2022 (10) TMI 1244 - AT - Central Excise

Quantification of demand - Valuation of excisable goods manufactured - valued lower than the cost of production and profit of the goods - Section 4(1) (a) of the Central Excise Act, 1944 - recovery of short paid duty with interest and penalty - HELD THAT - From the perusal of the report of the cost auditors it is evident that there are few instances wherein the goods specially Palio model cars were being cleared on transaction value which was lower than the cost of production. It was clarified by the appellant that the said model was being phased out. Commissioner has rejected the said argument, ignoring the factual report contained in the cost auditor report there is no sale of the said car during the Financial 2012-13, and thereafter. It is found that the ratio at which the cost of production of Palio cars has increased over the years is much higher than the ratio for the other Fiat Car models manufactured by the assessee. With no evidence of any plan to stop production and selling of Palio brand cars from 2008 onwards itself being on record, the above analysis clearly implies that in the case of Palio models, the assessee failed to bring down the cost of production and hence resorted to selling the cars below the cost of production to penetrate the segment - when production and clearance show such sharp decline, rejection of the submission to this effect that this was being phased out cannot be justified. In the present case it is not even the case of revenue that any additional consideration over the price charged for the actual sale of goods was received by the appellant from the buyer of goods in any manner directly or indirectly. That being so, there are no hesitation in holding that the transaction value is to be accepted for determination of the duty liability in respect of the goods cleared by the appellant, and the amendment made in the rule 6 in 2014 is only clarifying. There are no merits in the grounds for confirmation of demand against the appellant we are not taking the other issues of limitation, demand of interest and imposition of penalty for discussion. The impugned order set aside - appeal allowed.

Summary

Issues Involved:

1. Extended period of limitation u/s 11A(4) of the Central Excise Act, 1944.
2. Valuation of excisable goods below the cost of production and profit.
3. Applicability of the Supreme Court's judgment in Fiat India Pvt. Ltd.
4. Inclusion of additional expenses in the assessable value.
5. Justification of transaction value as per Section 4(1)(a) of the Central Excise Act, 1944.
6. Recovery of interest and imposition of penalty u/s 11AA/11AB and 11AC respectively.

Summary:

1. Extended Period of Limitation:
The Commissioner invoked the extended period of limitation u/s 11A(4) of the Central Excise Act, 1944, for determining and demanding Central Excise duty not paid on the finished excisable goods by Fiat for the period from March 2010 to March 2014 and April 2014 to July 2014.

2. Valuation of Excisable Goods:
The appellant adopted a valuation of excisable goods lower than the cost of production and profit, which was claimed by Revenue to be non-conforming to the provisions of Section 4(1)(a) of the Central Excise Act, 1944. The audit revealed that the cost of production was higher than the assessable value, leading to a demand for differential duty.

3. Applicability of Supreme Court's Judgment in Fiat India Pvt. Ltd.:
The appellant argued that the Supreme Court's judgment in Fiat India Pvt. Ltd. was not applicable as the circumstances were different. The Commissioner, however, found similarities and applied the judgment, stating that the appellant sold cars below the cost of production to penetrate the market, similar to Fiat India Pvt. Ltd.

4. Inclusion of Additional Expenses:
The Commissioner included expenses such as selling, advertisement, warranty, and logistics in the assessable value, along with a notional profit of 10%. The appellant contested this inclusion, arguing that these expenses should not form part of the cost of production as per CAS-4 standards.

5. Justification of Transaction Value:
The Commissioner rejected the appellant's transaction value, stating that it was not the normal price and was influenced by extra-commercial considerations. However, the Tribunal found that the transaction value should be accepted as there was no additional consideration flowing from the buyer to the seller, and the sales were made to independent buyers.

6. Recovery of Interest and Imposition of Penalty:
The Commissioner confirmed the recovery of interest u/s 11AA/11AB and imposed a penalty u/s 11AC of the Central Excise Act, 1944. The Tribunal, however, set aside the impugned order, allowing the appeal and negating the demand for interest and penalty.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order, and held that the transaction value should be accepted for determining the duty liability as there was no additional consideration received by the appellant from the buyer. The appeal was allowed, and the impugned order was set aside.