TaxTMI 
TaxTMI 
2020 (9) TMI 383
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....16-17 Dt. 24.03.2017 37,22,68,312 37,22,68,312 E/86519/2017 ---- 10,00,000 E/86545/2018 PUN-EXCUS-001-COMMR- 013/17-18 Dt. 22.12.2017 102,92,06,051 102,92,06,051 E/86543/2018 ---- 15,00,000 E/86596/2019 PUN-EXCUS-001-COMMR- 026/2018-19 Dt. 12.03.2019 138,10,27,324 138,10,27,324 E/86595/2019 ---- 15,00,000 Total 601,90,89,353 1.2 Since issues involved in all these appeals are common we will be referring to Order in Original No PUN-EXCUS-002- PR.COMMR-16 TO 19/15-16 dated 20.02.2016 passed by the Commissioner Central Excise Pune in appeal No E/86245/2016. By the impugned order, Commissioner has held as follows: "127. Accordingly I pass the following order: ORDER i. M/s. VWIPL i.e. Noticee No. 1 and M/s. VWGSIPL i.e. Noticee No.2 are related persons as defined under Section 4(3)(b) of the Central Excise Act, 1944, as they are interconnected undertakings under clause (A) and are also having interest directly and indirectly in the business of each other under clause (iv) of the said Section, ii. The value of VW Brand Cars (Polo and Vento Variants) shall be determined in terms of Section 4(1) (b) of the Central Excise Act, 1944 read wit....
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....n 11 AC of the Central Excise Act, 1944. viii. I impose a penalty of Rs. 50,00,00,000/- (Rupees Fifty Crores Only) on M/s. Volkswagen Group Sales India Pvt. Ltd., Mumbai (M/s. VWGSIPL) under the provisions of Rule 26 (1) of the Central Excise Rules, 2002. 128. This order is issued without prejudice to any other action that may be taken against the assessee or anybody else under the provisions of the Central Excise Act, 1944 and / or the Rules made there under and / or any other law for the time being in force." 2.1 On the basis of intelligence gathered that the appellants were undervaluing the "Polo" and "Vento" models of their car and thus short paying the duty due on these models, investigations were undertaken by the officer of Director General Central Excise Intelligence. During the course of investigations huge volumes of documents recovered from and provided by the Appellant were examined and statements of various functionaries with the appellant companies recorded. 2.2 On the basis of investigations carried out in respect of the clearances made during the period January 2010 to March 2014, three separate show cause notices all dated 06.02.2015 as detailed below we....
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.... assessable value of said goods for the payment of Central Excise duties / Cesses. 2.7 On the basis of allegations made in respective show cause notices in para 2.3, 2.5 & 2.6, each show cause notice separately: * proposes for the recovery of duty so evaded in terms of provisions of erstwhile Section 11 A(1) / Section 11 A (4) of Central Excise Act, 1944 along with interest thereon under Section 11 AB / Section 11 AA of Central Excise Act, 1944 (as applicable during the demand period). * proposes for imposition of Penalty on M/s. VWIPL u/s 11 AC of Central Excise Act, 1944 and also on M/s. VWGSIPL under provisions of Rule 26 (1) of CER. * proposes for confiscation of goods removed in contravention of provisions of Central Excise Act, 1944, under Rule 25 of CER and also Penalty under Rule 25 (1) of CER read with Section 11 AC of Central Excise Act, 1944. 2.7 Show Cause Notice No. 11/CKN-I/CKN-RIII/COMMR/ 2015 dated 06.05.2015 for demand of duty of Rs. 38,38,55,306/- pertaining to the period from 01.04.2014 to 06.08.2014, which is a subsequent demand to Show Cause Notice F.NO. DGCEI/MZU/I&IS /15 for demand of duty of Rs. 277.01 Crores for the period from January 2010 to March....
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....Rules. iv. I revise the demand of Central Excise duty of Rs. 402,87,28,268/- to Rs. 323,65,87,666/- in respect of SCN F.No. DGCEI/MZU/I&IS 'C'/30 14/13/455 dated 06.02.2015, as explained in Para 87.2 above. v. I revise the demand of Central Excise duty of Rs. 277.01 Crores to Rs. 106,01,33,547/- in respect of SCN F.No. DGCEI/MZU/I&IS 'A'/30-17/463 dated 06.02.2015, as explained in Para 108 above. vi. I revise the demand of Central Excise duty of Rs. 38,38,55,306/- to Rs. 13,04,85,264/- in respect of SCN No. 11/CKN-I/CKN-R III/COMMR/2015 dated 06.05.2015, as explained in Para 108 above. vii. There is no change in the demand raised of Rs. 183.28 Crores in respect of SCN F.No. DGCEI/MZU/I & IS 'A'/30- 18/15/471 dated 06.02.2015, as explained in Para 115 above. viii. Further, as mentioned in the SCN Fine. DGCEI/MZU/I&IS 'C'/30 14/13/455 dated 06.02.2015, the total demand of Central Excise duty recoverable from M/s. VWIPL in respect of all the issues covered under all the SCNs under discussion is Rs. 402,87,28,268/which is revised and confirmed to Rs. 323,65,87,666/-, being the duty short paid by them on the vehicles (Polo and Vento Variants) f....
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....10(b) of the Valuation Rules. Further, the following ancillary issues must be determined in case the demand is confirmed against the Appellant: * Whether the department may take a stand in the present proceedings which is contrary to their stand before CAG? * Whether a substantial part of the demand is barred by limitation, considering the department was specifically informed about the related party transactions by the Appellant through various correspondences? * Whether the present case is a fit case for imposition of penalty under Section 11AC of the Central Excise Act, 1944? * Whether the demand is required to be re-quantified by granting cum-duty benefit to the Appellant, as the demand has been calculated in the Impugned Order on the basis of final sale price to dealers which already includes excise duty and cesses * Volkswagen AG is a company incorporated in Germany and is engaged in manufacture, sale and distribution of various Volkswagen Branded Vehicles across the globe. Volkswagen Group Sales India Private Limited ("VWGSIPL") was incorporated in 2007 as a National Sales Company (NSC) for Volkswagen Group in India and is a fully owned subsidiary of Volkswagen AG. ....
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....ties. Department alleged that there is a mutuality of interest between the parties, which has influenced the sale price. Rejecting the transaction value three Show Cause Notices dated 06.02.2015 proposed to determine the assessable value and demand of duty by following three distinct routes. * The demand has been calculated simply on the differential between VWGSIPL's sale price to dealers and VWIPL's sale price to VWGSIPL. This has led to incorrect demand as VWGSIPL's sale price already includes excise duty and cesses (which is more than margin of VWGSIPL). * "Materials" and/or "evidence" and/or "factors" relied to allege "mutuality of interest" against them are- * an email dated January 28, 2010 written on behalf of VWAG to VWGSIPL and the Appellant regarding sale price of Polo cars when launched in India'; * Planning Rounds held annually, which are discussions held between VWAG, the Appellant and VWGSIPL for planning production and sale for the next year based on market research and/or analysis and/or projection including analysis of the competition, * Statements of Mr. Puneet Sabharwal, Mr. Rabenstein, (Head Finance Controller, VWGSIPL) and Mr. P....
