anr. v, Voltas Ltd., 1977 (1) E.L.T. (177) (S.C.), wherein this court had held that the value for the purpose of Section 4 would include only the manufacturing cost plus manufacturing profit and exclude post-manufacturing cost plus manufacturing profit but exclude post-manufacturing cost and profit arising from post-manufacturing operation by observing that this Court in the aforesaid decision intended to say was that entire cost of the article plus profit minus trade discount would represent the assessable value and in that decision there was no issue on the question of including the post manufacturing cost and post-manufacturing profits. In conclusion, insofar as am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no need to add 10% as notional profit and expenses do not form part of production where there is no sale. (iv) They are carrying out transaction as per Vehicle Supply Agreement. (v) Resorting to valuation under Rule 11 is arbitrary and needs to be struck down. In support they have cited decisions in the case of Brij Bhushan Lal Parduman Kumar Vs CIT, AIR 1979 SC 209; Raghubar Mandal Harihar Mandal vs The State of Bihar, AIR 1957 SC 810; State of Orissa Vs Maharaja Shri B P Singh Deo, 1970 (76) ITR 690 (SC) and TAL Manufacturing Solutions Ltd Vs CCE, Pune-l (Order No A/579/07/C- 1/EB dated 22.08.07). (vi) They are submitting revised calculation as per their interpretation. Before going into the above submissions, I think it is necessary to revisit the relevant rules of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Rule 3 : The value of any excisable goods shall, for the purposes of clause (b) of sub-section (1) of section 4 of the Act, be determined in accordance with these rules. Rule 8: Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id As already discussed earlier, the goods in the present case are not captively consumed, but sold. Rule 8 of the Valuation Rules, 2000 do not apply to the present case. Hence the above referred cases by the noticee are not relevant to the present case, From my discussions above, I find that resorting to valuation under Rule 11 by the Department is not arbitrary but is based on the logic and rationale of the prevalent provisions of the statute. In the earlier 1975 Valuation Rules, Rule 7 which provides for the best judgment assessment, gives an indication that the assessing authority while quantifying the assessable value under the said Rules, may take the assistance of the methods provided under Rules 4, 5 or 6 of the Valuation Rules. In the present case, 1 find that the provisions of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 apply. These Rules are different from the 1975 Valuation Rules. The case laws cited by the noticee basically relate to "best judgment assessment" Brij Bhushan Lal Parduman Kumar Vs CIT, AIR 1979 SC 209: HELD: The law relating to 'best judgment assessment is same both in the case of income tax assessment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods." [Emphasis supplied] In the present case, I find that the goods have been sold by the assessee and duty has been paid on transaction value which is below the manufacturing cost + profits. When goods are sold, the only way to compute the correct transaction value is as per the principle laid down in the definition of transaction value. The CBEC Circular dated 15.01.2014 only states that calculations of manufacturing cost may be carried out using CAS-4 standards. In the present case, I find that since the goods have been sold, and there is no issue related to goods captively consumed, it is necessary to determine the transaction value as per the provisions of Section 4(3)(d) of the Central Excise Act, 1944, In find that the Cost Auditor has done the valuation as per AS-2, which is certified by cost auditor in the Cost Audit report. As per the Indian Accounting Standards, AS-2 deals with accounting of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f short-payment i.e cases where the transaction value is less than the manufacturing cost. The Central Excise law does not provide for such adjustments. Hence the calculations submitted by the assessee are rejected and the case laws cited by them hold no relevance to issue at hand." 4.3 From the impugned order at "E" commissioner has recorded that appellant have challenged the quantification of demand. While adjudicating the case he has not even referred to any quantification done in the show cause notice. As per annexure A to the Show Cause Notice 08.04.2015 where the demand has been quantified we find not only serious clerical and mathematical errors have are noticed but it is also noticed that there is no justification of addition of certain expenses. The relevant columns from the Annexure A to the show cause notice are reproduced below : Year/ Month Description Qty Cleared Total COP Additions to COP for selling etc expenses Total with notional profit of 10% Assessable Value adopted 1 2 3 4 5 6 7 Mar-10 Punto 1.4 75 2,84,37,075 2,71,08,075 Fire 1.4 4 3,91,408 3,15,840 Pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o nth Selling Advertisement Warranty Logistics Total Mar 2010 52291667 681275000 9790833 825916 7 751616667 2010-11 0 465900000 205510000 0 671410000 2011-12 647570000 693470000 253200000 0 159424000 0 2012-13 269160000 511330000 0 0 780490000 2013-14 64210000 220000 15600000 0 80030000 Absurdity of the additions sought to be made is evident from the table. For the year 2012-13, it seems that appellant had cleared 201 Punto 1.2 cars incurring the Selling expense of Rs 26,91,60,000/- and the advertisement expenses of Rs 51,13,30,000/-, against total cost of production as per the annexure of Rs 7,91,27,268/- additional expenses sought to be added to the comes to Rs 78,04,90,000/-. And the excise duty is sought to be demanded on the value of Rs 94,55,78,995/- thereby making the differential duty as Rs 11,60,95,800/- for the said year in respect of this model. Similar discrepancies can be pointed for each year. A note on the annexure to Show cause notice reads "The expenses shown in column 5,6,7 & 8 are taken from the Company's balance Sheet." The figures shown in the balance sheet of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 332018 20030 15 Punto 1.2 15 352048 332018 20030 16 Punto 1.3 10815 432463 409794 22669 17 Punto 1.3 144 432463 409794 22669 18 Punto 1.4 175 401464 397723 3741 Total 51664 19 SDE 75 PS 37959 144804 117238 27566 20 SDE 75 PS 146584 117238 29346 21 SDE 90 PS 20 148991 128000 20991 22 Fire 1.2 8V 231 214907 66114 148793 23 Fire 1.2 8V 13 214907 66114 148793 24 Fire 1.4 8V 862 129967 75413 54554 25 