2008 (6) TMI 19 - AT - Central Excise

Manufacture of chassis and sale of complete motor vehicle assessee contend that in determining value of motor vehicle, actual cost of chassis manufactured by the principal manufacturer at its end, is to be taken into account - value of chassis for the purpose of arriving at the assessable value of the complete motor vehicle shall be the assessable value of the chassis worked out by Eicher (principal manufacturer) u/r 8, and not its actual cost - questions is answered in favour of Revenue

Issues Involved:
1. Determination of the value of excisable goods used in manufacturing another article under Rule 8 of the Central Excise Valuation Rules, 2000.
2. Inclusion of the actual cost of inputs supplied by the principal or the value worked out under Rule 8 in the assessable value of the product manufactured by a job worker.

Detailed Analysis:

1. Determination of the value of excisable goods used in manufacturing another article under Rule 8 of the Central Excise Valuation Rules, 2000:

The core issue revolves around whether the value of the motor vehicle should include the 110% of the cost of the chassis as per Rule 8 of the Central Excise Valuation Rules, 2000. The appellants argued that the additional 10% represents the profit margin of the manufacturer (Eicher) and should not be included in determining the assessable value of the body-built vehicle. However, the Commissioner of Central Excise, Indore, held that the assessable value of the complete motor vehicle must include 110% of the cost of the chassis, as declared by Eicher, aligning with the Supreme Court's decision in Ujagar Prints.

The Tribunal referenced the case of Ujagar Prints, where it was established that the assessable value of processed fabrics includes the value of the grey fabric supplied, the job work charges, and the manufacturing profit and expenses. This principle was extended to the current case, indicating that the value of the complete motor vehicle should include the value of the chassis (110% of the cost) plus the job work charges and manufacturing profit and expenses of Bhagirath. The Tribunal concluded that the value of the complete motor vehicle cannot exclude the additional 10% of the cost of manufacture of the chassis, as it is part of the statutorily fixed value under Rule 8.

2. Inclusion of the actual cost of inputs supplied by the principal or the value worked out under Rule 8 in the assessable value of the product manufactured by a job worker:

The Tribunal examined whether the actual cost of the inputs supplied by the principal should be taken into account or the value worked out under Rule 8. The appellants relied on the decision in Bhilwara Processors, which suggested that the assessable value should be based on the cost of the grey fabric supplied and not the notional valuation under Rule 8. However, the Tribunal noted that this decision was based on a misreading of the Supreme Court's ruling in Pawan Biscuits Co. (P) Ltd., which followed Ujagar Prints.

The Tribunal clarified that the value of an intermediate product when used as raw material is the cost for the job worker, but the assessable value of the final product should be based on the value, not merely the cost. The Tribunal emphasized that the statutorily determined value under Rule 8, which includes the additional 10% of the cost of production, should apply at all stages of valuation for non-sale transactions.

The Tribunal also addressed the appellants' argument that including the profit element of the principal manufacturer in the assessable value could lead to anomalies. It was held that the profit margin, whether fixed statutorily or otherwise, is part of the value of the goods and should be included in the assessable value of the final product.

Conclusion:

The Tribunal concluded that the value of the chassis for determining the assessable value of the complete motor vehicle should be the assessable value of the chassis worked out by Eicher under Rule 8 of the Excise Valuation Rules, and not its actual cost. The questions framed in the order of reference were answered in favor of the Revenue and against the assessee-appellant. The appeals were directed to be listed before the Division Bench for final disposal according to law.

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