TaxTMI 
TaxTMI 
2020 (9) TMI 383
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....66 E/86251/2016 ---- 50,00,00,000 E/86542/2017 PUN-EXCUS-002-COMMR- 036/16-17 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 ....
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....ically for confiscation, I do not order confiscation of the same and also refrain from imposing penalty proposed under Rule 25 of Central Excise Rules 2002 in view of imposition of penalty under provisions of Section 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 appellan....
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..../s. VWGSIPL during the period from January, 2010 to March, 2014, in contravention of Rule 11 of Valuation Rules, 2000 read with Section 4 (1) of the Central Excise Act, 1944, as they did not include / consider the extra commercial consideration received, in the 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....
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....as they are interconnected undertakings under clause (A) and also had interest directly and indirectly in the business of each other under clause (iv) of the said Section. iii. 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 with Rule 10(a), Rule 9 and Rule 11 of the Valuation 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 a....
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....". As Commissioner has limited the demand based on the Related Party rule, i.e. the show cause notice at para 2.3, the findings recorded in respect of other two show cause notices dated 06.02.2015 are irrelevant. • The short point involved in the present case is whether the Appellant and VWGSIPL are Related Persons within the meaning of Section 4(3) (b) of the Act and therefore, consequently, whether the value is to be determined under Rule 10(a) or 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 Appella....
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....ter sales support to the Customers. The profit margin on such cars given to VWGSIPL is only in the range of 5.5%-6% (commensurate to similar dealers/distributors). • Like any other independent distributor, VWGSIPL is entitled for its distribution margin. Accordingly, the sale price between Appellant and VWGSIPL is arrived at by Retail Minus method i.e. Retail Sale Price - VWGSIPL's (Dealer) margin = Sale Price. Excise Duty is discharged such sale price arrived at retail sale price. • Transaction value rejected on account of relationship between the parties. 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). • "Materi....
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.... • It is only on the basis of the above model employed for determination of the sale price between them and VWGSIPL that they were able to make some operating profits during the years of demand in the impugned order. • During the relevant period, the market share of the Appellant has declined, whereas the average assessable value has increased. • The losses are suffered by the Appellant not due the deliberate predatory pricing, but due to lesser than expected sales volume. Fewer sales have led to the higher overheads per vehicle. • As a matter of fact, the Appellant has made profits during Financial Years 2013-14 of INR 420.7 Cr. It is also submitted that if the Financial Assistance given by Volkswagen AG is taken into consideration, the Appellant has made 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 pric....
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....rest, direct or indirect, in the business of each other. The businesses of the seller and the buyer are distinct. The control by the common parent also establishes only a one-way interest, and not a two-way interest, necessary to establish mutuality. Reliance is placed on following decisions • Attic Industries Ltd, [1984 (17) ELT 323 (SC)] • Calcutta Chromotype Ltd [1998 (99) ELT 202 (SC)] • Alembic Glass [2002 (143) ELT 244 (SC)] • Kaira Co-op Milk Producers, [2002 (146) ELT 502 (SC)] • Rule 10 of the Valuation Rules specifically deals with interconnected undertakings, whereas Rule 9 deals with relationship covered by three other sub-clauses of clause (b) of sub-section (3) of Section 4 of the Act. Consequently, in relation to interconnected undertakings, Rule 10 alone is relevant and applicable, it being a specific rule, which would prevail over Rule 9 which deals with relationships 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 claus....
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....ionship between the buyer and the seller alone and not, the buyer, seller and a third person (including a parent company, which has already been factored in for the purpose of ascertaining interconnection, and therefore, once again would not be relevant for establishing the second condition required to be satisfied in Rule 10(a) of interest in the business of each other. • This interpretation of Rule 10, and its non-applicability to the present case, is also supported by Report of the Comptroller and Accountant General of India ("CAG") presented before the Parliament on 19th December, 2014. In that report, the issue of sale of cars by the Appellant to VWGSIPL has also been discussed. The said report also reveals that the Ministry of Finance has opined that though the Appellant and VWGSIPL are inter-connected Undertakings; however they are not covered under Rule 10 of the Valuation Rules. • If the above settled principles are applied to the present case, the following 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 ....
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....ehicles • The arrangement between the Appellant and VWGSIPL was not unique and similar arrangements exist in other parts of the world as well for e.g. China, Spain, and UK etc. Further, various automobile and other manufacturing companies follow the same model of appointing marketing or a sole selling agent. • Appellant's case is squarely covered by the judgment passed by the Hon'ble Supreme Court in CCE, Aurangabad v. Goodyear South Asia Tyres, 2015 (322) E.L.T. 389 (S.C.) ('Goodyear judgment). Further reliance is placed on the following decisions: • Detergents India, [2015 (318) E.LT, 559 (S.C.)] • Onida Saka Ltd. [2016 (331) E.L.T. 496 (Tri.-Del)] • Alembic Glass Industries Ltd v CCE, 2002 (143) ELT 244 (SC) • Biostar Pharmaceuticals Ltd. v. State of Maharashtra, 2017 (351) E.L.T. 193 (Bom) • Ralliwolf Ltd [1992 (59) ELT 220 (Bom)] • Hind Lamps Ltd., [1989 (43) ELT 161 (SC)] • Extended Period of limitation is not invokable in the present case, as entire facts were completely in the knowledge of the department throughout. In view of the referred specifi....
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....n VWIPL, VW International Finance N.V. holds 22.53% of authorized shares and in VWGSIPL 99.99%. Remaining 501,625,161 paid up shares in VWIPL and an entire lot of Preference Shares in both the companies are held by VWAG. • Under the Licensing Agreement dtd. 14/3/2011 VWIPL is entitled to use the know-how and patents relating to manufacture and sale of the contractual products. In terms of the said Licensing Agreement, it has been specifically mentioned that "the licensee shall not have the right to enter contracts on the manufacturing, assembly or sale of any contract products, local parts, replacement parts or accessory parts, without the prior consent of the Licenser." ( Para 5} • Being group companies of Volkswagen Group, VWIPL and VWGSIPL are inter-connected undertakings and hence in terms of Section 4(3) (b) (i) of the Central Excise Act, 1944, they are deemed to be "related persons". • As per the Service and Distribution Agreement dtd. 9/3/2009 between VWIPL and VWGSIPL, • VWGSIPL shall buy the entire production of VW Vehicles from VWIPL at the prices agreed upon between them. • The prices are dete....
