COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. MIS. FIAT INDIA (P) LTD. & ANR.

61Copy pinpoint61. After amendment of Section 4 :- Section 4 lays down that the valuation of excisable goods chargeable to duty of excises on ad-valorem would be based upon the concept of transaction value for levy of duty. 'Transaction value' means the price actually paid or payable for the goods, when sold, and includes any amount that the buyer is liable to pay to the assessee in connection with the sale, whether payable at the time of sale or at any other time, including any amount charged for, or to make provisions for advertising or publicity, marketing and selling, and storage etc., but does not include duty of excise, sales tax, or any other taxes, if any, actually paid or payable on such goods. Therefore, each removal is a different transaction and duty is charged on the value of each transaction. The new Section 4, therefore, accepts different transaction values which may be charged by the assessee to different customers for assessment purposes where one of the G · three requirements, namely; (a) where the goods are sold for delivery at the time and place of delivery; (b) the assessee and buyers are not related; and (c) price is the sole consideration for sale, is not satisfied, then the transaction value shall not be the assessable value and value in such case has to be arrived H at, under the Central Excise Valuation (Determination of Price

COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 1025 FIAT INDIA (P) LTD. & ANR. [H.L. DATTU, J.]

of Excisable Goods) Rules 2000 ('the Rules 2000' for short) A which is also made effective from 1st July, 2000. Since the price is not the sole consideration for the period even after 1st July, 2000, in our view, the assessing authority was justified in invoking provisions of the Rules 2000. B

62Copy pinpoint62. Reference to the Citations:

Shri Bhattacharya, learned ASG, submits that in view of the decision of this Court in Bombay Tyre lntemational case (supra), the nominal price of the goods, even if it is sold for a loss price, for the purpose of assessable value under Section C 4 of the Act, at least the manufacturing cost and manufacturing profit should be taken into consideration. In view of this decision, the learned counsel goes to the extent of saying the judgements relied upon by the opposite side on the decision of this Court in Guru Nanak Refrigeration (supra) and Bis/eri lntemational (supra) should be treated as per-incurium. We cannot agree. In Bombay Tyre's case, the issue before the Court was whether the value of an article for the purpose of excise duty had to be determined by reference exclusively to the manufacturing cost and manufacturing profit of the manufacturer or should be represented by the wholesale price charged by the manufacturer which would include post- manufacturing expenses and post-manufacturing profits arising between the completion of manufacturing process and the point of sale by the manufacturer. It is relevant to notice at this stage, in the Bombay Tyre's case, this Court considered the scope of Section 4 before its amendment and after the new section 4 was substituted with effect from 01.10.1975. This Court in the said case, after detailed consideration of rival contentions and after referring to several precedents of this Court has concluded that the levy of excise duty was on the manufacture or production of goods, the stage of collection need not in point of time synchronise with the completion of the manufacturing process while the levy had the status of a constitutional concept, the point of collection was located where the statute H

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A declared it would be. The Court further went on to observe when enacting the measure to serve as a standard for assessing the levy, legislature need not contour it along lines which spell out the character of the levy itself. From this stand point, it is not possible to accept the contention that because B the levy of excise is a levy on goods manufactured or produced, the value of the excisable article must be limited to the manufacturing cost plus the manufacturing profit. The Court further was of the opinion, that a broad-based standard of reference may be adopted for the purpose of determining the c measure of levy. Any standard which maintains a manner with the essential character of levy could be regarded as a valid basis for assessing the measure of levy. This Court in this decision also distinguished the view expressed in AK. Roy & Anr. v. Vo/fas Ltd., 1977 (1) ELT 177 (SC), wherein this Court had held that the value for the purpose of Section 4 would 0 include only the manufacturing cost plus manufacturing profit and exclude post-manufacturing cost plus manufacturing profit but exclude post-manufacturing cost and profit arising from post-manufacturing operation by observing that this Court in the aforesaid decision intended to say was that entire cost of the article plus profit minus trade discount would represent the assessable value and in that decision there was no issue on the question of including the post manufacturing cost and post- manufacturing profits. In conclusion, insofar as amended Section 4 of the Act, the Court has observed that the assessable value will be the price at which the goods are ordinarily sold by the assessee to the buyer in the course of wholesale trade at the factory gate. However, firstly, the buyer should not be a related person and the price should be sole consideration for the same. This proposition is subject to G Section 4(1 )(a). Secondly, if the price of the excisable goods cannot be ascertained either because the goods are not sold or for any other reason, the value will have to be determined as per the Central Excise Valuation Rules.