Fire 1.4 16V 360 143950 85344 58606 26 SDE 75 PS MSIL 12545 121493 92794 28699 27 SDE 75 PS MSIL 5216 121493 92794 28699 Total 19247 2012-13 1 Indica 1405 14585 318076 249494 68582 2 Linea 1.3 1372 602421 515117 87304 3 Linea 1.4 158 538675 440962 97713 4 Manza 1.3 6615 489595 344272 145323 5 Manza 1.4 259 415412 321516 93896 6 Punto 1.2 201 432250 393668 38582 7 Punto 1.3 5286 509924 454302 55622 8 Punto 1.4 10 496473 424752 71721 9 Vista 1.3 13577 406745 346375 60370 10 Vista 1.4 5532 332750 296466 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recurring cost: Abnormal and non-recurring cost arising due to unusual or unexpected occurrence of events, such as heavy break down of plants, accident, market condition restricting sales below normal level, abnormal idle capacity, abnormal process loss, abnormal scrap and wastage, payments like VRS, retrenchment compensation, lay-off wages etc. The abnormal cost shall not form the part of cost of production." In case of Cadbury India [2006 (200) E.L.T. 353 (S.C.)] Hon'ble Supreme Court has held as follows: "10. According to settled principles of accountancy only the elements that have actually gone into the manufacture/production of these 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 production. The Appellant produced along with the reply to the Show Cause Notice the following authoritative texts: Wheldon's Cost Accounting and Costing Methods, Cost Accounting methods by B.K. Bhar, Principles of Cost Accounting by N.K. Prasad, Glossary of Management Accounting Terms by ICWAI. 13. The cost accounting principles laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003(153) ELT 249 (SC) ] per-in curiam , distinguishing it on the basis of the facts of the case , though the transaction value in case of M/s Guru Nanak Refrigeration Corpn was less than the manufacturing cost and profit . The Hon'ble Supreme Court has cautioned against drawing general conclusions and inferences quoting the truism stated by Lord Halsbury that " a case is only an authority for what it actually decides and not for what may seem to follow logically from it. "2.1 Further , in paragraph 50, the Hon'ble Supreme Court has cited two instances where a manufacturer may sell goods at a price lower than the cost of manufacture and profit and yet the declared value can be considered as normal price . These instances are when the company wants to switch over its business or where a manufacturer has goods which could not be sold within a reasonable time . The Hon'ble Court has further held that these examples are not exhaustive . Therefore , mere sale of goods below the manufacturing cost and profit cannot be taken as the sole basis for rejecting the transaction value." From the perusal of the report of the cost auditors it is evident that there are few instances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 328 67 From the table as above which has been culled out from the same report of cost auditor from which Commissioner has taken the COP for his analysis, when production and clearance show such sharp decline, rejection of the submission to this effect that this was being phased out cannot be justified. That being so if the in terms of observations made by the Hon'ble Supreme Court in the case of FIAT India in para 50 and referred by the Board in above circular the transaction value below the cost of production can be justified. 4.9 Now from the reading of the decision of the Hon'ble Supreme Court in the case of FIAT India, it is quite evident that Hon'ble Supreme Court has sought comparison of the manufacturing cost + manufacturing profit with the normal price/ transaction value. The judgment is not an authority to add notional profit of 10% to the cost of production for making such comparison. Even Central Excise Valuation Rules do not provide so. From the days of Bombay Tyre International the concept of manufacturing profit has been there and it is profit that needs to be determined by applying the test of reasonability, while analyzing the account books of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gate represent the wholesale cash price. If the price charged to the purchaser at the factory gate is fair and reasonable and has been arrived at only on purely commercial basis, then that should represent the wholesale cash price under Section 4(1)(a) of the Act. This is the price which has been charged by the manufacturer from the wholesale purchaser or sole distributor. What has to be seen is that the sale made at arms length and in the usual course of business, if it is not made at arms length or in the usual course of business, then that will not be real value of the goods. The value to be adopted for the purpose of assessment to duty is not the price at which the manufacturer actually sells the goods at his sale depots or the price at which goods are sold by the dealers to the customers, but a fictional price contemplated by the section. This Court in Raj Kumar Knitting Mills case (supra), while construing the said expression, has held that the word 'ordinarily sold' do not refer to contract between the supplier and the importer, but, the prevailing price in the market on the date of importation and exportation. Excise duty is leviable on the value of goods as manufactured. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration in the form of market penetration. However how to quantify the market penetration to add to the transaction value needs to be defined. 4.11 In the present case it is not even the case of revenue that any additional consideration over the price charged for the actual sale of goods was received by the appellant from the buyer of goods in any manner directly or indirectly. That being so, we have no hesitation in holding that the transaction value is to be accepted for determination of the duty liability in respect of the goods cleared by the appellant, and the amendment made in the rule 6 in 2014 is only clarifying. Further in case of T & T Metals Pvt Ltd. [2021 (376) E.L.T. 545 (Tri. - Kolkata)] Kolkata Bench held as follows: "7.3 We further find that the appellant's case is squarely covered by the ratio laid down by the Apex Court in the case of Guru Nanak Refrigeration (Supra) wherein also, in identical facts and circumstances, the Department proposed to reject the transaction value for the reason that cost of manufacture was found to be higher than the price at which goods were eventually sold. The Apex Court taking note of the fact that when there was no additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X
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