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.... • It is contended on behalf of VWIPL that it is not enough that VWIPL & VWGSIPL are inter connected undertakings and hence they are related persons, it is also necessary to satisfy the ingredients of Rule 10(a) of the Rules, i.e. they are also related in terms of section 4(3) (b) (iv) of the Act. • From the scheme of Section 4 (3) (b), all the four clauses (i), (ii), (iii) & (iv) are mutually exclusive. However, when clause (i) is read with Rule 10 (a), it is seen that there is an apparent conflict. In that situation the substantive provisions of the Act shall prevail over the subordinate legislation as held by the Hon'ble Apex Court in the case of ITW Signode India Ltd. Vs. C.C.E. - 2003 (158) 403 (S.C.). • VWIPL & VWGSIPL are related persons not only in terms of clause (i), but also in terms of clause (iv). Even though the two companies do not hold shares in each other, VWIPL depends totally on VWGSIPL for the marketing of its cars. Similarly, marketing activities of VWGSIPL largely depend on the manufacture and supply of cars by VWIPL. Therefore, both the companies have interest, directly or indirectly in the business of each other. ....
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....y M/s Bilag Industries and Aventis Crop Science (India) Ltd., to be related and held that price at which Aventis sold to final customers to be the assessable value. (Para 14 to 18 of the decision) • Reliance is also placed on following decisions • Narendra Machine Works (P) Ltd. [2001 (128) ELT 118 (T)] • Narendra Industries [2001 (132) ELT 141 (T)] • Dharnendra Indus. Ltd. [2004 (164) ELT 435 (T)] • "J' Foundation - [2015 (324) ELT 422 (S.C.)] • Flash Laboratories Ltd. [2003 (151) ELT 241 (S.C.)] • In case of Goodyear South Asia Tyres Private Limited [2015 (322) ELT 389 (S.C.)] relied upon by counsel for appellants,- • holding that the expression "interest in the business of each other" is a two-way traffic. • judgment relies upon its earlier judgments in the case of Attic Industries Limited - 1984 (17) ELT 323 (S.C.) and Detergents India Limited - 2015 (318) ELT 559 (S.C.). • Factually this case is clearly distinguishable. In this case, more than 70% of the sales were to the third parties at a lesser rate than sold to Goodyear. In the case in hand,....
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....Documents recovered during the investigation have revealed as to how the pricing has been undertaken keeping in view of retail sale, market penetration and overall attempt to reduce duty burden. It was a pricing policy decision of VW AG to position Polo & Vento in lower price segments. The said document shows that based on market research of Polo Hatchback in comparison with the cars having similar/like features, prices of Polo at the time of introduction in the Indian market should be in the range of more than Rs. 4,50,000/-. However VW was of the view that a price range of more than Rs. 4,50,000/- for Polo will give them access to only 21% of the market segment. Hence it was planned that Polo cars featuring in the higher segment should be positioned in the price range of Rs. 3.50 lakhs to Rs. 4.50 lakhs i.e. in the next lower segment. The said document shows that after price reduction of Polo VW 250, the accessible segment would be enlarged from 21% to 56%. • The marketing company was bearing expenditure on advertising, marketing support, sales promotion, and tactical support of Polo & Vento cars of the manufacturing company. Debit Notes raised by a marketing c....
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.... In the present case, there was no disclosure about the method of valuation adopted. Therefore, the extended period of limitation invoked in the SCN dated 06.02.2015 which has been confirmed by the Commissioner in the impugned order is required to be upheld. • Penalty on VWGSIPL under Rule 26(1) of the Central Excise Rules, 2002: The allegation against VWGSIPL is that they had aided and abetted VWIPL to suppress the material facts regarding the true transactions between them and VWIPL and thereby helped them (VWIPL) in gross under valuation of excisable goods. In the impugned orders, the Commissioner has recorded detailed findings to the effect that VWIPL and VWGSIPL were working under the final authority of their holding company, VWAG, Germany. All policy decisions in matters of pricing and selling of the excisable goods were taken by VWAG and communicated to them for implementation. Therefore, they (VWGSIPL) were fully aware of under-valuation and short payment of Central Excise duty. They had acquired possession of the said excisable goods and concerned themselves in transporting, removing, depositing, keeping, selling or purchasing of the said excisable goods knowi....
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....period proposing to demand duty by invoking different routes to the valuation of Goods Cleared. Interestingly in this case three show cause notices have been issued by the Additional Director General Central Excise Intelligence on 06.02.2015 demanding the duty for the period January 2010 to March 2014, on the same clearances by determining the value of clearances in three different manners. Commissioner has noted the fact about issuance of three different show cause notices in respect of same clearance during the same period and has observed in her order as follow: "66.1 At the very outset, I place on record that this is an unusual proceeding, in that three of the four Show Cause Notices have been issued by DGCEI in respect of the sale of Polo and Vento Variant Cars manufactured by the noticee during the period from January 2010 to December 2014, and each deals with a different issue regarding valuation of the cars for the purposes of the Central Excise law and rules made thereunder, and as a consequence thereof, the demands raised and the period covered are overlapping. DGCEI has, admittedly, incorporated this peculiarity into the SCNs themselves, and since there cannot be t....
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....ciple basis and the price is the sole consideration for the sale, Section 4 (1)(b) of the Act read with Rule 9 of Valuation Rules, if the sale is to related person, Rule 6 of Valuation Rules, if any money or other consideration is involved against the sale, Rule 10 of Valuation Rules, if sale is through inter-connected undertakings and Rule 11 of Valuation Rules, if the value cannot be determined under Rules 4 to 10, using reasonable means consistent with principles and general provisions of the Valuation Rules i.e. best judgment. Considering the fact that all these types of intricacies have effect on the valuation of cars, the application of best judgment under Rule 11 of the Valuation Rules, using the principles of the relevant Rules, appears to be appropriate for assessment of the goods. Precisely that is what has been done in the subject three different SCNs, wherein the provisions relevant to different situations has been invoked, as detailed in each SCN, with a proposal to decide the three SCNs together, which is proper and reasonable. Therefore, I do not find any force in the arguments of the assessee in this regard and the case laws referred by the assessee in support of th....