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....ade profits in the Financial Year 2011-12 and 2012- 13 also. * The department has further placed reliance on two pyramidical charts to submit that prices were deliberately reduced to enhance the market share. It is submitted that the said chart merely indicates to the market research as to the accessible market share for VW branded vehicles and nowhere indicates that the prices have been influenced by the relationship between the parties. * As regards Agreements, all of the agreements show that the relationship between the parties was at an arm's length. The Supply Agreement shows that the price of imported goods was to be determined having regard to the market forces. Significantly, the import price has been accepted as the true and correct assessable value under Section 14 of the Customs Act, 1962. The Appellant, as the manufacturer, is not a party to the marketing and financial agreements between VWAG and VWGSIPL. The business of both VWAG and VWGSIPL is bigger and independent of the Appellant's business, which is limited to only manufacture of Polo and Vento. None of the agreements show that the selling price of Appellant was influenced by the relationship between t....
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....other than that of an interconnected undertaking. Any other interpretation shall render Rule 10 wholly redundant and otiose, as well as result in rewriting Rule 9 to apply to interconnected undertakings covered by sub-clause (i) of clause (b) of sub-section (3) of Section 4 of the Act, barring Rule 10, there is no other rule in Valuation Rules dealing with interconnected undertakings, and therefore, it will amount to adding words into Rule 9 which is not permissible. * Rule 10(a) is divided into two parts. The first part deals with an interconnected undertaking, which is also related in terms of sub-clause (ii) or (iii) or (iv) of clause (b) of sub-section (3) of Section 4 of the Act. The second part deals with a case where the buyer is a holding or subsidiary company of the Assessee. Admittedly, the second part does not apply in the present case, since VWGSIPL is neither a holding company, nor a subsidiary company of the Appellant (Assessee). * In the first part of Rule 10(a), the key word is the word 'also'. The presence of the word 'also' in Rule 10(a) shows that mere inter-connection, as defined in Section 4(3) (b) of the Act, is not sufficient. Thus, ....
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.... position emerges, which clearly indicates that both companies are independent and dealing on arm's length basis: * As submitted earlier, the Appellant and VWGSIPL do not have mutuality of interest merely due to the reason that both of them have a common holding company as held by the Supreme Court in Attic Industries (supra). That fact merely proves that Appellant and VWGSIPL are inter-connected undertakings. In terms of Rule 10(b) of the Valuation Rules, the transaction value cannot be rejected if the companies are merely related as "interconnected undertakings". * There is no cross-shareholding between the Appellant and VWGSIPL. * There is no common management person in Appellant and VWGSIPL. The commercial decisions of both the companies are taken by the distinct board of directors of respective companies. Each company enjoys autonomy in relation to its operations and carries business in a way that furthers its own commercial interests. * There is no profit sharing between the Appellant and VWGSIPL. * There is no flow back of any financial interest between the Appellant and VWGSIPL. * The main business objectives of the two companies are different. The 2 entitie....
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....respondences, it is submitted that extended period cannot be invoked for the period subsequent to this date. [Syncom Formulation, (2004 (172) ELT 77 (T), Bell Granito, 2006 (198) ELT 161 (SC), Ugam Chand Bhandari 2004 (167) ELT 491 (SC), Pioneer Scientific Glass, 2006 (197) ELT 308 (SC), Damnet Chemicals, 2007 (216) ELT3 (SC), Anand Nishikawa 2005 (188) ELT 149 (SC), Neyveli Lignite Corp. 2007 (209) ELT 310 (T), Bentex Industries, 2004 (173) ELT A079 (SC)] * Extended period cannot be invoked in case of bona fide belief on part of the assessee, as in the present case. [NRC Ltd 2007 (5) STR 308 (T), Uniworth Textiles Ltd. 2013 (288) ELT 161 (SC), Larson & Toubro Ltd. 2007 (211) ELT 513 (SC)] * Judgments relied upon by Departmental Representative are not applicable. * The department has demanded duty at the price at which the goods are sold by VWGSIPL to dealers. For arriving at the differential duty, the department has simply calculated the duty on the difference between VWGSIPL's sale price and VWIPL's sale price. However, the department has failed to recognise that VWGSIPL's sale price to dealer includes the excise duty and cesses charged at the time of sale....
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....er) and VWGSIPL (marketing Company). * The Planning Round mechanism is mentioned in Schedule-I of the Service & Distribution Agreement dated 09.3.2009 between VWIPL & VWGSIPL. * VWGSIPL & VWIPL shall prepare the Planning Rounds (PR) for the supplies/deliveries of Contractual vehicles for the period of next five years each year. This PR shall be completed in line with the scheduled dates for the VW Group * As per the Marketing Assistance Agreement dated 18/5/2007 between VWAG and VWGSIPL, * VWGSIPL undertakes promotion, advertising and marketing activities on its own behalf which are intended to promote its sales of VW products in India. * VWAG will bear the portion of costs of advertising and promotional activities relating to brand building campaigns as mutually agreed upon between the parties. * Other marketing and promotional expenses in connection with sales activities will be incurred and borne by VWGSIPL. * VWGSIPL incurs the expenses on account of advertisement or publicity, sales promotional activities, etc. Portion of these expenses is borne by VWAG as evidenced by the Debit Notes (Pg. Nos. 1527, 1529, 1581 & 1592 of Vol. V) raised by VWGSIPL on VWAG from tim....
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....VWIPL and VWGSIPL as is evidenced by e-mail dtd. 28/1/2010 along with work sheet for Polo Hatch Back from VWAG to VWGSIPL and copy to VWIPL and Others. This work sheet shows that the price of the vehicles (i.e. the transaction value) has been determined on Retails Minus Basis. Based on this price, the vehicles would be purchased by VWGSIPL from VWIPL. Such price cannot, be accepted as the true transaction value. * The definition of transaction value clearly provides that expenses on account of advertising or publicity, marketing and selling organization expenses, etc. are normally to be borne by the manufacturer and if the buyer is made to bear the same, such expenses shall be included in the price to arrive at the assessable value. In the present case, admittedly such expenses are borne by the Marketing Company, VWGSIPL. Therefore, these expenses have to be included in the assessable value of the goods. * It may be noted that by not including the expenses on account of advertising or publicity, marketing and selling organization expenses, etc., VWIPL is selling the contractual vehicles at a reduced price to VWGSPL and thereby evading duty. Thus, both VWIPL and VWGSIPL stand be....
