TaxTMI 
TaxTMI 
2022 (10) TMI 1244
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....944 in SCN under F.No V(84,87)15 04/Adj/Commr/2015-16/160 dated 5th May 2015 for the period from April 2014 to 10.07.2014, for the reasons mentioned above, and for determining and demanding Central Excise duty not paid on the finished excisable goods, by FIAT for the period within and beyond one year from the relevant date. I further hold that: (b) The Assessee has been continuously been paying Central Excise duty on assessable value which was below the Manufacturing cost + profits in the case of Palio and Punto car models from entire period from March-10 to July-14 as well as some other models like Fire 1.4 (2019-10), SDE90 PC (2010- 11), Linea, Manza, Vista, SDE95 (2013-14). The differential value as computed in the two SCN's are liable to be included in the assessable value. Accordingly I hold that M/s Fiat India Automobiles limited having their factory and registered office at Plot No. B-19, M.I.D.C. Industrial Area, Ranjangaon, Taluka-Shirur, District Pune - 412220 mentioned in the Show cause notices as hereinabove discussed are liable as follows: (a) Central Excise duty amounting to Rs. 53,74,57,207/-(Rupees Fifty Three Crore Seventy Fo....
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....s are as follows : S.No List of objections Revenue implications (if any) Noticee Agreement, Yes/No, if no, reason for disagreement Auditor's conclusions with reason 1 Cost of production in few cases were higher than the assessable value Refer Annexure 1 & 2. Car Impact- Rs.17.71 crores PWT Impact Rs 4.11 crores Total Impact- Rs.21.82 crores. No The noticee is of the opinion that the COP was higher as compared to the Selling price only in the initial start up phase. i.e. 2008-09. In case of Palio there has been instance of it being in negative territory as same has been phased out from Dec, 2011. As evident subsequently all the regular products are having selling price higher compared to COP. Even though the duty was duly paid by the noticee on the basis of transaction value in all these cases, the cost of production certified by the Company and verified by us for the product referred in Annexure 1 & 2 were higher than the transaction value, it being in the initial period of operation. 2.3 Revenue observed that the Cost Auditor in Annexure -1 and Annexure -2 of his report has only compared COP with the assessable value adopted by the notice....
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....se Act, 1944; (i) The short payment of Central Excise duty amounting to Rs. 53, 74, 57, 207 (Fifty Three Crores Seventy Four Lakhs Fifty Seven Thousand Two Hundred & Seven Only) , should not be demanded and recovered from them under the provisions of Section 11A(4)/proviso to Section 11(A)( 1)of the Central Excise Act, 1944, for the period from March' 10 to March 14. (ii) The interest should not be demanded and recovered from them under the provisions of Section 11AA/11AB of the Central Excise Act, 1944 on the amount of Central Excise duty not paid/short paid by them; and (iii) Penalty should not be imposed under the provisions of Section 11AC of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002. 2.6 Another show cause notice dt. 5.5.2015 (read with addendum dt.3.3.2016) on same issue demanding duty amount Rs. 44,95,523/-(Forty four Lakhs Ninety Five thousand Five hundred twenty three Only) for the period 1.04.2014 to 10.07.2014. The said show cause notice also proposes to recover interest under Section 11AA of Central Excise Act,1944 and penalty under Rule25 of Central Excise Rules, 2002. 2.7 These show cause notices ....
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....facts of the present case wherein most models / products were sold above the cost of production, Supreme Court's decision in Fiat India's case was not at all applicable. ➢ The judgment in Fiat India was rendered where goods were sold at manufacturing loss of more than 50% having gross under-recovery of even material costs, there were continuous losses for a period of 5 years and there was expressed intent of selling at loss to penetrate the market. ➢ The appellant never intended to sell its products at exceptionally lower prices to penetrate the market. The appellant had always conducted its business in prudent manner as evident from its decision to discontinue loss- making Palio model. The appellant undertook all reasonable efforts to increase their sales volume and profits. Therefore, decision of Fiat India is not at all applicable. ➢ The Revenue did not issue show cause notices based on the report submitted by the Special Auditor. Some further working was done in which the department considered expenses pertaining to Selling & Distribution, Advertisement & Sales Promotion, Logistic, Warranty and then added notional profit of 10% to....