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.... Further, it will be relevant to point out here that each of the SCNs have been discussed in detail by me, and it is found that the SCNs stands on merits as well as on limitation, and point towards non-declaration of the correct assessable value on various counts. Hence, M/s. VWIPL's stand of overlapping of issues and adoption of different yardsticks for same transaction is mis-construed, and is more a ploy to deviate the proceedings from original subject i.e. merits of the case. It is relevant to note that the sustainability of any case depends on its merits. Hence, the decisions quoted by M/s. VWIPL are of no help for them in this regard. 121. Now coming to next important issue of overlapping of demand. I find that at the end of each SCN, the investigating agency has clearly mentioned that there is an overlapping of demand. Therefore, it will be reasonable and apt to examine the aspect of overlapping of demand, before I confirm the demand of Central Excise duty to be recovered from M/s. VWIPL for the aforesaid contravention on their part during the material period. 121.1 In this regard, the observations of the investigating agency in their Show Cause Notice F.No. DGCEI/....
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....pect is that, where a matter has already been adjudicated by the competent authority and another order of adjudication is passed relating to the same transaction subsequently, the second order is a nullity. The authority who undertakes the enquiry resulting in the second adjudication acts without jurisdiction. The second order being a nullity, it should be taken as not to exist at all. When the fact of such an order having been passed is brought to light, the records should be corrected, the order deleted from the record and the party affected informed accordingly." Thus at the time of hearing of the matter we had accepted the preliminary objection raised by the Appellant's counsel and directed him to make submissions only in respect of the Show Cause Notice which has been adjudicated leading to confirmation of demand against the appellants. 4.3 Legal Provisions for consideration of issue on merits- The relevant legal provisions from Central Excise Act, 1944 and Central Excise Valuation (Determination of Price of Excisable Goods), 2000, which are under consideration are reproduced below Section 4 of the Central Excise Act,1944 read as under (1) Where under this....
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....t charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 Rule 6 'Where the excisable goods are sold in the circumstances specified in clause (a) of sub section (1) of section 4 of the Act, except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing. directly or indirectly from the buyer to the assessee. Explanation 1........ Explanation 2.......... Rule 9 - 'When the assessee so arranges that the excisable goods are not sold by an assessee except to or through a person who is related in the manner specified in either of sub-clauses (ii), (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, the value of the goods shall....
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....ods to the price which is actually obtained by the assessee, when such goods are sold in the market, or the nearest equivalent thereof. In other words, the legal fiction so created by Section 4 makes excise duty leviable on the actual market value of the goods or the nearest equivalent thereof. In Bangaru Laxman v. State (through CBI) and Anr.- (2012) 1 SCC 500, this Court relying on J.K. Cotton Spinning and Weaving Mills Ltd. v. U.O.I, (1987) Supp. (1) SCC 350, observed that a deeming provision creates a legal fiction and something that is in fact not true or in existence, shall be considered to be true or in existence. Therefore, though the price at which the assessee sells the excisable goods to a buyer or the nearest ascertainable price may not reflect the actual value of the goods, for the purpose of valuation of excise duty, by the deeming fiction created in Section 4(1), such selling price or nearest ascertainable price in the market, as the case may be, is considered to be the value of goods. 27. It is well settled that whenever the legislature uses certain terms or expressions of well-known legal significance or connotations, the courts must interpret them as used or un....
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....entral Excise, Madras (2002) 10 SCC 344 has stated "Generally speaking the expression 'normal price' occurring in Section 4(1)(a) and (b) means the price at which goods are sold to the public. Where the sale to public is through dealers, the 'normal price' would be the 'sale price' to the dealer. 32. In Commissioner of Central Excise, Ahemedabad v. Xerographic Ltd. (2006) 9 SCC 556, this Court has explained the concept of normal price. That was in the context of transaction between the related persons. It was observed "that the existence of any extra commercial consideration while fixing a price would not amount to normal price." 33. In Burn Standard Co. Ltd. & Anr. v. Union of India (1991) 3 SCC 467, it is stated, "Section 3 of the Act provides for levy of the duty of excise. It is a levy on goods produced or manufactured in India. Section 4 of the Act lays down the measure by reference to which the duty of excise is to be assessed. The duty of excise is linked and chargeable with reference to the value of the excisable goods and the value is further defined in express terms by the said section. In every case the fundamental criterion for computing the value of an excisable ....
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....g of clause (c) of Section 4(4) of the Act. Again if the price is not the sole consideration, then again clause (a) of Section 4(1) will not be applicable to arrive at the value of the excisable goods for the purpose of levy of duty of excise." 38. In Commissioner of Central Excise v. Ballarpur Industries Ltd., (2007) 8 SCC 89, it is observed: "19. Under Section 4(1)(a) normal price was the basis of the assessable value. It was the price at which goods were ordinarily sold by the assessee to the buyer in the course of wholesale trade. Under Section 4(1)(b) it was provided that if the price was not ascertainable for the reason that such goods were not sold or for any other reason, the nearest equivalent thereof had to be determined in terms of the Valuation Rules, 1975. Therefore, Rule 57-CC has to be read in the context of Section 4(1) of the 1944 Act, as it stood at the relevant time. Section 4(1)(a) equated "value" to the "normal price" which in turn referred to goods being ordinarily sold in the course of wholesale trade. In other words, normal price, which in turn referred to goods being ordinarily sold in the course of wholesale trade at the time of removal, constituted ....
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....cise duty. The main provision is Section 4(l)(a) which provides that the value would be the normal price thereof, that is, the price at which the goods are ordinarily sold by the assessee to a buyer in the course of a wholesale trade. Section 4(4)(e) clarifies that a sale to a dealer would be deemed to be wholesale trade. Therefore, the normal price would be the price at which the goods are sold in the market in the wholesale trade. Generally speaking, the normal price is the one at which goods are sold to the public. Here the sale to the public is through the dealers. So the normal price is the sale price to the dealer. The proviso, which has been relied upon by learned counsel, does not make any exception to this normal rule. All that the proviso provides is that if an assessee sells goods at different prices to different classes of buyers, then in respect of each such class of buyers, the normal price would be the price at which the goods are sold to that class. The proviso does not mean or provide that merely because the assessee sells at different prices to different classes of buyers, the price of that commodity becomes an unascertainable price. The price of that commodity wi....