63Copy pinpoint63. Our attention was also drawn by learned counsel Shri

COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 1027 FIAT INDIA (P) LTD. & ANR. [H.L. DATIU, J.]

Bhattacharya to the decision of this Court in Assistant Collector A of Central Excise & Ors.. v. M.R.F. Ltd. 1987 (27) ELT 553 (SC), wherein the Court dealt with concept of post-removal expenses.

64Copy pinpoint64. Shri Vellapally and Shri Lakshmi Kumaran learned B Counsel by placing reliance on Guru Nanak's case (supra) and Bisleri's case (supra) contends that the issue raised in these appeals is no more res integra. We cannot agree. In Guru Nanak's case, the facts are: the assessee therein was engaged in the manufacture of refrigeration and air-conditioning machinery. They had cleared the goods after approval of the price list by the department. The adjudicating authority being of the view that the assessable value declared by the assessee was low as compared to the cost of material used in the manufacture of the said machinery, had issued a show cause, to show cause why the assessable value should not be re-fixed and the duty fixed on the re-fixed assessable value after taking into consideration the cost of raw material plus manufacturing cost plus reasonable profit margin. The adjudicating authority after considering the reply filed had confirmed the show cause notice and had directed the assessee to pay the difference in excise duty. In the appeal filed before the Tribunal, the assessee had succeeded. In the appeal filed by the department, this Court was of the view that since in the show cause notice issued by the adjudicating authority there was no allegation that the wholesale price to the buyers was for consideration other than the one at which it was purported to be sold or that it was not at arms length and further, there was no allegation that there was any flow back from the buyer to the assessee and therefore, the department cannot take a stand that the normal price was not ascertainable for the purpose of valuation under Section 4(1 )(a) of the Act and therefore, the Tribunal was justified in accepting the whole sale price as the correct price.

65Copy pinpoint65. In Bis/eri's case, the issue as noted by the Court was, H

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A whether the assessee had undervalued the aerated water (Beverages) by excluding two items, namely, the amounts received under credit notes as price support incentive and rent on containers as assessable value. The Court after referring to provisions of Section 4(1 )(a) of the Act and the decision of B this Court in Bombay Tyre's case (supra) has held that the amounts received under credit notes as price support incentives from supplier of raw materials cannot be included in the assessable value, since the department failed to prove that there was flow back of additional consideration from buyers c of aerated waters to the assessee and further, the price was not uniformly maintained and favour of exra-commercial consideration was shown to the buyers of aerated waters (beverages). The Court has also observed that under Section 4, the price and sale are related concepts. The value of the excisable article has to be computed with reference to the price 0 charged by the manufacturer, the computation being made in accordance with Section 4. In every case, it will be for the revenue to determine on evidence whether the transaction is one where extra-commercial consideration have entered and if so, what should be the price to be taken into account as the E value of the excisable article for the purpose of excise duty.

66Copy pinpoint66. In our considered view, either the decision of Guru Nanak's case (supra) or the decision in Bisleri's case (supra) would not assist the assessee in any manner whatsoever. We F say so for the reason, that, in Guru Nanak's case, the department had accepted the price declared by the assessee and the narration of the facts both by the Tribunal and this Court would reveal that ii was one time transaction and lastly, this Court itself has specifically observed that the view that they have taken, is primarily based on the facts and circumstances of the case. In the instant cases, the department never accepted the declared value. It is for this reason, provisional assessments were completed instead of accepting declared price by the assessee under Rule 98 of the Rules inter a/ia holding that during the enquiry, the assessees had admitted

COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 1029 FIAT INDIA (P) LTD. & ANR. [H.L. DATIU, J.]

67Copy pinpoint67. Reference to Valuation Rules:

Shri. Bhattacharya, the learned ASG, contends that the assessees are not fulfilling the conditions enumerated in G Section 4(1 )(a) of the Act and therefore, the valuation has to be done in accordance with Section 4(1)(b) read with the 1975 Valuation Rules. He would submit that since the price of the cars sold by the assessee was not ascertainable, the Revenue is justified in computing the assessable value of the goods for H

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A the levy of excise duty under Section 4(1 )(b) of the Act and the relevant rules. He would further submit that the Valuation Rules need not be applied sequentially. He would contend that all the Rules 3, 4, 5, 6 and 7 of the 1975 Valuation Rules specifically use the expression "shall... be determined", "shall be based" or B "shall determine the value" and nowhere word "sequentially" occurs in these Rules, unlike Rule 3(ii) of the Customs Valuation Rules, 1988. He would submit that merely the presence of word "shall" does not imply that all the Rules has to be applied sequentially. He would further submit that in the facts and c circumstances of the present cases, Rule 7 is the only applicable Rule in view of the decision in Bombay Tyre's case and assessing authority as well as the first appellate authority correctly adopted the application of this Rule.