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....tion was known to the Department. as early as in 2011. In that connection, the Learned Senior Counsel for the Appellants referred to various correspondences exchanged between the Department and the Appellants. In particular, he referred to the Department letter dated 26.09.2011 (pg. No.1131, Vol. IV), letter dated 16/24th March 2011 (pg No.1138, Vol. IV), letter dtd. 28.11.2011 (pg No.1146, Vol. IV), letter dtd.09.07.2013 (Pg. No.1150, Vol. IV), and letter dtd. 14.11.2013 (pg.No.1152, Vol. IV) and contended that the demand subsequent to 26.09.2011 is not sustainable because by that date the method of valuation of motor cars was already known to the Department. These contention are not acceptable for the reasons as follows: * In the present case, it is not correct to say that there was no suppression of any fact and that the method of valuation was known to the Department. * It is only during the investigation that the Department. found that the valuation of the cars was being determined by the holding Company in Germany (i.e. VWAG) and the same was being communicated to the marketing company and the manufacturing company. * Email dated 28th January 2010 along with the workshe....
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....n VW AG & VWIPL for supply and delivery of contractual parts for production. The agreements and documents pertaining to planning rounds between VW AG, VWIPL & VWGSIPL recovered during the investigation reveal that the entire process of arriving at prices of Polo & Vento is mutually agreed. The PR for the supplies of contractual parts and deliveries of contractual vehicles for the period of next five years were completed in line with the scheduled date of VW Group. But for the extensive investigation conducted by the then DGCEI, the aforementioned documents would not have come to the hands of the Department. Therefore, it cannot be contended that the demand subsequent to September 2011 cannot be sustained. * It may not be out of place to mention that the demand has to be raised (whether for the normal period or for the extended period) from the relevant date. The relevant date has been specified in Section 11A of the Central Excise Act, 1944. The date of knowledge is not one of the relevant dates. Even assuming that the Department. had the knowledge of their activities, that knowledge will not obliterate the suppression of facts on the part of the Appellant as held by the Hon'....
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.... under Rule 26 can be imposed only on the natural person and not on the firm or company. This ground has no merit. It has been held by the Hon'ble Apex Court in the case of Agarwal Trading Corporation & Ors - 1983 (13) ELT 1467 (S.C.) that a firm or a company is a legal person and hence penalty can be imposed on it. * During the last day of hearing, a grievance was made on behalf of the Appellants that the Learned Commissioner has not considered the Appellants' submission regarding cum-duty benefit. This grievance is not genuine. The Learned Commissioner has considered this submission in paras 87.1 to 87.3 in the impugned Order. Further, the Appellants' stand is contradictory and inconsistent. In their reply to the Show Cause Notice, vide para H.3 (Pg. No.754 of Vol.III), the Appellants have stated that the proposed duty demand, if calculated correctly, comes to INR 323,65,87,666/- and not INR 402,87,28,269/-, as mentioned in the SCN. Again in para H.6 (Pg. No.755 of Vol.III), it has been stated that total duty demand after cum-duty benefit comes to INR 267,06,98,402/-. However during the hearing, a chart was tendered before the Hon'ble Bench showing actual differ....
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....and (b) the sale of vehicles at loss i.e. below cost of production and consequent financial assistance received by M/s. VWIPL from M/s. VWAG to further the point of mutuality of interest. 66.3 M/s. VWIPL, I find, has contested this overlapping of issues, demand, and different Valuation Rules invoked under the three SCNs for valuation of the very same cars (Polo and Vento Variants) for the very same period. They have contended that the SCNs under reference are arbitrary and conflicting and with overlapping demands; that the department have raised different yardsticks to demand duty on the same transactions, and that, based on the ratio of a number of court decisions, there is a strong case for setting aside the SCNs on this ground alone. 66.4 In this regard, I have seen from the SCNs and replies thereto that there are number of complexiti es involved in the arrangements and transactions adopted by the assessee and their group companies among themselves, which are unearthed after extensive investigation by the officers of DGCEI i.e. the arrangement of sale of entire production of VW brand cars through fellow subsidiary company, M/s VWGSIPL, who also bears the marketing and produc....
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....e parties involved, and their say has also been covered in the SCNs. Therefore, I find that it is only logical and proper to first go through each SCN and examine its sustainability on merits and limitation. Only then can the aspect of overlapping of issues, time and demand can be addressed judiciously. It would be a travesty of the entire process to summarily dismiss the demands only on this count. Further, I also find that it would be appropriate to decide the fourth SCN dated 06.05.2015 along with the three SCN's dated 06-02-2015, being related to the same category of vehicles and issues. 67. As explained above, I therefore find that it would be more appropriate to adjudge the issue involved in all these SCNs i.e. valuation of cars with reference to Central Excise duty liability under best judgment assessment as laid down in Rule 11 of the Valuation Rules, traversing through each SCN, discussing the allegations in the SCN and replies thereto with reference to relevant Valuation Rules invoked, SCN wise. 119. After my detailed discussion in respect of each of the SCNs under discussion, I find that the issues are inter-linked and pertain to clearance of same vehicles i.e. Po....
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....lication on the financial assistance which otherwise could have been a part of the selling price of WWIPL to VWGSIPL is amounting to Rs. 183.28 Cr. The total duty liability demanded includes the above duty component." . 121.3 In view of the above, it is clear the total duty confirmed of Rs. 323,65,87,666/- in respect of SCN F. No. DGCEI/MZU/I&IS'C'/30-14/13/455 dated 06-02-2015, covering the period from July 2010 to December 2014, includes the other duty demands confirmed above in respect of remaining other two SCNs for Rs. 106,01,33,547/- pertaining to the period from January 2010 to March 2014 in respect of SCN F.No. DGCEI/MZU/I&IS "A"/30-17/15/460 dated 06-02-2015 and for Rs. 183.28 Cr pertaining to the period from January 2010 to March 2014 in respect of SCN F.No. DGCEI/MZU/I&IS 'A'/30-18/15/468 dated 06-02-2015." We cannot agree with the method adopted by the Commissioner while dealing with the three Show Cause Notice dated 06.02.2015. Commissioner could not have determined three different methods for valuation of the same goods simultaneously. Commissioner while adjudicating has to be judicious enough to determine what is the correct approach to determine th....
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....the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cumduty, excluding sales tax and other taxes, if any, actually paid, u shall be deemed to include the duty payable on such goods. (3) For the purpose of this section, - a. "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent; b. persons shall be deemed to be "related" if i. they are inter-connected undertakings; ii. they are relatives; iii. amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or iv. they are so associated that they have interest, directly or indirectly, in the business of each other. c. Explanation. - In this clause - i. "inter-connected undertakings" shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969); and ii. "relative" shall have the meaning assigned to it in clause....
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....nnected that they are also related in terms of sub-clause (ii) or (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act or the buyer is a holding company or subsidiary company of the assessee, then the value shall be determined in the manner prescribed in rule 9. Explanation. - In this clause "holding company" and "subsidiary company" shall have the same meanings as in the Companies Act, 1956 (1 of 1956). (b) in any other case, the value shall be determined as if they are not related persons for the purpose of sub-section (1) of section 4.' Rule 11 - 'If the value of any excisable goods cannot be determined under the foregoing rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of section 4 of the Act.' 4.5 Meaning of Transaction Value and Value under Section 4 (1) (a) Interpreting Section 4, Hon'ble Supreme Court has in case of FIAT India [2012 (283) ELT 161 (SC)]after noting all the decisions rendered in past has observed as under: "26. Section 4 of the Act lays down the valuation of excisable goods chargeable to duty of excise. The duty of excise i....