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....e, therefore, is the amount paid by the buyer for the purchase of goods. In the present case, it is the stand of the revenue that 'loss making price' cannot be the 'normal price' and that too when it is spread over for nearly five years and the consideration being only to penetrate the market and compete with other manufacturers who are manufacturing more or less similar cars and selling at a lower price. The existence of extra commercial consideration while fixing the price would not be the 'normal price' as observed by this Court in Xerographic Ltd.'s case (supra). If price is the sole consideration for the sale of goods and if there is no other consideration except the price for the sale of goods, then only provisions of Section 4 (1)(a) of the Act can be applied. In fact, in Metal Box's case (supra) this Court has stated that under sub- Section (1) (a) of Section 4 of the Act, the 'normal price' would be the price which must be the sole consideration for the sale of goods and there cannot be any other consideration except the price for the sale of goods and it is only under such situation Sub-Section (1) (a) of Section 4 would come into play. In the show cause notices issued, t....
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....ion 4 (1) (a) of the Act. He submits that admittedly assessees are selling their goods at 100% loss continuously for five years i.e. from the year 1996 to 2001 and therefore, the transactions of the assesses cannot fit into description of expression 'ordinarily sold'. While countering this argument, Shri Joseph Vellapally would submit that the selling price at which the goods are sold in the ordinary course of business by the assessee to all the buyers is the same or uniform without any exception. He would, therefore, contend that the goods are ordinarily sold in terms of Section 4 (1) (a) of the Act. While adopting the submission of Shri Vellapally, Shri Lakshmi Kumaran would further contend, relying on Ship Breaker's case (supra) that this Court while explaining the meaning of the expression 'ordinarily sold', occurring in Section 14 of the Customs Act, 1962 which is in pari materia with Section 4 of the Act, would mean the sale where the goods are sold to un- related persons and price is the sole consideration. He would also contend that Section 4 of the Act was amended with effect from 1stApril, 2000, to incorporate 'transaction value' as an 'assessable value' instead of 'norma....
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....d above, and a perusal of the same shows that the value to be determined is a deemed value and not necessarily the actual value of the goods. Thus, Section 14(1) creates a legal fiction. Section 14(1) states that the value of the imported goods shall be the deemed 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" in Section 14(1) is of great importance. In Section 14(1) we are not to see the actual value of the goods, but the value at which such goods or like goods are ordinarily sold or offered for sale for delivery at the time of import. Similarly, the words "in the course of international trade" are also of great importance. We have to see the value of the goods not for each specific transaction, but the ordinary value which it would have in the course of international trade at the time of its import." 47. In Varsha Plastics Private Limited & Anr. v. Union of India & Ors., (2009) 3 SCC 365, at page37l, it is observed: "19. Section 14(1) of the Act prescribes a method for determination of the value of the goods. It is a deeming provision. B....
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....acturing profit, when the company wants to switch over its business for any other manufacturing activity, it could also be where the manufacturer has goods which could not be sold within a reasonable time. These instances are not exhaustive but only illustrative. In the instant cases, since the price charged for the sale of cars is exceptional, we cannot accept the submission of the learned counsel to give a meaning which does not fit into the meaning of the expression 'ordinarily sold'. In other words, in the transaction under consideration, the goods are sold below the manufacturing cost and manufacturing profit. Therefore, in our view, such sales may be disregarded as not being done in the ordinary course of sale or trade. In our view, for the purpose of Section 4(1) (a) all that has to be seen is: does the sale price at the factory gate represent the wholesale cash price. If the price charged to the purchaser at the factory gate is fair and reasonable and has been arrived at only on purely commercial basis, then that should represent the wholesale cash price under Section 4(1)(a) of the Act. This is the price which has been charged by the manufacturer from the wholesale purchas....
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....t the sole consideration. However, it is contended by learned senior counsel Shri Vellapally that the reason for the assessees for selling their cars at a lower price than the manufacturing cost was because the assessees had no foothold in the Indian market and, therefore, had to sell at a lower price than the manufacturing cost and profit in order to compete in the market. He would submit that the intention of the assessees to penetrate the market cannot be treated as extra commercial consideration as it does not flow from the buyer to the seller. Therefore, there is no additional consideration flowing from buyer to seller and whole transaction is bona fide. 53. Now what requires to be considered is what is the meaning of the expression `sole consideration'. Consideration means something which is of value in the eyes of law, moving from the plaintiff, either of benefit to the plaintiff or of detriment to the defendant. In other words, it may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other, as observed in the case of Currie v. Misa (1875) LR 10 ....
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....rticle which price will be the price at which it is ordinarily sold to a buyer in the course of wholesale trade. It is for the Excise authorities to show that the price charged to such selling agent or distributor is a concessional or specially low price or a price charged to show favour or gain in return extra- commercial advantage. If it is shown that the price charged to such a sole selling agent or distributor is lower than the real value of the goods which will mean the manufacturing cost plus manufacturing profit, the Excise authorities can refuse to accept that price. 60. Since under new Section 4(1)(a) the price should be the sole consideration for the sale, it will be open for the Revenue to determine on the basis of evidence whether a particular transaction is one where extra- commercial consideration has 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 and that is what exactly has been done in the instant cases and after analyzing the evidence on record it is found that extracommercial consideration had entered into while fixing the price of the sale of the cars to the customers. When the pri....
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....arged 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 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 at, under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 ('the Rules 2000' for short) which is also made effective from 1^st 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." 4.6 In case of Grasim Industries Ltd [Order dated 11th May 2018 in Civil Appeal No 3159 of 2004] a Five Member Bench of Hon'ble Supreme Court has considered the issue of changes made in the Section 4 of the Central Excise Act, 1944 and various other issues referred to it. The relevant excerpts from the said deci....