68Copy pinpoint68. Per Contra, Shri Joseph Vellapally, would submit that D only when the normal price is not ascertainable in terms of Section 4(1 )(a), then Section 4(1 )(b) read with the 1975 Valuation Rules would come into play to determine the nearest equivalent assessable value of the goods. He would contend that the Valuation Rules have to be applied sequentially, i.e. first, E Rules 4 and 5 should be invoked in order to determine the assessable value and if Rules 4 and 5 are not applicable or assessable, value cannot be ascertained by applying the said Rules, and then only Rule 6 can be invoked. He would further submit that it is only Rule 6(b)(ii) of the 1975 Valuation Rules F which contemplates determining of assessable value on the basis of cost of manufacture, only when the goods are captively consumed by the manufacturer and value of comparable goods manufactured by the assessee or any other assessee are not available. G

69Copy pinpoint69. Under Section 4(1)(b) of the Act, 1944, any goods which do not fall within the ambit of Section 4(1 )(a) i.e. if the 'normal price' cannot be ascertained because the goods are not sold or for any other reason, the 'normal price' would have to be determined in the prescribed manner i.e. prior to 1st day H

COMMISSIONER OF CENTRAL EXCISE, MUMBAI v.1031 FIAT INDIA (P) LTD. & ANR. [H.L. DATIU, J.] of July, 2000, in accordance with Rules, 1975 and after 1st day of July 2000, in accordance with Rules, 2000.

70Copy pinpoint70. Rule 2 of the 1975 Valuation Rules provides for definition of certain terms, such as "proper officer", "value" etc., Rule 3 of the above Rules, provides that the value of any excisable goods, for the purposes of Clause (b) of Sub-Section (1) of Section 4 of the Act be determined in accordance with these Rules. Rule 4 provides that the value of the excisable goods shall be based on the value of such goods by the assessee for delivery at any other time nearest to the time of removal of goods under assessment. Rule 5 provides that when the goods are sold in the circumstances specified in Clause (a) of Sub-Section (1) of Section (4) of the Act except that the price is not the sole consideration, the value of such goods shall be based on the aggregate price and the amount of the money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. Rule 6 provides, that, if the value of the excisable goods under assessment cannot be made, then to invoke provisions of Rule 6 of the Rules, wherein certain adjustments requires to be made as provided therein. Rule 7 is in the nature of residuary clause. E It provides that if the value of excisable goods cannot be determined under Rule 4, 5 and 6 of the Rules, the adjudging authority shall determine the value of such goods according to the best of his judgment and while doing so, he may have regard to any one or more methods provided under the F aforesaid Rules. A bare reading of these rules does not give any indication that the adjudging authority while computing the assessable value of the excisable goods, he had to follow the rules sequentially. The rules only provides for arriving at the assessable value under different contingencies. Again, Rule G 7 of the Valuation Rules which provides for the best judgment assessment gives an indication that the assessing authority while quantifying the assessable value under the said Rules, may take the assistance of the methods provided under Rules 4, 5 or 6 of the Valuation Rules. Therefore, contention of the H

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A learned counsel that the assessing authority before invoking Rule 7 of the 1975 Valuation Rules, ought to have invoked Rules 4, 5 and 6 of the said Rules cannot be accepted. In our view, since the assessing authority could not do the valuation with the help of the other rules, has resorted to best judgment method B and while doing so, has taken the assistance of the report of the 'Cost Accountant' who was sisked to conduct special audit to ascertain the correct price that requires to be adopted during the relevant period. Therefore, we cannot take exception of the assessable value of the excisable goods quantified by the c assessing authority.

71Copy pinpoint71. In the result, the appeals require to be allowed and, accordingly, they are allowed and the impugned order is set aside and the order passed by the adjudicating authority is restored. No order as to costs. D K.K.T. Appeals allowed.