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.... is clear and explicit, words cannot be interpolated.' 29. Section 4 of the Act, as we have already noticed, speaks of valuation of excisable goods, with reference to their value. The `value' subject to other stipulation in Section 4 is deemed to be the `normal price' at which the goods are 'ordinarily' sold to the buyer in the course of 'wholesale trade' where the buyer is not `related person' and the `price' is the `sole consideration' for the sale. Against this background, for the purpose of this case, we have now to consider the meaning of the words 'value', 'normal price', 'ordinarily sold' and 'sole consideration', as used in Section 4(1) (a) of the Act. 30. The `value' in relation to excisable commodity means normal price or the price at which the goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade at the time and place of removal where the buyer is not a related person and price is the sole consideration for sale. Stated another way, the Central Excise duty is payable on the basis of the value. The assessable value is arrived on the basis of Section 4 of the Act and the Central Excise Valuation Rules. 31. Section 4(1) (a) deems the `nor....
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....hin it the power to determine the true value of the excisable article, after taking into account any concession shown to a special or favoured buyer because of extra-commercial considerations, in order that the price be ascertained only on the basis that it is a transaction at arm's length. That requirement is emphasized by the provision in the new Section 4(l)(a) that the price should be the sole consideration for the sale. In every such case, it will be for the Revenue to determine on the evidence before it whether the transaction is one where extra-commercial considerations have entered and, if so, what should be the price to be taken as the value of the excisable article for the purpose of excise duty." 36. In Metal Box India Ltd. v. CCE (1995) 2 SCC 90, this Court held: "10. ... It has been laid down by Section 4(1)(a) that normal price would be price which must be the sole consideration for the sale of goods and there could not be other consideration except the price for the sale of the goods and only under such a situation sub-section (l)(a) would come into play." 37. In Calcutta Chromotype Ltd. v. CCE, (1998) 3 SCC 681, it is held: 14. ... Law is specific that when duty....
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....cisable goods is a function of the price. In other words, "value" is derived from the normal price at the factory gate charged to an unrelated person on wholesale basis and at the time and place of removal. 11. It is for the Department to examine the entire evidence on record in order to determine whether the transaction is one prompted by extra- commercial considerations. It is well settled that under Section 4 of the said Act, as it stood at the material time, price is adopted as a measure or a yardstick for assessing the tax. The said measure or yardstick is not conclusive of the nature of the tax. Under Section 4, price and sale are related concepts. The "value" of the excisable article has to be computed with reference to the price 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 considerations have entered and, if so, what should be the price to be taken into account as the value of the excisable article for the purpose of excise duty. These principles have been laid down in the judgment of this Court in the case of Uni....
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....n and not with excisability. In the present case, there is no dispute that AMS came under Sub-Heading 3402.90 of the Tariff. There is no dispute in the present case that AMS was dutiable under Section 3 of the Act. In Union of India v. Bombay Tyre International Ltd., this Court observed that the measure of levy did not conclusively determine the nature of the levy. It was held that the fundamental criterion for computing the value of an excisable article was the price at which the excisable article was sold or was capable of being sold by the manufacturer. It was further held that the price of an article was related to its value and in that value, we have several components, including those components which enhance the commercial value of the article and which give to the article its marketability in the trade. Therefore, the expenses incurred on such factors inter alia have to be included in the assessable value of the article up to the date of the sale, which was the date of delivery." 43. What can be construed from the plain reading of Section 4 of the Act and the interpretation that is given by this Court on the expression `normal value' is, where excise duty is chargeable on ....
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....to act with discretion to seek reasonable income, preserve capital and, in general, avoid speculative investments. This court in the case of Union of India v. Hindalco Industries 2003 (153) ELT 481, has observed that, `if there is anything to suggest to doubt the normal price of the wholesale trade, then recourse to clause (b) of sub-section(1) of Section 4 of the Act could be made'. That the price is not the normal price, is established from the following three circumstances which the assessees themselves have admitted; that the price of the cars was not based on the manufacturing cost and manufacturing profit, but have fixed at a lower price to penetrate the market; though the normal price for their cars is higher, they are selling the cars at a lower price to compete with the other manufacturers of similar cars. This is certainly a factor in depressing the sale price to an artificial level; and, lastly, the full commercial cost of manufacturing and selling the cars was not reflected in the lower price. Therefore, merely because the assessee has not sold the cars to the related person and the element of flow back directly from the buyer to the seller is not the allegation in the ....
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....r the Customs Act. This Court in Eicher Tractors Ltd., Haryana v. Commissioner of Customs, Mumbai (2001) 1 SCC 315 has held: "6. Under the Act customs duty is chargeable on goods. According to Section 14(1) of the Act, the assessment of duty is to be made on the value of the goods. The value may be fixed by the Central Government under Section 14(2). Where the value is not so fixed, the value has to be determined under Section 14(1). The value, according to Section 14(1), shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation - in the course of international trade. The word "ordinarily" necessarily implies the exclusion of "extraordinary" or "special" circumstances. This is clarified by the last phrase in Section 14 which describes an "ordinary" sale as one "where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale ....". Subject to these three conditions laid down in Section 14(1) of time, place and absence of special circumstances, the price of imported goods is to be determined under Section 14(1-A) in accordan....
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....o such or like goods ordinarily sold or offered for sale in the ordinary course of events in international trade at the time and place of transportation." 48. In Rajkumar Knitting Mills (P) Ltd. v. Collector of Customs, Bombay (1998) 3 SCC 163, at page 165, it is held: "7. ... The words "ordinarily sold or offered for sale" do not refer to the contract between the supplier and the importer, but to the prevailing price in the market on the date of importation or exportation." 49. In Ashok Leyland Ltd. v. Collector of Central Excise, Madras, (2002) 10 SCC 344, at page 348, it is held : "The price of that commodity will remain the normal price at which those goods are ordinarily sold by the assessee to the public, in other words, the price at which they are sold in the market." 50. In the context of Section 4(1)(a) of the Act, the word 'ordinarily' does not mean majority of the sales; what it means is that price should not be exceptional. In our considered opinion, the word 'ordinarily', by no stretch of imagination, can include extra-ordinary or unusual. In the instant cases, as we have already noticed, the assessees sell their cars in the market continuously for a period of fi....
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....value of goods as manufactured. That takes into account manufacturing cost and manufacturing profit. 51. Excise is a tax on the production and manufacture of goods and Section 4 of the Act provides for arriving at the real value of such goods. When there is fair and reasonable price stipulated between the manufacturer and the wholesale dealer in respect of the goods purely on commercial basis that should necessarily reflect a dealing in the usual course of business, and it is not possible to characterize it as not arising out of agreement made at arm's length. In contrast, if there is an extra-ordinary or unusual price, specially low price, charged because of extra commercial considerations, the price charged could not be taken to be fair and reasonable, arrived at on purely commercial basis, as to be counted as the wholesale cash price for levying excise duty under Section 4(1)(a) of the Act. 52. The next submission of Shri Bhattacharya, learned ASG, is that the price at which the cars sold by the assessees is not the sole consideration as envisaged under Section 4(1)(a) of the Act. He would contend that admittedly there exists a consideration other than the price, that is, to p....
