2015 (12) TMI 668 - SC - Central Excise

Valuation - inclusion of interest and gains arising out of advance received against supplies - Misdeclaration of value - Held that - Commissioner once again reiterated the conclusion of his earlier order which compelled the assessee to approach the Customs, Excise and Service Tax Appellate Tribunal again challenging the order of the Commissioner. The finding of the Commissioner was that the huge amount of customers booking advances were used to meet their working capital requirements as well as were partly invested in deposits/securities. On that basis, he concluded that the interest, dividends and capital gains from such investment enabled them to meet the working capital requirements which resulted in lowering their capital borrowings. The Tribunal, after re-examining the entire material that was produced before it by the assessee, noted that the overall effect of the deposit on the financial position of the company or its profitability had no direct relevance to the dispute. It found that for excise valuation, the relevant consideration was as to whether the deposits had the effect of lowering the sale prices of the motorcycles or whether the sale prices were normal sale prices unaffected by the deposits. It is clear that each and every aspect of the issue is examined, on the basis of which finding is arrived at that the price of the motorcycle manufactured by it were market driven and it did not follow a cost of production plus reasonable profit pricing policy. - These are finding of facts which are arrived on the analysis of the evidence produced before it and do not call for any interference - Decided against Revenue.

Summary

Issues:
- Allegation of incorrect valuation and duty evasion on motorcycles
- Inclusion of customer deposit in motorcycle valuation for excise duty
- Tribunal's perfunctory handling of the case leading to remand
- Commissioner's conclusion on the use of customer deposits for working capital
- Tribunal's re-examination of the material and finding on motorcycle pricing

Allegation of Incorrect Valuation and Duty Evasion:
The respondent, a motorcycle manufacturer, faced a Show Cause Notice in 1991 alleging incorrect motorcycle valuation and duty evasion from 1985-86 to 1990-91. The notice claimed that a customer deposit of Rs. 500 per motorcycle was undeclared and constituted additional consideration affecting excise duty valuation.

Inclusion of Customer Deposit in Motorcycle Valuation:
The Commissioner's Order-in-Original included the Rs. 500 deposit in motorcycle pricing for excise duty calculation, resulting in a demand of Rs. 2 crores duty and a Rs. 50 lakhs penalty. The Tribunal initially allowed the assessee's appeal, but upon appeal by the Department, the case was remanded by the Supreme Court for detailed consideration.

Tribunal's Perfunctory Handling and Remand:
The Supreme Court remanded the case as the Tribunal had not thoroughly examined the impact of customer deposits on motorcycle pricing. The Tribunal was instructed to assess if the deposits affected pricing, without allowing additional documents, emphasizing a detailed review with the help of a cost accountant.

Commissioner's Conclusion and Tribunal's Re-examination:
After the remand, the Commissioner reaffirmed the earlier decision, prompting the assessee to challenge it again before the Tribunal. The Tribunal, after re-evaluating the evidence, found that customer deposits did not influence motorcycle pricing significantly. It noted the market-driven pricing approach, emphasizing that the company did not follow a cost-plus profit strategy.

Conclusion:
The Tribunal's detailed analysis post-remand concluded that customer deposits did not impact motorcycle pricing significantly, affirming a market-driven pricing strategy over a cost-plus profit approach. The appeal lacked merit and was dismissed based on factual findings from the evidence presented.