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....ase, there was no additional consideration of money value flowing directly or indirectly from the buyer to the seller. Fiat judgment involved a period from 27.5.1996 to 4.3.2001 and the Supreme Court had no occasion to consider the impact of the aforesaid explanation inserted with effect from 14.5.2003. ➢ Therefore, decision in Fiat India's case cannot have any application for the period post 2003. ➢ Appellant correctly followed the provisions of Rule 10(a) read with Rule 9 of the Valuation Rules in respect of products manufactured and sold to TML and FGAIPL. The price at which the goods have been sold by TML / FGAIPL to unrelated person (dealer) alone is relevant for determining the assessable value as per Section 4(1)(b) of the Act. ➢ TML holds 50% of the shareholding in the appellant and therefore, the appellant and TML are interconnected undertakings under the same management. Further, FGAIPL is a 100% subsidiary of FGA and FGA also holds 50% shareholding of the appellant. Therefore, the appellant and FGAIPL are also inter-connected undertakings under the same management. Therefore, the Appellant and TML / FGAIPL are related to ea....
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....rms of their letter dated 25.03.2015. ➢ Appellant continuously incurred losses on Punto and Palio variants. They were paying central excise duty on transaction value which was below the cost of production in the case of Palio and Punto car models for the period from March 2010 to July 2014 as well as some other models like Fire 1.4 (2019 to 2010), SDE90 PC(2010 - 11) Linea, Manza, Vista, SDE95(2013-14). ➢ In the case of Palio cars, the email of the CEO of the company dated December 2011 states that Palio cars will not be sold from 2012 onwards, this does not justify the transaction value being below the cost of manufacturing + profit from 2008 to 22 December 2011 i.e for the period prior to the decision taken by the company to stop selling Palio cars, in fact, after December 2011 there was no sale of Palio cars from the financial year 2012-13 to July 2014, implying that all the Palio cars were sold below the cost of manufacturing cost + profit prior to the decision to phase out the cars. ➢ In the case of Punto models, the price was kept lower to compete with identical cars in the same segment. ➢ For cases other than Pa....
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....s in its business. In this context they have further stated that (i) They have prudently performed their business activities unlike Fiat India where Supreme Court has held that Fiat India was not a prudent businessman. In every case where product is sold at loss, it is not open for the excise authorities to deem such loss as extra commercial consideration. During the initial start-up phase and while phasing out Palio model cars, transaction value was less than cost of production in Palio cars. In the pricing of Punto petrol models, transaction value was lower than cost of production for competition in the market. The Company is in profit and there was no capital erosion at operating level. Hence as per Board Circular dated 15.01.14, the Fiat judgment cannot be made applicable to them. Board Circulars are binding on the Department as confirmed in legal decisions in the case of Ranadey Micronutrients, UCO Bank, Dhiren Chemical Industries and Ambuja Cement. In light of the amendment carried out in Section 4 of the Central Excise Act, 1944the money value of additional consideration has to flow from buyer to seller and if the money value of the consideration cannot be ascertain....
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....ery car/ powertrain manufactured by them for Tata motors and FGAIPL. On perusing the J agreement and other documents, I find that Fiat India Automobile Limited has reserved a part of their manufacturing capabilities of Cars (Tata branded or FIAT branded) and Power trains exclusively for use of Tata Motors Limited and FGAIPL. It is thus obligatory for TML and FGAIPL to buy a fixed minimum number of Cars/Power trains from FIAT every year. In case there is a shortfall, then it is obligatory on the part of TMV/FGAIPL to pay cost of unabsorbed fixed overheads for the reserved capacity of TMY/FGAIPL (1.e difference between reserved/committed volumes to the actual takeoff during the year). For this purpose, Take or Pay mechanism related to Cars and Power trains has been specified in the agreement. Thus it is obligatory on the part of TML and FGAIPL to either utilize in full the fixed capacity reserved for it by FIAL or the cost related to the unutilized portion is recovered as cost of Car/Power train actually cleared. From the above it is clearly evident that a substantial portion of FIAL's income is on account of mark-up charges of Tata/FIAT Brand Cars and TOP charg....