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....some detriment to the promisee." 56. In Salmond on Jurisprudence, the word 'consideration' has been explained in the following words. "A consideration in its widest sense is the reason, motive or inducement, by which a man is moved to bind himself by an agreement. It is for nothing that he consents to impose an obligation upon himself, or to abandon or transfer a right. It is in consideration of such and such a fact that he agrees to bear new burdens or to forego the benefits which the law already allows him." 57. The gist of the term 'consideration' and its legal significance has been clearly summed up in Section 2(d) of the Indian Contract Act which defines 'consideration' thus: "When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration to the promise." 58. From a conspectus of decisions and dictionary meaning, the inescapable conclusion that follows is that 'consideration' means a reasonable equivalent or other valuable benefit passed on by the promisor to the promisee or by the trans....
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....h reference to its value then the normal price on which the goods are sold shall be deemed to be the value, provided: (1) the buyer is not a related person and (2) the price is the sole consideration. These twin conditions have to be satisfied for the case to fall under Section 4(1)(a) of the Act. We have demonstrated in the instant cases, the price is not the sole consideration when the assessees sold their cars in the wholesale trade. Therefore, the assessing authority was justified in invoking clause(b) of Section 4(1) to arrive at the value of the exercisable goods for the purpose of levy of duty of excise, since the proper price could not be ascertained. Since, Section 4(1)(b) of the Act applies, the valuation requires to be done on the basis of the 1975 Valuation Rules. 61. 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....
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....aterial departure from the deemed normal price concept of the erstwhile Section 4(1)(a) of the Act?" 23. Accordingly, we answer the reference by holding that the measure of the levy contemplated in Section 4 of the Act will not be controlled by the nature of the levy. So long a reasonable nexus is discernible between the measure and the nature of the levy both Section 3 and 4 would operate in their respective fields as indicated above. The view expressed in Bombay Tyre International Ltd.(supra) is the correct exposition of the law in this regard. Further, we hold that "transaction value" as defined in Section 4(3)(d) brought into force by the Amendment Act, 2000, statutorily engrafts the additions to the 'normal price' under the old Section 4 as held to be permissible in Bombay Tyre International Ltd. (supra) besides giving effect to the changed description of the levy of excise introduced in Section 3 of the Act by the Amendment of 2000. Infect, we are of the view that there is no discernible difference in the statutory concept of 'transaction value' and the judicially evolved meaning of 'normal price'. 4.7 Appellants have contended that the value determined by them for payment ....
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....d and Fabia which at the relevant time, pre-merger, were sold to the then existing Skoda Auto India Pvt. Ltd.; vii. There is no dispute with regard to the price at which the Appellant sold the two cars Rapid and Fabia to Skoda Auto India Pvt. Ltd.; viii. VWGSIPL is a marketing company, which distributed and sold not only Polo and Vento, but also other brands (various models of Audi, Skoda, Lamorghini and Porche) of the Volkswagen Group, some of which were imported as completely built cars by VWGSIPL and also purchased from other manufacturers such as erstwhile Skoda Auto India cars like Jetta, Passat, Audi A6, Audi A8 etc., which had nothing to do with the Appellant; ix. VWGSIPL conducted market research, and promoted and marketed Volkswagen brand of cars and its business extended to various other brands of Volkswagen Group, over and beyond Polo and Vento manufactured by the Appellant x. VWGSIPL received reimbursement of part of the marketing and sales promotion expenses of the Volkswagen brand from VWAG, for all the brands marketed in India, including Polo and Vento; xi. That the margin given to VWGSIPL for sale to dealers, during the relevant period was in the range of ....
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.... 2011-12 2012-13 2013-14 2014-15 Installed Normal Capacity Nos 2,00,000 2,00,000 2,00,000 2,00,000 Total Production 62,025 1,07,515 94,131 99,583 Capacity Utilization (%) 41 54 47 50 Market Share (%) 1.37 3.11 2.42 2.37 1.68 Assessable Value - Polo 3,82,168 3,51,975 4,23,880 4,37,813 4,59,985 Assessable Value - Vento 5,16,879 5,53,292 5,69,143 5,61,998 5,77,118 Unabsorbed Overheads INR 510.4 426.5 582.91 608.45 Unabsorbed Overheads % 64.92 39.96 46.84 50.58 Profit after Tax 'Rs Crores 332.2* 76.7* 420.7 *The Profits shown are after taking into account the Financial Assistance Received from M/s VWAG Germany, otherwise there was loss. 4.11 In para 73.2 of impugned order various agreements between the M/s VWIPL, M/s VWGSIPL & M/s VWAG, Germany has been discussed and following observed: "73.1 To ascertain the true nature of the relationship between the parties, I find it appropriate to examine and discuss the arrangement of transactions and agreements between the group companies, Memorandum of Association under Companies Act, 1956 and other documen....
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....keting Assistance Agreement - 18.05.07, the reimbursements are made to the latter by former against the marketing and promotional expenses incurred by M/s VWGSIPL in connection with brand building campaigns of Vw brand in India towards a portion of the cost of advertising and promotional activities relating to sales of VW products in India. (v) Further, Service & Distribution Agreement dated 09.03.2009 between VWIPL & VWGSIPL relates to terms of the agreement for sale of vehicles and parts and components of vehicles of VW brands (contractual vehicles) to be assembled and / or manufactured by M/s VWIPL. The service and distribution agreement clearly specified that M/s VWIPL shall sell the vehicles of VW brands to dealers only through M/s VWGSIPL. Article 1.1 states that M/S VWGSIPL shall order from time to time during the duration of this agreement contractual vehicles (i.e. Polo and Vento Variant of Cars) from M/s VWIPL. Further M/s VWGSIPL shall buy the entire production of VW vehicles from M/s VWIPL. As per Service & Distribution Agreement between VWIPL & VWGSIPL dated 09.03.2009, VWGSIPL shall order from time to time VW vehicles manufactured by VWIPL and would buy entire lot of....
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....ehicles manufactured by VWIPL; that VWAG had made VWIPL agreed that contractual cars would be in accordance with the quality standards of VWAG and only VWAG is entitled to decide SOP, and operation assembly of new vehicles except in exceptional cases. The said Agreement provides inter-alia for a "PPA", defining it as "Production Planning Committee - working group which works under the leadership of VWAG in collaboration with VW INDIA and representatives of production, sales, finance, product management, procurement and personnel from Parties. The responsibility of the PPA is to decide the production schedule, capacity adjustments, capacity releases and to define restrictions." This agreement clearly shows that entire production, sale and all related functions of Polo & Vento are fully controlled by VW AG and VWIPL has to follow the same for manufacture and sale thereof. As per Service & Distribution Agreement dated 16.07.2008 and supply agreement dated 14.03.2011 with VW AG, VWIPL agreed to manufacture VW brand (POLO, Vento) cars (contractual vehicles as per contract/ agreement). VWIPL would import parts from VWAG for this purpose. Since VWAG already had an agreement with VWGSIPL w....
