2009 (11) TMI 764 - AT - Central Excise

Valuation of bullet proof vehicles supplied to Jammu & Kashmir Police by the respondent - job-work - transaction value - Held that - goods have to be assessed at the place of removal and if the value cannot be determined under main provisions of Section 4(1)(a) of the Act, rules for valuation have to be resorted - the goods should be assessed in the condition in which the same are cleared from the factory and the value addition on account of the processing carried out by the job worker subsequent to the clearance of the goods should not be taken into account - appeal dismissed - decided against appellant.

Summary

Issues involved:
Valuation of bulletproof vehicles supplied to Jammu & Kashmir Police; Interpretation of legal provisions for assessment of transaction value under Central Excise Act, 1944; Application of Section 4 of the Act in determining duty payment; Consideration of separate activities like bulletproofing in valuation process; Relevance of factory registration and place of removal in valuation for duty calculation.

Analysis:
The appeal revolved around the valuation of bulletproof vehicles supplied to Jammu & Kashmir Police by the respondent, involving two purchase orders placed on Mahindra Defence Systems, a division of Mahindra & Mahindra Ltd. The Revenue contended that duty should be paid on the total price of bulletproof vehicles, while the respondent argued for a separate valuation of the base vehicle and bulletproofing activity. The Asstt. Commissioner confirmed a duty demand, but the Commissioner (Appeals) set it aside, leading to the Revenue's appeal.

The Revenue argued that duty should be based on the transaction value with Mahindra & Mahindra Ltd., emphasizing the single transaction nature and the delivery terms to Jammu. They highlighted the need for duty payment on the complete vehicle value post-amendment of Section 4 of the Act, rejecting the concept of deemed normal price in favor of actual transaction value. Additionally, they relied on Chapter XVI Note 6 for treating the vehicle as incomplete or semi-finished.

In response, the respondent's counsel stressed that the base vehicle was assessed before removal, following the principle of assessing goods in the form they are removed. They asserted that bulletproofing was a distinct activity undertaken by a sub-contractor, suggesting duty demand from the sub-contractor if it amounted to manufacture. They challenged the applicability of Chapter Note 6 without evidence supporting incomplete manufacturing.

The Tribunal analyzed the legal provisions, emphasizing the requirement to assess goods at the place of removal and resort to valuation rules if the value determination under Section 4(1)(a) is not feasible. They illustrated the scenario with a hypothetical example to clarify the duty calculation process when different divisions within a company are involved in the production chain. The Tribunal upheld the Commissioner (Appeals) decision, citing a CBEC Circular and legal precedents to support the exclusion of value addition outside the factory of clearance for duty calculation, affirming that goods should be assessed based on their condition at the time of clearance.

In conclusion, the Tribunal concurred with the Commissioner (Appeals) and dismissed the Revenue's appeal, emphasizing the importance of assessing goods at the time of clearance and excluding value addition post-clearance by independent contractors for duty calculation, in line with legal provisions and precedents.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the Tribunal's decision based on legal provisions and precedents, ensuring a thorough understanding of the valuation dispute related to bulletproof vehicles supplied to Jammu & Kashmir Police.