2014 (6) TMI 201 - AT - Central Excise

Determination of assessable value - method of Valuation - body-built motor vehicles, namely Dumpers & Tippers - Job Work - Clearance of goods by the Appellants to the Depot of TML pursuant to the chassis supplied to them free of cost, by TML - Determination under Rule 10A or Rule 6 of the Valuation Rules read with Section 4(1)(a) of the Central Excise Act, 1944 - Held that - According to Chapter Note V of Chapter 87 of the Central Excise Tariff, building of body or fitting of a structure or equipment on the chassis falling under Heading 8706, amounts to manufacture of motor vehicles. We find that there is no sale of motor vehicles by the appellants either to TML or to any other customers. These vehicles were for the first time sold by TML from their depots and therefore, the clarification that the appellants sold the body, is of no help to them. We find that the chassis were supplied to the appellants free of cost. On fabrication of components of the body, it results into emerging a final product namely, motor vehicle which is distinct from the chassis. Since the said motor vehicles were not sold by the appellants and sold for the first time by TML, the value was to be determined in this case under Rule 10A of the Central Excise Valuation Rules, which provided for determination of value of the final products manufactured on behalf of the principal manufacturer - Following decision of Audi Automobiles & Others 2009 (5) TMI 426 - CESTAT, NEW DELHI and M/s. Hyva (India) Pvt. Ltd. (2013 (8) TMI 770 - CESTAT MUMBAI) - Matter remanded back - Decided in favour of Revenue.

Issues Involved:
1. Determination of assessable value of motor vehicles.
2. Applicability of Rule 10A of the Central Excise Valuation Rules, 2000.
3. Principal-to-principal transaction vs. job work.
4. Interpretation of terms "on behalf of" and "any inputs".
5. Validity of Rule 10A in light of Central Excise Act provisions.
6. Computation errors in demand.
7. Invocation of extended period of limitation and imposition of penalties.

Detailed Analysis:

1. Determination of Assessable Value of Motor Vehicles:
The core issue is whether the assessable value of motor vehicles cleared by the appellants to Tata Motors Ltd. (TML) depots should be determined under Rule 10A or Rule 6 of the Central Excise Valuation Rules, 2000. The appellants argued that their transactions with TML were on a principal-to-principal basis, and thus, Rule 10A was not applicable. However, the Tribunal found that the appellants were job workers for TML, and the value should be determined under Rule 10A, which applies to goods manufactured on behalf of a principal manufacturer.

2. Applicability of Rule 10A of the Central Excise Valuation Rules, 2000:
Rule 10A was inserted to provide a method for valuing goods manufactured by job workers on behalf of a principal manufacturer. The Tribunal noted that the appellants received chassis free of cost from TML and manufactured fully body-built vehicles, which were then transferred to TML's depots. The Tribunal concluded that the appellants' activities fell under the definition of job work as per Rule 10A, and thus, the value should be determined based on the transaction value at which TML sold the vehicles.

3. Principal-to-Principal Transaction vs. Job Work:
The appellants contended that their transactions with TML were on a principal-to-principal basis, citing various case laws. However, the Tribunal referred to previous decisions, including Audi Automobiles vs. CCE, Indore, and Hyva India Pvt. Ltd., which held that such transactions were job work. The Tribunal emphasized that the appellants did not sell the motor vehicles but merely transferred them to TML's depots, supporting the job work classification.

4. Interpretation of Terms "On Behalf Of" and "Any Inputs":
The appellants argued that Rule 10A requires the job worker to manufacture goods "on behalf of" the principal manufacturer and from "any inputs" supplied by the principal manufacturer. They contended that these conditions were not met since they used their own materials. The Tribunal, however, interpreted "any inputs" to mean that even if some materials were supplied by the principal manufacturer, it would satisfy the condition. The Tribunal also clarified that "on behalf of" does not necessarily imply an agency relationship but refers to the job work done for the principal manufacturer.

5. Validity of Rule 10A in Light of Central Excise Act Provisions:
The appellants challenged the validity of Rule 10A, arguing it contravened Sections 2(f), 3, and 4 of the Central Excise Act. The Tribunal rejected this argument, stating that Rule 10A was introduced to determine the value of goods in cases where the manufacturer (job worker) does not sell the goods but transfers them to the principal manufacturer. The Tribunal found no contravention of the Act's provisions.

6. Computation Errors in Demand:
The appellants pointed out errors in the computation of demand, particularly the non-deduction of sales tax from the value. The Tribunal directed the Commissioner to consider the sale price from TML's depots as cum-duty price and recalculate the demand accordingly, ensuring that the excise duty and sales tax elements are correctly accounted for.

7. Invocation of Extended Period of Limitation and Imposition of Penalties:
The Tribunal examined whether the extended period of limitation and penalties were justified. It noted that the appellants had informed the Department about their valuation method post-01.04.2007. The Tribunal remanded the case to the Commissioner to examine the aspect of suppression of facts and the applicability of the extended period of limitation. It also directed that penalties should be reconsidered in light of these findings, especially where demands were for the normal period.

Conclusion:
The Tribunal upheld the applicability of Rule 10A for determining the assessable value of motor vehicles manufactured by the appellants on behalf of TML. It directed the Commissioner to correct computation errors and reassess the applicability of the extended period of limitation and penalties. The appeals were disposed of with directions for a fresh hearing and reconsideration of specific issues.

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