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.... -26.02 431631 -3.4 455164 5.45 515117 13.17 Linea 1. 568628 418850 -26.34 420796 0.46 451448 7.28 440962 -2.32 I find that the ratio at which the cost of production of Palio cars has increased over the years is much higher than the ratio for the other Fiat Car models manufactured by the assessee. With no evidence of any plan to stop production and selling of Palio brand cars from 2008 onwards itself being on record, the above analysis clearly implies that in the case of Palio models, the assessee failed to bring down the cost of production and hence resorted to selling the cars below the cost of production to penetrate the segment. I further find that the assessee has submitted a copy of email dated 15-Dec-2011 which is written by Rajeev Kapoor, President and CEO, FIAL and is addressed to various people, who I assume are key persons in the Company. The email states that "As there is no plan to sell Polio next year, we have to take a call on closing down the plant. I need a confirmation from Commercial that no more....
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....in 2008-09, 2009-10, 2010-11 and 2011-12. The email of Dec-11 submitted by the noticee clearly states that Palio cars will not be sold from 2012 onwards and this does not justify the selling Palio cars below the cost of production + profit for the earlier years i.e. from 2008 to Dec-2011. I also find that in the case of Punto cars, the assessee have themselves admitted that the principal reason for selling the cars below the cost of production, was the prevailing competition in the market and being a prudent business entity, they decided the sale price in accordance with the price trends of its competitors. This implies that it was a planned strategy to sell the cars below the cost of production in order to compete with similar cars in the segment, with a view to gain market share. I now come to the profitability table (shown above) which the assessee has submitted to prove that they are a prudent business entity. I find that the assessee has added finance cost to the PBT in order to arrive at EBIT. Profit before tax (PBT) is a profitability measure that looks at a company's profits before the company has to pay corporate income tax. This measure deducts all e....
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.... 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 hove 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 bock directly from the buyer to the seller is not the allegation in the show cause notices issued, the price at which the assessees had sold its goods to the whole sole trader cannot be accepted as 'normal price for the sale of cars." CBEC Circular No. 979/3/2014-CX., dated 15-1-2014 inter-alia states: "Transaction Value below manufacturing cost and profit 2. The first issue is whether the declared transaction value can be rejected ....
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....ed into. In addition, due care may be taken at the level of the Commissioner to see whether the case at hand is similar to the facts and circumstances of the FIAT case." From my findings, discussed earlier, it is clearly established that a. The Assessee has been continuously been paying Central Excise duty on transaction value which was below the cost of production in the case of Palio and Punto car models from entire period from March-10 to July-14 as well as some other models like Fire 1.4 (2019-10), SDE90 PC (2010-11), Linea, Manza, Vista, SDE95 (2013-14). b. In the case of Palio cars, the email of the CEO of the Company dated Dec-11 states that Palio cars will not be sold from 2012 onwards This does not justify transaction value being below the cost of manufacturing + profit from 2008 to Dec-11 i.e for the period prior to the decision taken by the company to stop selling Palio cars. In fact after Dec-11, there was no sale of Palio cars from FY 2012- 13 to July 2014, clearly implying that all the Palio cars were sold below the cost of manufacturing cost + profits prior to the decision to phase out the cars. c. In the case of Punto mod....
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.... related and there is no flow of consideration from buyer to seller. The relevant portion of the order is reproduced below: 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 any excisable goods with reference to value, such value shall be deemed to be the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal and where the assessee and the buyer have no interest directly or indirectly in the business of each other and the price is the sole consideration for the sale. Normal price, 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 consider....