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....alue claimed to be the true transaction value is determined by the Planning Round, every year which is headed by M/s VWAG, Germany. This fact was also admitted by Mr Peter Pajunk, Head Central Controlling of M/s VWIPL in his statement dated 02.02.2015, wherein he stated "I state that we sell the cars on the prices finalized and confirmed in Planning Rounds which we get from VW AG. But I do not know the reasons for the same."During the course of investigations certain documents such as e-mail from M/s VWAG Germany were recovered determining the transfer price of Polo Model of car. This e-mail clearly suggests that the price was determined by M/s VWAG, Germany and dictated to its two Indian Subsidiaries. The fact about the existence of this e-mail dated 28.01.2010 along with all its contents have been admitted by Shri Sabharwal in his statement dated 19.01.2015. The scanned copy of e-mail is reproduced below: 4.8 Mutuality of Interest and Related Person Appellants for the reason of the fact that both VWIPL and VWGSIPL are subsidiary companies of M/s Volkswagen AG, Germany are interconnected undertaking do not dispute that they are covered by the definit....
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....per Section 4 (1) (b), ibid. For that purpose, they refer to Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. For the reason that they are related person, being interconnected undertakings, rule 9 of the said Rules will not be applicable to them and in their case the assessable value needs to be determined in terms of Rule 10, ibid. They submit that from the wordings of the rule 10 (a) it is quite evident, that for the said rule to be applicable, they should apart from being interconnected undertakings should also be related as per any of the three sub clauses (ii), (iii) or (iv) of Section 4(3)(b) of the Central Excise Act, 1944. Sub clauses (ii) and (iii) are not applicable in their case, the only remaining clause that needs to be examined then is whether they and M/s VWGSIPL are so related that they can be said to have interest directly or indirectly in business of each other. Relying on the various decisions they argue that there is no mutuality of interest in business of each other, and hence the value in their case needs to be determined as per Rule 10 (b), ibid, as per which the value shall be the transaction value as per section 4(1)(a). The....
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....n which is as under: 73.2 I find that there exists a Memorandum of Association and Articles of Association of VWGSIPL dated. 07.03.2007 under the Companies Act, 1956, and Memorandum of Association under Companies Act in respect of VWIPL. I also find that various agreements have been made between M/s. VWAG, M/s. VWIPL and M/s. VWGSIPL for their transactions and functioning with reference to production, marketing and sale of subject contractual cars which are enlisted below: i. Marketing Assistance Agreement dated 18.05.2007 between M/s. VWAG and M/s. VWGSIPL. ii. Financial Assistance Agreement dated 07.07.2008 between M/s. VWAG and M/s. VWGSIPL. iii. Disbursing Agent Agreement dated 16.07.2008 (w.e.f 15.04.2007) between M/s. VWIPL and M/s. VWAG. iv. Purchase Function Service Agreement dated 15.10.2008 between M/s. VWIPL and M/.s VWGSIPL. v. Supply Agreement dated 14.03.2011 (w.e.f January-2010) between M/s. VWAG and M/s. VWIPL. vi. Service and Distribution Agreement dated 09.03.2009 between M/s. VWIPL and M/s. VWGSIPL. vii. Licensing Agreement dated 14.03.2011 between M/s. VWIPL and M/s. VWAG. viii. Service Level Agreement dated 01.10.2009 between M/s. VWI....
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....f sale of vehicles by M/s VWIPL to M/S VWGSIPL are governed by service and distribution agreement dated 09.03.2009 and pricing terms are provided under Clause 3 of Schedule 1 of this agreement. According to it, the price for contractual vehicles at which it will be purchased by VWGSIPL from VWIPL would be agreed upon by both the parties. (vi) from the aforementioned agreements, it comes out that M/s VWIPL have appointed M/s VWGSIPL as their sole selling agent (SSA) and the cars so manufactured by M/s VWIPL are exclusively sold through the said SSA; that reimbursements are made as per two agreements made between M/s VWAG and M/s VWGSIPL viz. i) Financial Assistance Agreement - 07.07.2008 and ii) Marketing Assistance Agreement - 18.05.2007. (vii) 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 VW....
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.... VW brand cars in India, it made VWIPL agree to sell all cars to VWGSIPL so that the latter would distribute them in the territory of India, through a dealer's network. M/s VWIPL sells the goods to VWGSIPL following a valuation of goods under Section 4(1) (a) of the Act. VWGSIPL then clears/ sells the goods to dealers at a different price higher than the sale value of VWIPL. 73.4 It was also stated in the SCN that the VW brand cars manufactured by VWIPL are kept in an earmarked premises within their plant after sale to VWGSIPL. The sale of fully manufactured vehicles to VWGSIPL is after CP.8 (Check Point 8), a defined area of control. CP.8 is discussed in the Service & Distribution Agreement between VWIPL & VWGSIPL. Once the cars are sent after CP.8, the invoices are issued by VWIPL in the name of VWGSIPL; that thereafter, an invoice by VWGSIPL is generated in the premises of VWIPL for sale to dealer and VWGSIPL acknowledges the receipt of the car under Deliver Acknowledgement Note. This position was not refuted by the assessee. This indicates a commonality of interest in marketing the cars of VW brand and the distinction in functionality between VWIPL & VWGSIPL has been cre....
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....tein, Heat Financial Controlling of VWGSIPL stated that factory support means overall support by VWAG to VWGSIPL against sale of Polo & Vento; that they have VWAG as global manufacturer with production facilities like VWIPL in India. He stated that factory support & manufacturer support means support from VWAG towards manufacture and sale of Polo & Vento cars. 74.2 From the above, it clearly emerges that M/s. VWAG has borne part of the expenditure on account of advertisement etc. incurred by VWGSIPL. M/s. VWAG also arranged that all the VW brand cars manufactured by M/s. VWIPL are sold through M/s. VWGSIPL. Since 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. This shows a mutuality of interest in the business of each other viz, between VWIPL & VWGSIPL and vice versa, which is nothing but the sole aim of selling the VW brand cars in Indian market. When both VWIPL and VWGSIPL, the fellow subsidiaries of VWAG has got the objective of materializing the sale of VW brand cars in Indian market by way of VWIPL manufacturing them and VWGSIPL distributing them, the mutuality of interest in the ....
