2018 (11) TMI 1136 - AT - Central Excise

Valuation - prototypes - Department contends that the valuation under Section 4(1)(b) r/w Rule 11 and Rule 8 should be applied - Held that - At no stretch of imagination, the assessable value of similar model vehicle can be ₹ 71,14,198/-. It is to be noted that under Rule 126 of Central Motor Vehicle Rules, 1989, a prototype of every motor vehicle shall be subject to testing by designated Government Departments or Research Associations or Testing Institutes to ascertain the compliance of provisions of the Act and Rules. The said Act itself uses the word prototypes . Only after certification by such authorities can the manufacturer of motor vehicles manufacture and market the motor vehicles. The similar model vehicles which are commercially manufactured can be said to be copies of the prototypes. It cannot be then said that these prototypes are consumed in further manufacture of motor vehicles. Thus Rule 8 of Central Excise Valuation Rules 2000 will not apply to such a situation. Appeal dismissed - decided against Revenue.

Summary

Issues: Valuation of prototypes under Central Excise Valuation Rules 2000

Analysis:
1. Facts: The appeal was filed by the department against the Commissioner of Central Excise's order partially setting aside the demand raised in the show cause notice regarding the valuation of prototypes of motor vehicles.

2. Valuation Methodology Dispute: The respondents contended that Rule 8 was not applicable, and they adopted the future sale price of motor vehicles under Rule 4, discharging appropriate duty. The department argued that prototypes and subsequent model vehicles are distinct, so Rule 4 valuation cannot apply. They insisted on applying Rule 11 r/w Rule 8 for valuation.

3. Department's Arguments: The department contended that prototypes were sold for testing road worthiness, akin to captive consumption, thus Rule 8 should apply for valuation. They argued against the Commissioner's reliance on past decisions and judgments not directly applicable to the case at hand.

4. Respondent's Defense: The respondents clarified that prototypes were cleared for testing, not captively consumed, and hence Rule 8 was inapplicable. They adopted the future sale price under Rule 4 for valuation, as the prototypes were final products themselves.

5. Decision: The Tribunal noted that the prototypes were not consumed in further manufacture, thus Rule 8 did not apply. The Commissioner's detailed analysis of prototypes and their valuation methodology was upheld. The Tribunal highlighted the department's acceptance of past decisions favoring the respondents, concluding that Rule 11 r/w Rule 8 need not be applied in this case.

6. Conclusion: The Tribunal dismissed the department's appeal, finding no grounds to interfere with the Commissioner's order. The valuation of prototypes under Rule 4 was deemed appropriate, and the department's insistence on Rule 11 r/w Rule 8 was rejected based on the specific nature of the prototypes and past precedents favoring the respondents.

Judgment Date: 12.09.2018