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....s related activities of Volkswagen cars manufactured by M/s. VWIPL, as per the Marketing Assistance Agreement and Financial Assistance Agreement, between M/s. VWGSIPL and M/s. VWAG. The said fact has been acknowledged by Company officials in their statements records under Section 14 of the Central Excise Act, 1944 during investigation. The same are reproduced herein below: i. Shri Date, company official of VWGSIPL deposed in his statement dated 19.06.2013 that debit notes relates to reimbursement of expenses towards marketing, brand building and other sales related activities of cars manufactured by M/s VWIPL. ii. Shri Puneet Sabharwal, CGM of VWIPL & Authorised Signatory of VWGSIPL deposed in his statement dated 19.01.2015 that all expenses towards marketing, advertising and sales promotion of contractual vehicles are incurred by VWGSIPL, though there is no agreement between VWIPL & VWGSIPL. On being asked, Sri Sabharwal deposed that VWIPL is not incurring any expenses towards advertising, marketing and sales promotion of Polo & Vento, as VWIPL is entrusted by VWAG only to manufacture contractual vehicles. iii. In his Statement dated 02.02.2015, Mr. Michael Rabenstein, Hea....
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....AG has a controlling and deciding role in production and pricing of contractual vehicles (Polo and Vento Variants). Further, if all the agreements and other documents related to production and price planning are read together it shows that entire arrangements have been designed in such way that whole business structure from production to sale and pricing of the vehicles remains in control of M/s. VWAG and both the parties to these agreements, viz. VWIPL and VWGSIPL do not have any say in this matter. 75.2 Further, I also find that the price fixed for each car is arrived on the basis of "Retail Minus" model. This fact has been acknowledged by Shri Puneet Sabharwal, Chief General Manager - Indirect Taxation of M/s VWIPL & M/s VWGSIPL, in his statement dated 19.01.2015, recorded under Section 14 of the Central Excise Act, 1944, wherein he has stated that they arrived at the retail price at which Polo & Vento would be sold to the customers by VWGSIPL, after doing competitor analysis, dealer's price. The prices of VWGSIPL/National Sales Company (NSC) were arrived at after doing backward calculation from which they arrived at the ex-factory price and then the assessable value of VWI....
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.... of each other: i. VWAG is parent holding company and VWIPL and VWGSIPL are fellow subsidiary companies of VWAG. ii. VWAG had the major shareholding in both the fellow subsidiary companies iii. VWAG provided technical and licensing support to VWIPL for manufacture of subject cars as per contract. However, no license fee is payable by VWIPL if result (profit) is Zero or less than Zero. iv. VWIPL was set up for manufacture and marketing of cars and VWAG supplied the raw material / components for manufacture of subject cars. v. However, the marketing of subject cars i.e. Polo and Vento variants of VW Brand Cars was assigned to VWGSIPL which was set up for distribution and marketing of VW Brand cars. vi. It was arranged that VWGSIPL was assigned the job of Sole Selling Agent (SSA) of VWIPL was to be sold to VWGSIPL, who further sold to the their dealers for further sale in retail market as per agreements at the instance of VWAG. In fact, practically the VW brand cars manufactured by VWIPL are kept in earmarked premises within their plant after sale to VWGSIPL and thereafter, an invoice by VWGSIPL is generated in the premises of VWIPL for sale to dealer and VWGSIPL acknowled....
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...., directly or indirectly, in the business of each other. Therefore, it is established beyond doubt that M/s. VWIPL and M/s. VWGSIPL are also related in terms clause (i) and (iv) of Section 4(3)(b) of the Central Excise Act, 1944, 80.3 In view of the above, I find that entire arrangement was designed in such manner by M/s. VWAG, through their subsidiaries M/s. VWGSIPL and M/s. VWIPL, so as to avoid payment of excise duty by undervaluing the VW Cars (Polo and Vento Variants) by not loading advertisement, sales promotion and marketing expenses incurred by M/s. VWGSIPL. Further, methodology of pricing the vehicles also shows the prices have been artificially lowered for sale of vehicles from M/s. VWIPL to M/s. VWGSIPL and the noticees have tried to veil their modus operandi under the name of genuine commercial consideration. In view of the entire discussions above, the transactions of noticees cannot be said to be based upon genuine commercial consideration, in the facts and circumstances of the case. Therefore, the sale of the contractual vehicle (VW brand of cars - Polo & Vento) by M/s. VWIPL to M/s. VWGSIPL, is not at arm's length and not on principal to principal basis. Theref....
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....rsed by VW AG. As per the legal position, transaction value shall include the receipts/recoveries or charges, incurred or provided for in connection with the manufacturing, marketing, selling of the excisable goods viz. (a) Advertising or publicity; (b) Marketing and selling organization expenses; (c) Storage; (d) Outward handling; (e) Servicing, warranty; Commission or (g) any other matter. 81.4 The above list is not exhaustive and whatever elements which enrich the value of the goods before their marketing are includible in "value" as per provisions of Section 4. On perusal of the retail minus price structure, VWGSIPL in addition to sales promotion, also includes certain components like transport cost, handling charges, warranty, NSC net margin, while arriving the price at which the goods are to be sold to the dealers. 81.5 Sale price to the dealers by VWGSIPL has been arrived by deciding at what price the goods to be sold to the dealers keeping in view of what should be the dealer's margin and what should be the retail price. Similarly the expenditures/elements on account of the components like advertisement/ Sales promotion, warranty, warehousing/ handling charges were/ ....
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....ing is for the benefit of VWIPL who is the manufacturer of cars. Further such a creation of subsidiary separately for manufacturing (VWIPL). & distribution (V entrusting VWGSIPL the sale promotion work, ultimately limiting the sale price for excise purpose from VWIPL to VWGSIPL is an artificial way of determination of price. As established above that the sale to VWGSIPL is not at arm's length and not on principal to principal basis as both the fellow subsidiaries are having the common aim to manufacture and distribute the VW AG brand (VW) cars in India. In the instant case, price at which contractual vehicles were sold by VWIPL to VWGSIPL was not the sole consideration for sale as expenses on account of sales promotion and advertising were borne by M/s VWGSIPL, portion of which was reimbursed by VW AG. 81.8 In this regard, the definition of transaction value, as prescribed under Section 4 (3)(d) of the Central Excise Act, 1944, comprehends as to what are the components Which should not be ignored while computing the assessable value: (d) "transaction value" ........ 81.9 Hence, it is clear from the above that the price at which M/s. VWIPL are selling the vehicles to M/s. VW....