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....le value of VWIPL. Further, on being asked, Shri Sabharwal admitted that VWGSIPL does the market research/analysis of the competition on the basis of which they decide the price point at which Polo/Vento should enter the market." 4.12 All the above facts as recorded in impugned order on the basis of the various agreements clearly point to one fact that the issue for consideration is not one of relationship between the buyer and seller simplicitor, because the two Indian subsidiaries are mere puppets in the hand of M/s VWAG, Germany who is authority to determine and take decisions in relation to production and sale of the vehicles of Volkswagen Brand namely Polo and Vento in Indian territory. In fact German unit by rendering financial assistance to both the Indian subsidiaries make them financially viable for their operation. In none of the cases relied upon by the Appellants during the course of arguments on appeal have such an arrangement been considered. In our opinion, in the present case if corporate veil is pierced then we find that the entire operations of manufacture and sale of these vehicle was throughout on account of M/s VWAG, Germany. In the impugned order Commission....
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....he premises of VWIPL for sale to dealer and VWGSIPL acknowledges the receipt of the car under Deliver Acknowledgement Note. vii. VWGSIPL had to bear marketing and promotional expenses for subject cars and a portion of such expenses were reimbursed by VWAG. viii. VWAG also extended financial assistance to VWIPL against the losses incurred by VWIPL or infused the money through share holding to increase net worth of VWIPL. ix. VWAG also waived the payments against raw material / components supplied to VWIPL on certain occasions. x. VWAG had a controlling role in production planning of subject cars and also in pricing pattern. xi. The marketing and product promotional expenses are put in the segment of VWGSIPL instead of in the segment of VWIPL which reduced the duty component leading to lower prices of subject cars and make them more competitive in retail market. xii. VWAG had a decisive role in fixation of prices at every segment level, in Retail minus method. In other words, the price of subject cars were not fixed as per globally accepted principles i.e. cost. constructive method. xiii. The most important aspect of the ....
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.... Polo & Vento) by M/s. VWIPL to M/s. VWGSIPL, is not at arm's length and not on principal to principal basis. Therefore, the price at which the goods are sold is not the sole consideration for sale. 81.1 Now coming to M/s. VWIPL's contention that all advertisement, sales promotion and marketing expenses are not attributable to sales of Volkswagen Cars. In this regard, I find that the issue involved in this case pertains to valuation of Volkswagen Cars (Polo and Vento Variants). Further, as discussed supra, the entire production of contractual vehicles - Polo & Vento are sold to VWGSIPL by VWIPL and complete marketing support in the form of sales promotion, brand awareness / brand building, tactical support, advertising and allied activities for sales of said contractual vehicles is carried out by VWGSIPL. There are agreements (Marketing Assistance Agreement and Financial Assistance Agreement) between VW AG & holding company with VWGSIPL for this purpose. Further the company officials in their Statements recorded under Section 14 of the Central Excise Act, 1944 have accepted the facts that M/s. VWGSIPL is reimbursed for expenses towards marketing, brand building and other....
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....itures/elements on account of the components like advertisement/ Sales promotion, warranty, warehousing/ handling charges were/ are kept with VWGSIPL, which otherwise should have been a part of the value of sale of the goods by manufacturer. It is needless to say that such arrangement leads to reduction in assessable value and corresponding central excise duty component which is charged on ad valorem basis, in order to keep the prices of the cars low and thereby penetrate Indian market which is the common aim and interest of all the group companies in this case. 81.6 It is fact that an intermediary subsidiary company has been created in the name of VWGSIPL/NSC and VWIPL had agreed to sell entire goods to VWGSIPL, who does all the promotional activities as per agreement with VW AG, though VWIPL are the manufacturers of the cars. In an ideal situation, it is the responsibility of manufacturer to undertake promotion of its manufactured products. But here the scenario is different. As VWAG is the brand owner, it has created/formulated a system in such a way that one subsidiary (VWIPL) would manufacture the car and the other subsidiary would buy the entire lot from manufacturer and t....
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....nsaction 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. VWGSIPL, cannot be accepted as transaction value and the same is not sole consideration and the transaction is not at arm's length. Therefore, the value at which M/s. VWIPL have paid the Central Excise duty for sale to M/s. VWGSIPL, cannot be treated as true and proper transaction value, as it does not include the expenses incurred by M/s. VWGSIPL relating to sale of subject contractual VW Cars (Polo and Vento Variants) manufactured by M/s. VWIPL. Thus all the above expenses incurred by VWGSIPL for promotion of VW brand cars should form a part of assessable value. Accordingly, I find that the method of arriving at the transaction value, as adopted by M/s. VWIPL, is not correct. 82.1 Now coming to the examination of valuation method adopted by M/s. VWIPL, I find that M/s. VWIPL in their reply have claimed that the transaction value adopted by them is as per mandate of Central Excise Act as well as Valuation Rules, M/s VWIPL sells its entire production viz., contractual vehicles of VW brand - Polo & Vento cars to M/s VWGSIPL. However, M/s. VWIP....
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....n 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) are not applicable and therefore, provisions of Section 4(1)(b) will apply. These provide for valuation to be determined in such manner as may be prescribed i.e. as per Valuation Rules. 82.4 Now, Rule 9 and 10 of the Valuation Rules specifically cover cases where assessee so arranges that the excisable goods are not sold by the assessee except to or through related person. It is an admitted fact that M/s VWIPL sell their entire production of finished excisable goods viz., Polo & Vento of VW brand of Cars to M/S VWGSIPL (a related person). 82.4.1 Rule 10 of the Valuation Rule states, ........ 82.4.2 Rule 9 of the Valuation Rules, 2000, reads, "....". 82.5 From the above, it is clear that only if the undertakings are also related in terms of either of sub-clause (ii) or (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, then only value shall be determined in the manner prescribed in rule 9 i.e. the value for the purpose of levy of duty shall be the normal transaction value at which these are sold by the relat....
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....GSIPL 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 other decision viz. CCE, Aurangabad Vs Goodyear South Asia Tyres Put. Ltd., 2015 (322) ELT 389 (SC), which is heavily relied upon by M/s. VWIPL. On going through the said decision, I find that the original company was RPG CEAT which was subsequently taken over by M/s. Goodyear. Also, 70% of their production was cleared to third parties i.e. unrelated parties, and that too at rates lesser than that sold to Goodyear. In the said judgement, Hon'ble Supreme Court has also relied upon its own decision in the case of 'Commissioner of Central Excise, Hyderabad v. M/s. Detergents India Limited and Another' [2015 (318) E.L.T. 559 (S.C.)] wherein it was held: "We are of the view that the "arrangement" spoken of in the proviso must be something by which the assessee and the related person "arrange" that the goods are sold at something by which the assessee and the related person "arrange" that the goods are sold as something below the normal price, so that tax is either avoided or evaded by such arrangement. Secondly, the e....
