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2013 (8) TMI 770 - AT - Central ExciseDetermination of Assessable Value - Job work - Undervaluation of the Goods - The assesses were manufacturers of dumpers/body built motor vehicles and accessories falling under Chapter 87 of the Central Excise Act - they were also engaged in building body on the chassis on job work basis - Department was of the view that the assesses had undervalued the goods to the extent that fully built up vehicles were sold at an higher price from the place of removal other than the factory gate - Held that - The value of the goods supplied by the assesses was to be determined under Rule 10A of the Central Excise Valuation Rules, 2000 and not under Rule 6 there was no infirmity in the Orders-in-Original with regard to valuation of the goods under Rule 10A of the Valuation Rules - Since the duty was required to be paid under Rule 10A, interest was also required to be paid on the duty quantified by the department the Orders-in-Original with regard to confirmation of duty under Rule 10A of the Valuation Rules along with interest was upheld Penalties were set aside. Following AUDI AUTOMOBILES Versus COMMISSIONER OF CENTRAL EXCISE, INDORE 2009 (5) TMI 426 - CESTAT, NEW DELHI - once it was sought to be contended that Rule 10A will have no application in the facts of the case, it was for the assesses to produce relevant documents like the invoice and agreement which would support the case put forth by the assesses - it was necessary for the assesses to disclose the nature of the understanding between the manufacturer of chassis and the said firms, and in case, such understanding was in the form of writing, to place on record the document in that respect. It was apparent that the firms had cleared the goods in relation to the body fabricating and mounting on the chassis which were supplied to the said firms free of cost by the manufacturer of chassis - the activity for the purpose of valuation would squarely fall under Rule 10A and not under Rule 6 - Decided against assesses.
Issues Involved:
1. Determination of assessable value under Rule 10A of the Central Excise Valuation Rules, 2000. 2. Applicability of Rule 6 of the Valuation Rules read with Section 4(1)(a) of the Central Excise Act. 3. Interpretation of the term "on behalf of" in Rule 10A. 4. Whether the transactions between the appellants and Tata Motors are on a principal-to-principal basis. 5. Errors in quantifying the demand and applicability of penalties. Detailed Analysis: 1. Determination of Assessable Value Under Rule 10A: The primary issue was whether the assessable value of the goods cleared by the appellants should be determined under Rule 10A of the Central Excise Valuation Rules, 2000. The appellants argued that their transactions with Tata Motors were on a principal-to-principal basis and that they were not agents of Tata Motors. They contended that since the body is sold to Tata Motors, the value should be determined under Section 4(1) of the Central Excise Act read with Rule 6 of the Valuation Rules. However, the Tribunal referred to Rule 10A, which provides the method of valuation for goods manufactured on a job work basis and concluded that the valuation should be done under Rule 10A. 2. Applicability of Rule 6 of the Valuation Rules: The appellants argued that Rule 10A was not relevant in their case and that the value should be determined under Rule 6 read with Section 4(1)(a) of the Central Excise Act. They cited various decisions to support their contention that the fully built body supplied by a body builder to the chassis supplier constitutes a sale. However, the Tribunal found that the facts of the case were identical to those in Audi Automobiles v. CCE, Indore, where it was held that the valuation should be done under Rule 10A and not Rule 6. 3. Interpretation of "On Behalf Of": The appellants contended that Rule 10A would be applicable only when the goods are manufactured "on behalf of" the principal manufacturer and that their transactions with Tata Motors were on a principal-to-principal basis. They relied on several decisions to argue that "on behalf of" implies an agency relationship. The Tribunal, however, referred to the decision in Audi Automobiles and concluded that the expression "on behalf of" in Rule 10A denotes the manufacturer of the excisable goods and does not imply representation to any third party. 4. Principal-to-Principal Transactions: The appellants maintained that their transactions with Tata Motors were on a principal-to-principal basis and not as agents. They cited the decision of the Patna High Court in Tata Engineering & Locomotive Company Ltd., which held that body builders are independent manufacturers. However, the Tribunal noted that this decision was distinguishable as the duty was demanded from the appellants and not from Tata Motors, and Rule 10A was not in existence at that time. 5. Quantification Errors and Penalties: The appellants pointed out quantification errors, such as the non-deduction of sales tax from the value and the non-allowance of Cenvat credit on chassis supplied by Tata Motors. The Tribunal agreed that sales tax should be deducted from the value. Regarding penalties, the Tribunal found that since the valuation dispute arose due to the interpretation of Rule 10A and Rule 6, there was no case for imposing penalties. Therefore, the penalties were set aside. Conclusion: The Tribunal upheld the Orders-in-Original with regard to the confirmation of duty under Rule 10A of the Valuation Rules along with interest but set aside the penalties imposed. The sales tax amount paid by the appellants was to be deducted from the value. The appeals were disposed of accordingly.
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