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....entral Excise Act, 1944. Further, it is also established that price is not the sole consideration and transaction between M/s. VWIPL and M/s. VWGSIPL is not at arm's length. The entire set up has been designed or arranged in such a manner that M/s. VWIPL has to pay lesser excise duty on such artificially reduced value for sale of all the contractual vehicles (Polo and Vento Variants) to M/s. VWGSIPL, who in turn sells the said vehicles at higher value by adding various expenses incurred by them in relation to the marketing and sale of the vehicles, which are reimbursed by M/s. VWAG. Now, I find it reasonable and apt to examine the method of valuation, as per the statutory provisions, laid down in the Act. 82.3. As per Section 4 (1) (a) of the Act, "in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value. Since M/s VWIPL and M/s VWGSIPL are related persons, in terms of the provisions of Section 4(3)(b) of the Act and also the price is not the sole consideration for sale, provisions of Section 4(1)(a....
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....s Goodyear South Asia Tyres Put. Ltd., 2005 (322) ELT 389 (SC). Further, M/s. VWIPL have also contended that the decision of Hon'ble Supreme Court in the matter of Flash Laboratories, 2003 (151) E.L.T. 241 (S.C.), is not applicable in this case. In this regard, I find that in the Flash Laboratories case, Hon'ble Supreme Court has discussed the decision of Attic Industries and Bombay Tyre International and held that "Relationship between the appellant and PBL, though indirect, they have mutuality of interest in the business of each other - Appellant and PBL to be treated as related person..." Further, it is also observed that in the case of Flash Laboratories, both Flash Laboratories and Parle Biscuits Limited are subsidiary companies of M/s Parle Products Limited and 40% of the products of Flash Laboratories are sold to Parle Biscuits Ltd. In the instant case, both M/s. VWIPL & M/s. VWGSIPL are subsidiaries of M/s. VWAG who is the holding company and 100% of the products manufactured by M/s. VWIPL are sold through M/s. VWGSIPL only. In view of the above, the decision of Hon'ble Supreme Court in Flash Laboratories is squarely applicable in this case. 83.2 Now coming to the ....
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....eared by M/s. VWGSIPL to their dealers. Further, the issue involved in this case is only is respect of VW cars (Polo and Vento Variants) manufactured by Y/s. VWIPL and sold exclusively to M/s. VWGSIPL for further sale. Moreover, the agreements contract between them specifies that the entire produce of VW brand cars by the assessee is to be sold to M/s. VWGSIPL. Hence, there is 100% sale of these vehicles to M/s. VWGSIPL by M/s. VWIPL. Though, it is irrelevant in the light of above established fact of mutuality of interest between related parties, even if the assessee's contention that they are also engaged in the production and selling of "Skoda cars", is considered for argument sake, the production and sale of 'Skoda Cars' is on different parameters and contracts, and the domestic sale of Polo and Vento variants to M/S. VWGSIPL is more than 78% percent of the total sale of cars (including Skoda cars) by M/s. VWIPL during the period from FY 2009-10 to FY 2013-14. This fact is based on the data provided by M/s. VWIPL in Para 'G.4' of their reply. The total number of vehicles including 'Skoda Cars' sold during the period from FY 2009-10 to FY 2013- 14 - is....
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.... volumes of mutuality of interest among themselves, as all are working together in the interest of promotion of sale of subject cars and any benefit at any point directly or indirectly benefits all of them. 83.6 The discussion above is bound to lead to the conclusion that M/s VWIPL & M/s VWGSIPL have an interest, in the business of each other and that the mutuality of interest between the two is apparent and they are related persons." The two companies viz., M/s. VWIPL & M/s. VWGSIPL belong to the same group then the test of mutuality is established and satisfied. In a sense, the corporate veil has been lifted thereby pointing out that M/s. VWAG, M/s. VWIPL & M/s, VWGSIPL would be beneficiaries in the event of any benefit in the subject transactions. So far as the price manipulation is concerned, i.e., sale of the goods by M/s. VWIPL to M/s VWGSIPL at a depressed price, the same has beenestablished on record on the basis of plethora of evidence tendered and which has been discussed in detail in my above discussions. Hence, it is established that valuation under Section 4(1) (a) is not applicable in the case of the sale of goods (Polo & Vento variants of cars) by M/s. VWIPL to VWGS....
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.... is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guideless good citizens from those of the 'artful dodgers'. It may, indeed, be difficult for lesser mortals to attain the state of mind of Mr. Justice Holmes, who said, "Taxes are what we pay for civilized society. I like to pay taxes. With them I buy civilization." But, surely, it is high time for the judiciary in India too to part its ways from the principle of Westminister and the alluring logic of tax avoidance. We now live In a welfare state whose financial needs, if backed by the law, have to be respected and met. We must recognize that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that It stands on no less moral plane than honest payment of taxation. In our view, the proper way to construe a taking statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally, or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is....
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....marketing activities would be dependent to a significant extent, on the cars manufactured and supplied to it by VIPL (its other sources are its other Group division companies SAIPL, Audi India and Porsche India). Hence, there is a mutuality of interest and hence, the value is to be determined by applying rule 9 above. Therefore, the value for goods realised by M/s VGSIPL on sale to its customers would be the value for the purpose of assessable value of M/s VIPL.We observed from M/s VGSIPL's balance sheets for 2011-12 and 2012-13 that disclosure of related party transactions indicated purchase of goods manufactured by M/s VIPL. Comparing the figures relating to purchase of traded motorcars by VGSIPL vis-a-vis the value considered for the ER-1 returns, we saw that there was a difference of Rs. 647.71 crore which would be attributable to amounts such as warranty charges, VGSIPL margin etc.Since M/s VIPL and M/s VGSIPL are related companies, the above charges are to be included in calculating the assessable value for clearances made by M/s VIPL. Non-inclusion of the same resulted in short levy of duty of C 182.71 crore." Thus we find that the conclusions which had been arrived at by ....
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...... Francis Bennion in "Statutory Interpretation 1984 Edition page 526 para 238 states that Hansard reports, and other reports of parliamentary proceedings on the Bill which became the Act in question, are of obvious relevance to its meaning. They are often of doubtful reliability however. (emphasis supplied) The documents in question which are sought for do not relate to the enacting history or any past enactment or the present enactment. The notings made in various Departments at various levels by the officers namely, the Under Secretary, Deputy Secretary, Joint Secretary; Secretary etc., whatever their view might be, is not the view of the Cabinet. The ultimate decision is taken by the Cabinet. So the notings cannot and are not guides as to what decision the Cabinet took. ......... It has to be reiterated that the object of interpretation of a statute is to discover the intention of the Parliament as expressed in the Act. The dominant purpose in construing a statute is to ascertain the intention of the legislature as expressed in the statute, considering it as a whole and in its context. That intention, and therefore the meaning of the statute, is primarily to be sought in the ....