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.... 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 370129 whereas total Polo and Vento Variants of VW Cars sold to M/s. VWGSIPL is 290139. Hence, percentage of Polo and Vento Variants Cars sold exclusively to M/s. VWGSIPL is 78.38%. In the FY 2014-15, as submitted by M/s. VWIPL at 'Para G.7 of their reply to the SCN, that 65% of the total production was sold through VWGSIPL. 83.4 In this regard, I rely upon the ratio of related party's criterion, decided by Hon'ble Supreme Court in the case of M/s. Detergents India Limited and Another [2015 (4) SCALE 631 = 2015 (318) E.L.T. 559 (S.C.)], as the sale through M/s. VWGSIPL is more than 50% of the overall production by M/s. VWIPL during the material period and also it is already proved that the transactions in this case have been arranged to sale the Vw cars (Polo and Vento Variants) only through M/s. VWGSIPL by M/s. VWIPL, to evade payment of Central Excise duty by not loading certain promotional / other expenses incurred and benefits /assistance extended by parent company, in the value of cars manufactured by....
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..... 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 VWGSIPL. Therefore, the value of the goods has to be determined under Section 4(1) (b) of the Act read with the valuation Rules. To strengthen my findings, in this regard, I would like to rely upon the recent judgment of Hon'ble Supreme Court in the case of CCE, Mumbai- V Vs 'J' Foundation, reported in 2015 (324) ELT 422 (SC), wherein the Hon'ble Supreme Court followed the decision in the case of M/s. Detergents India, supra, in respect of interpretation of related person and held that the test of mutuality of interest established and satisfied as buyer and seller belong to same Group of Companies - Corporate veil torn by pointing out that such family concerns beneficiaries in affairs of each other - Tribunal order holding buyer and seller as non-related, erroneous and set aside - Section 4 of Central Excise Act, 1944." 4.13 In our view such tri-partite arrangements would not have been envisaged by the law makers at the time of drafting of the rules. However as the business complexities multiply, the ....
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....ether 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 a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it. A hint of this approach is to be found in the judgment of Desai, J. in Wood Polymer Ltd. v. Bengal Hotels Limited(1) where the learned judge refused to accord sanction to the amalgamation of companies as it would lead to avoidance of tax. It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of interpretation as was done in Ramsay, Burma Oil and Dawson, to expose the devices." 4.14 Impact of the CAG report of 2014, on determination of Value of Polo and Vento Models of Cars cleared by the Appellant. Appellants have also relied upon the CAG report t....
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....able 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 the CAG in their audit report are identical to what we have arrived at. However after having concluded so audit has referred to the reply submitted by the Ministry on the said audit objection stating as follows: "The Ministry replied (October 2014) that though M/s VIPL and M/s VGSIPL are interconnected undertakings, clearances by M/s VIPL would not be covered under rule 10 as M/s VIPL and M/s VGSIPL do not have a holding and subsidiary relationship. Further, DGCEI, Pune Regional Unit is already undertaking investigations in respect of the undervaluation of transaction value of vehicles manufactured by M/s VIPL in relation to sales to M/s VGSIPL, hence CERA observations are being included in the scope of DGCEI's investigations." Appellants have submitted that it is also the view of the Ministry that in this case the transactions between VWIPL and VWGSIPL, are not covered by rule 10 as they are not the holding and subsidiary company. Hence the valuation could not be done in terms of Rule 9 by t....
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....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 words used in the statute itself, which must, if they are plain and unambiguous, be applied as they stand. In the present case, the words used represent the real intention of the Parliament as we have found not only from the clear words used ....... See in this connection the observations of Halsbury's Laws of England, 4th Edition, Volume 44, paragraph 856 at page 522 and the cases noted therein. ......... Contemporanea Expositio, is a well-settled principle or doctrine which applies only to the construction of ambiguous language in old statutes. Reliance may be placed in this connection on Maxwell 13th Ed. page 269. It is not applicable to modern statutes. Reference may be made to G.P. Singh, Principles of Statutory Interpretation, 3rd Edn. pages 238 and 239. As noted in Maxwell on The Interpretation of Statutes, 12th Edition at page 269 that the leading modern case on contemporanea expositio is the case of Campbell College, Belfast v. Commissioner of Valuation for Northern I....
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....'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 determination of normal value and judicial exposition in respect of "normal value" applies to "transaction value." Thus in our view the value that qualifies to be a value under Section 4(1)(a) can be value which is on account of sale at arm's length, and not any value that is determined for transfer/ clearance of goods. In absence of any value under Section 4(1)(a), the only route available for determination of the value will be under Sec.4(1)(b) through Rule 11 of valuation rules and 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. By application of Rule 11, in case of related person transactions the value needs to be determined by application of Rule 9 of the Central Excise Valuation (determination of Price of Excisable Goods) Rules, 2000. Thus in absence of Section 4(1)(a) value satisfying the criteria laid down by the Apex Court in case of M/s FIAT Industries ....
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....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 find that the assessee's request on this ground is genuine and accordingly I correct and revise the demand of the subject SCN to Rs. 323,65,87,666/ 87.3 As regards other grounds, these are based more on presumptions rather than on facts or law. Had M/s. VWIPL followed the genuine and correct method of Valuation, they would have got its benefits also if permissible by law. I therefore decline to consider their request for reducing the duty demand on these grounds. "Hence, the revised/ corrected demand in respect of subject SCN is considered to be Rs. 323,65,87,666/- for the purpose of order." From the above it is quite evident that the Commissioner has in the impugned order not even examined the issue at all. We are in full agreement with this submission of the Appellant that the benefit of cum duty price will be admissible to them if it can be shown that the price which is taken for computation of assessable value and duty demand is....
