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TMI Blog2022 (8) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... the pricing is based only upon the cost of the materials procured by the petitioner. Normally, the cost price of a product would take into account the purchase cost of inputs, direct and indirect costs of manufacture and the profit margin. Unless the petitioner supplies the break-up of the sale consideration, the officer would not be in a position to determine the pricing methodology and it is for the petitioner to satisfy the officer that the ultimate price fixed by it does not take into account the value of the free-of-cost components. While it is entitled to exclude the value of the components supplied free by Daimler, the facts in relation to pricing have to be placed before the officer to establish that the product has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumentation provided by DICV. The agreement also provided for certain supplies to be effected in the reverse, that is, from Daimler to the petitioner, for use in the manufacture of the axels, on free-of-cost basis. The supply of the aforesaid components (hereinafter referred to as components ), are stated to be on bill-to/ship to, basis. This essentially means that orders are placed on suppliers of the components and the consideration thereof remitted by Daimler, with the products transported direct to the premises of the petitioner for incorporation into the axels. 4.This is a routine modus operandi of business followed by several organizations to ensure quality control in certain critical aspects of the contract. There is no spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause Notice issued by the petitioner was responded to, and after an exchange of communication, the impugned orders have come to be passed modifying the turnover returned to include the value of the free-of-cost components as well. 8.It was not as though the petitioner was caught unawares as the issue had been put to it, even in the pre-assessment proposals. Upon verification of the purchase invoices, the officer had found that a portion of the raw material supplied free of cost by Daimler had not been considered for computation of turnover for VAT though the same had been included in the assessable value for computation of excise duty. 9.Thus, he had proposed inclusion of the same in the turnover, being of the view that adopting basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 200.00 Bill Customer Ship to Our plant (Base Rate Rs.300+ED Rs.37.08 + VAT/CST Rs.17/ Rs.7). In case of ED AAM Chennai is taking Cenvat Credit and VAT credit is being availed by DICV, CST becomes cost to DICV) 300.00 500.00 B 3 Assessable Value for Dety Liability under Rule 6 of Central Excise Valuation Rules, 2000 1000.00 C=(A+B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the petitioner relies upon a judgment of the Hon ble Supreme Court in the case of Moriroku UT India (P) Ltd. Vs. State of U.P. [2008 (15) VST 559 SC]. That case dealt with the issue of whether the amortized cost of toolings was includable in the sale price of auto components as in the case of excise duty under the Central Excise Act, 1944. 12.The issue has been crystalized as to whether the Department was right in equating sales tax to excise duty . At para No.19, the Bench notes the distinction between the methodology for arriving of consideration in the context of central excise vis- -vis sales tax. They state that excise duty is a levy on the taxable event of manufacture and is computed on the value of manufactured g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue in the present case relates to the proper methodology for arriving at the cost price of the product in question. Neither side has any quarrel with the propositions of law as enunciated in either of the cases cited, Moriroku UT India or Hardeo Singh. 18.However, in the present case, we are concerned with sale of a product simpliciter and not a works contract. The Assessing Authority has also treated the transaction only as a sale and nowhere is there a reference to treatment of the transaction as a works contract. 19.The counter relies on certain other decisions rendered by High Courts, all in the context of works contract. However applying these cases would lead to a departure/variation from the position adopted by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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