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....ecided by this Court in the scenario where actual cost was not ascertainable. That is why we remark that first amendment to the proviso to sub-rule (2) of Rule 9 which was incorporated vide notification dated 19.12.1989 would be justified. However, the impugned provision clearly fails the test." Finally CAG has in its report has expressed the opinion stating as follows: "Audit opinion is that the undertakings are not only inter-connected but also satisfy the requirement of 'mutuality of interest in each other's business' under sub-clause (iv) of Section 4(3)(b)." Hence we do not find any merits in the submissions made by the appellant by referring this report of CAG. Earlier in the order we have extensively quoted the Hon'ble Apex Court in case of M/s FIAT India, as laying down essentially as to what constitutes the normal sale price/ transaction value etc. If we examine the value that appellant claim to be Section 4(1)(a) value, do not stand to the test laid down by Hon'ble Apex Court in that decision. In the case of Grasim Industries(supra) as noted earlier a five member bench of the Hon'ble Supreme Court, answered the question referred to it, stating that principles of deter....
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....g through the submissions of M/s. VWIPL on the issue of calculation of demand, I find that the assessee have pointed out certain discrepancies in sales price (adjusted net of excise duty) of M/s. VWGSIPL for FY 2012-13, and stated that the correct sale price (adjusted net of excise duty ) is Rs. 33,12,80,81,960/-, and not Rs. 41,08,52,00,000/- as shown in SCN and that, accordingly, the correct demand should be Rs. 81,87,59,397/-, and not Rs. 161,09,00,000/- for the Financial Year 2012-13, as mentioned in the SCN and also that the proposed demand if calculated correctly for the relevant period of SCN comes to Rs. 323,65,87,666/- and not Rs. 402,87,28,269 as mentioned in the SCN. On referring this issue to DGCEI, who have issued the subject SCN, for verification and comments, they have reported vide their letter F. No. DGCEI/MZU/I&IS 'C'/30-14/2014 dated 20-01-2016 that the correct sale price (adjusted net of excise duty) for FY 2012-13 is Rs. 33,12,80,81,960/-. They have also stated that the demand for that period is Rs. 81,87,59,397/- and the proposed demand therefore for all the relevant period works out to Rs. 323,65,87,666/-. Considering the DGCEI's said report, I fi....
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....a planning Round consisting of members of all the three group companies. This is because, M/s. VWAG determines the price of the cars in the Indian market and thus would determine the price at which it is to be purchased from VWIPL. Thus, practically the aspect of price determination is controlled by VWAG deviating from written terms of agreements. 91.5 M/s. VWAG intends to sell VW cars in India. It has a subsidiary VWIPL to manufacture cars and another subsidiary VWGSIPL to distribute the same. Since M/s VWAG has an interest to penetrate Indian market, the price at which the cars are to be sold is planned by M/s. VWAG. M/s. VWAG has borne part of the expenditure on account of advertisement etc. incurred by M/s. VWGSIPL. M/s. VWAG arranged that all VW brand cars manufactured by VWIPL are sold to VWGSIPL. Since M/s. VWAG's sole aim is to sell cars in India, both the subsidiaries help and work in unison to achieve the objective of sale of VW brand cars. Both M/s. VWIPL and M/s. VWGSIPL, the fellow subsidiaries of VWAG have got the objective of materializing sale of VW brand cars in Indian market. As per articles of Memorandum of Association of VWIPL, it is incorporated for manuf....
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....reduce the assessable value of the cars, so as to avoid payment of legitimate Central Excise duty and then compensate the resultant loss by other ways. This deliberately conceptualized set up/arrangement for depressing the price of cars artificially, was unearthed by detailed investigations by DGCEI officials. The department came to know about this peculiar methodology of undervaluation with intention to evade payment of duty by M/s. VWIPL in connivance with M/s. VWGSIPL and overall control of M/s. VWAG, only after the said detailed investigations by DGCEI officials. It is therefore clearly proved with evidence that there is suppression of facts with intent to evade duty. 91.7 It is also seen that a deliberate/ conscious decision was taken to create an intermediary subsidiary M/s. VWGSIPL to make less payment of duty. In case of their Skoda project, a confidential paper, which was unearthed during the investigation, has shown the deliberation of payment less duty by creating a distributing subsidiary for the goods manufacturing another subsidiary (Project Tiger') as done in the case of VWIPL and VWGSIPL. In that project, it was estimated that there would be a gain on account o....
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....e value. I also find that M/s. VWIPL, being part of a well organized MNC of international repute, with the best of legal assistance at their disposal to understand the nuances of different national tax structures, ought to have been well aware about the relevant provisions of Section 4 of the Central Excise Act and the Central Excise Valuation Rules. Therefore, I find that this is a clear-cut case of mis-declaration, and suppression of facts from the department with intent to evade duty, and that therefore the department is well within its right to invoke larger period for demanding the differential Central Excise duty in respect of such clearances made during the period from January 2010 to December-2014 in terms of the provisions of proviso to Section 11A(1) / Section 11A(4) of the Act, as the case may be, and I so do hold. In this regard, I place reliance upon the decision of the Hon'ble CESTAT in the case of -M/s. Bombay Dyeing & Mfg. Co. Pvt. Ltd. Vs. CCE, Mumbai - 1999 (113) ELT 331 (Tri.) - wherein it is held that where the assessee is in such knowledge and where the department have no knowledge of the situation, the department can allege suppression of facts................
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....ression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." Hence we hold that extended period of limitation as provided by Section 11A (4) will not be available for making the demand of duty in the circumstances of this case. 4.17 Demand for Interest Since the demand of tax has been upheld the demand for interest will follow. It is now settled law that interest under Section 11AA, is for delay in the payment of tax from the date when it was due. Since appellants have failed to determine the correct assessable value and pay the correct amount of duty by the due date interest demanded cannot be faulted. In view of the decisions as follows:- i. P V Vikhe Patil SSK [2007 (215) ELT 23 (Bom)] ii. Kanhai Ram Thakedar [2005 (185) ELT 3 (SC)] iii. TCP Limited [2006 (1) STR 134 (T-Ahd)] iv. P....
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....see by adopting a means as indicated in section 11AC. 19. From the aforesaid discussion it is clear that penalty under section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section. 20. At this stage, we need to examine the recent decision of this Court in Dharamendra Textile (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner. In Dharamendra Textile the court framed the issues before it, in paragraph 2 of the decision, as follows: "2. A Division Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff vs. Joint Commissioner of Income Tax, Mumbai & Anr. [2007 (8) SCALE 304]. The que....
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....The reference is answered.........". 21. From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. 22. There is another very strong reason for holding that Dharamendra Textile could not have interpreted section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. In paragraph 5 of the decision the court noted the submission made on behalf of the revenue as follows: "5. Mr. Chandrashekharan, Additional Solicitor General submitted that in Rules 96ZQ and 96ZO there is no reference to any mensrea as in section 11AC where mensrea is prescribed statutorily. This is clear from the extended period of limitation permissible under Section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. r....
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....proceeding under Section 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of Revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mensrea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(1) (a) which requires that mensrea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum Volume 85, page 580, Paragraph 1023: "A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws." In case of Hindustan Steels [1969 SCC (2) 627] Hon'ble Supreme Court has held as follows: "An order imposing penalty for failure to carry out a statutory obligation....