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....e 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 manufacture and marketing of cars. But, by the arrangement of M/s. VWIPL manufacturing it and M/s: VWGSIPL distributing it, and by putting marketing and promotion expenses of those cars out of the segment/account of VWIPL, I find that the sale value of the cars from VWIPL to VWGSIPL are artificially fixed lower so as to pay lesser duty than due, as detailed below, in contravention of provisions of Central Excise Law. 91.6 A (retail minus' method has been decided to arrive at price at different level, i.e., price at which goods is sold in retail, price at which M/s. VWGSIPL will sell to dealers and price at which M/s. VWGSIPL will buy cars from VWIPL. Since M/s. VWGSIPL has been assigned the job of advertising etc. , the cost incurred on that has been kept out of the price fixed for sale by VWIPL. Similarly, other components like warranty, warehousing charges etc. were kept out. The whole objective was to keep the sale price at ....
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.... 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 of it to the extent of 16.93 Million Euros, Same methodology was followed in the instant case as entire product of VWIPL was sold to VWGSIPL at a lesser price while price for dealers from VWGSIPL was kept at a higher side. This clearly shows that the arrangement of sale or marketing VWIPL manufactured cars through VWGSIPL only has been a deliberate attempt to evade payment of duty. Actually, the Tiger Report is one of the evidences which disclosed the actual face of M/s. VWIPL and its group and the mention of keeping such planning under wraps to avoid detailed scrutiny / investigation by the department/DGCEI. Though the assessee's argument in this regard is that they have not implemented the Project Tiger', it clearly unravels the complexity of the transactions planned and the intention of payment of lesser duty than legitimately due, lying behind such plan, which was already adopted in the instant case. Therefore, I fi....
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....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.............." 91.10 Therefore, considering the facts and circumstances of the case as discussed above, I find that the various decisions quoted by M/s. VWIPL will not come to their rescue in this regard. Accordingly, I find that the provisions for demand in respect of extended period in terms of proviso to sub-section (1) of Section 11A/ Section 11 (A) (4) of the Central Excise Act, 1944 (as applicable during the period of demand) have been rightly invoked in the present case for demanding the amount of Central Excise duty short-paid by them on sale of vehicles (Polo and Vento Variants) during the period from January 2010 to December 2014." In our view impugned order has completely mis-directed while determining the issue of limitation. There can be no dispute about the fact that the issue of valuation of Polo and Vento Variants of the Cars manufactured and cleared by the Appellant was always in the knowledge of the depar....
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....nd 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. Pepsi Cola Marketing Co [2007 (8) STR 246 (T-Ahd)] v. Ballarpur Industries Limited [2007 (5) STR 197 (T-Mum)] 4.18 Penalty under Section 11AC of the Central Excise Act, 1944. Penalty under Section 11AC has been imposed by the Commissioner for the reason that she has held the essential ingredients to invoke extended periods of limitation exists in the present case. She relied upon the decision of Apex Court in case of Dharamendra Textiles for holding that the penalty under Section 11AC is justified. However we do not agree with the findings of the Commissioner that there was suppression with intention to evade payment of Central Excise duty, hence we did not find any merits in the invocation of extended period of limitation. Hon'ble Supreme Court has in case of Rajasthan Spinning and Weaving mills [2009 (238) ELT 3 (SC)] clarified its order in case of Dharamendra Textiles stating as follows: ....
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....ragraph 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 question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the `Act') inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mensrea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271(1) (c) of the Income Tax Act, 1961 (in short the `IT Act') taking the stand that Section 11AC of the Act is identically worded....
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....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. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statues mensrea is specifically provided for, so is the limit or imposition of penalty that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section 11AC, Rule 173Q was in vogue in which no mensrea was provided for. It only stated "which he knows or has reason to believe". The said clause referred to wilful action. According to learned counsel what was inferentially provided in some respects in Rule 173Q, now stands explicitly provided in Section 11....
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....ture, 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 is the result of a quasi criminal proceedings and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of provisions of the Act or which the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute." ....
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....and of duty has to be restricted within the normal period of limitation as per Section 11 A (1), ibid. • Since extended period of limitation is not invokable, penalties imposed under Section 11AC are set aside. • Since the issue is purely of interpretation, and sufficient evidence is available on record to show that Appellant and M/s VWGSIPL entertained a bonafide belief in the matter, the penalties imposed under Rule 26 of Central Excise Rules, 2002 are set aside. • The matter is remanded back to the adjudicating authority, for redetermination of the assessable valu e after allowing the benefit of cum duty price on the sale price of M/s VWGSIPL to independent dealers and demand of duty within the normal period of limitation as per Section 11 A (1) of the Central Excise Act, 1944; • Commissioner should as far as possible re-determine the duty demand within six months of the receipt of this order, after affording the opportunity of hearing to Appellant. • Interest at the applicable rate is payable under Section 11AA of Central Excise Act, 1944. 5.2 The appeals filed by Appellant namely M/s VWIPL, are partially allow....
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....ontributed to the long lasting pricing process for the Polo which will be now the key to success for our brand Volkswagen in the Indian market. Best regards Frederik Gutermilch Frederik Gutermilch Area Manager India VO-3 Sales Subcontinent india VOLKSWAGEN AG Latterbox 011/39270 D-38436 Webuig आयà¥à¤•à¥à¤¤ केंदà¥à¤°à¥€à¤¯ उतà¥à¤ªà¤¾à¤¦ See Wihn was 19/1/2015 * Document 2 Polo Hatch Conceptline: 55KW MP SG Exwork WIPL bef. Tax 2 Landing charges FBU 3 Assessable (AV) 4 Basic Customs Duly (ECO) FRU 5 NCCD 5 Basic Excise Duty (CVD) 7 Cess 8 Educational Cess Customs Educational Cess (CEC) FOU 103peal Acditional Customs Outy (SACD) FBU 11 Less: Refund of SACD 12 Landed post Including customs duties 13 Clearing, landling 14 Warehouse 15 Warranty 15 Extenced Warranty 17 Franspart to Dealer Mumbal (VAT! Rest of lacia (CST) 290,217 250.217 1% of 290,217 200.217 60% of 1% of 14+15 2,902 2.902 8% of 14+15+15 23.217 23 217 0.125% of 14+15+15 ....