2018 (7) TMI 1949 - AT - Central Excise

Valuation - chassis of commercial vehicles cleared by the appellant to body builders - deduction of the discount from the Ex-Factory Dealer Net Price - Section 4(1)(a) of the Central Excise Act 1944 - appellant has adopted the comparable price of the same goods sold to independent customers which is net of discount - HELD THAT - Once the sale price of the chassis to independent buyers (net of discount) was available and satisfied all the requirements of Section 4(1)(a) of the Central Excise Act 1944 the same price can be adopted for valuing the chassis cleared to the body builders. The Larger bench of this Tribunal in the case of ISPAT INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX. RAIGAD 2007 (2) TMI 5 - CESTAT MUMBAI has held that when sale price to independent customer is available the same price can be adopted for valuation of the goods stock transferred. Hon ble Supreme Court in the various decisions has held that once comparable price of the similar goods to unrelated buyer is available the same can be adopted for valuation of the goods cleared for captive use - reliance placed in the case of COMMISSIONER OF C. EX. CHANDIGARH VERSUS BHARTI TELECOM. LTD. 2008 (4) TMI 41 - SUPREME COURT . Scope of SCN - HELD THAT - The Show Cause Notices propose to demand duty by applying the provisions of Rule 7 or 8 of the Valuation Rules. However the demand proposed in the notice and confirmed by the impugned order is on totally different grounds i. e. by taking into account the amounts of discounts and demanding duty thereon. The provision of Rule 7 or 8 of the Central Excise Valuation Rules does not empower the department to determine duty liability in this manner. Thus the entire case made out by the department is totally erroneous and does not have the support of any provisions of law. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Valuation of chassis of commercial vehicles cleared to body builders; Admissibility of discount deduction in valuation; Applicability of Central Excise Valuation Rules; Legality of demand based on discount amounts; Limitation period for demand.

Valuation of Chassis:
The appeal was filed against an Order confirming duty demand on chassis cleared to body builders, based on the Commissioner's decision that deducting discount from Ex-Factory Dealer Net Price was not permissible for valuation. The appellant argued that the sale price to independent buyers, net of discount, satisfied Central Excise Act requirements, hence could be used for valuing chassis to body builders. Citing relevant judgments, the appellant contended that the demand was legally untenable. The Tribunal noted that the price adopted for sales to independent buyers met Section 4(1)(a) requirements and could be used for valuing chassis to body builders.

Discount Deduction in Valuation:
The Commissioner's view that since discounts were not passed on to body builders, their deduction was impermissible, was challenged by the appellant. Referring to a Tribunal decision, the appellant argued that discounts agreed upon in the sale must be granted, even if not passed on. The Tribunal concurred, stating that discounts part of the sale agreement must be allowed, as per relevant case law.

Applicability of Central Excise Valuation Rules:
The department's reliance on Rule 7 or 8 of the Central Excise Valuation Rules for demanding duty based on discount amounts was found erroneous. The Tribunal held that the demand made by the department did not align with the provisions of the Valuation Rules, rendering the case unsupported by law.

Legality of Demand Based on Discount Amounts:
The Tribunal found the department's demand calculation unclear, as the Show Cause Notices proposed duty under Valuation Rules but confirmed demand based on discount amounts. This discrepancy led the Tribunal to deem the department's case as erroneous and lacking legal support. The Tribunal, based on appellant's arguments and relevant decisions, allowed the appeal, setting aside the impugned order.

Limitation Period for Demand:
Although the appellant raised the issue of limitation, the Tribunal did not delve into it due to allowing the appeal on merits. The Tribunal provided consequential relief to the appellant, emphasizing the erroneous nature of the department's demand calculation and the legal unsustainability of denying discount deductions in valuation.

This detailed analysis of the judgment highlights the key issues of valuation, discount deduction, application of Valuation Rules, legality of demand calculation, and the Tribunal's decision to allow the appeal based on legal grounds and relevant case law.