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.... 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 show cause notices issued, the price at which the assessees had sold its goods to the whole sale trader cannot be accepted as 'normal price for the sale of cars. [Emphasis provided] I have already discussed earlier on how the noticee has deliberately sold cars below the cost of production and how profitability was sought to be shown by writing off of losses while eroding the capital of the company, as is evident from the financial records submitted by the noticee. Therefore the contention of the noticee that money value of additional consideration has to flow from buyer to seller is rejected. In the present case, the money value of consideration is ascertainable and has been determined /computed on the basis of Cost Audit Report. Hence the noticees' contention that if the money value of any a....
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....ment 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 on 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 obtained 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 pass....
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.... 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 show 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 con refuse to accept that price." As regards the case law of CCE Vs Mazgaon Dock Ltd - 2005 (187) ELT 3 (SC) referred by the noticee, the gist of judgment is as follows: Valuation (Central Excise) - Additional consideration - Subsidy of 20% from Government cannot be said to be additional consideration as it is not received from buyer either directly or indirectly - Hence, not includible in price of goods for purpose of excise - Section 4 of Central Excise Act, 1944 read with Rule 5 of Central Excise (Valuation) Rules, 1975. (para 7]Valuation (Central Excise) - Additional consideration - Subsidy of 10% received from buyer, is additional consideration, includible in assessable value - Fact that it is received under a policy of Government, not hold otherwise ....
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....d by this court in the case of Sushil Suri v. Central Bureau of Investigation & Anr. (2011) 5 SCC 708, wherein this Court has observed, "Each case depends on its own facts and a close similarity between one case and another is not enough because either o single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cardozo) by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line a case falls, the brood resemblance to another case is not at all decisive." We do not intend to overload this judgment by referring to other decisions on this well settled legal principle In view of the above, the submission of the noticee is rejected. D. The assessee has submitted that when the excisable goods are sold, 'cost of production' or any other method is impermissible. They have placed reliance on the case UOI Vs Bombay Tyre International Ltd-1983 (14) ELT 1896 (SC) where in it was held that Section 4 determines the value on the basis of the price charged or chargeable by the particular assessee and also further stated that the decision i....
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....decision, the learned counsel goes to the extent of saying the judgments relied upon by the opposite side on the decision of this Court in Guru Nanak Refrigeration (supra) and Bisleri International (supra) should be treated as per-incurium. We cannot agree. In Bombay Tyre's case, the Issue before the Court was whether the value of an article for the purpose of excise duty had to be determined by reference exclusively to the manufacturing cost and manufacturing profit of the manufacturer or should be represented by the wholesale price charged by the manufacturer which would include post-manufacturing expenses and post-manufacturing profits arising between the completion of manufacturing process and the point of sale by the manufacturer. It is relevant to notice at this stage, in the Bombay Tyre's case, this Court considered the scope of Section 4 before its amendment and after the new Section 4 was substituted with effect from 1-10-1975. This Court in the said case, after detailed consideration of rival contentions and after referring to several precedents of this Court has concluded that the levy of excise duty was on the manufacture or production of goods, the stage of col....
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....se, the Supreme Court has deliberated at length on its own decision in the case of Bombay Tyres, and ruled that 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. Even though the decision in the case of Bombay Tyres has been followed in the case of GOI Vs Madras Rubber Factory - 1995 (77) ELT 433 (SC) and VOI Vs Century Manufacturing Company- 1992 (60) ELT 3 (SC), I find that in light of the Supreme Courts observation as above, the contention of the noticee cannot be accepted. I have already deliberated earlier on how the provisions of Section 4(1)(b) read with the Valuation Rules, apply to the present case. In view of my earlier findings, and the findings above, I find no merit in the submission of the assessee. E. The assessee has stated that the computation of differential duty is bad in law and is liable to be re- quantified. They have further stated that (i) The demand needs to be quantified only on cost of production and not cost of production + cost of sale....
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....ly consumed. The words 'Captive Consumption' refer to goods produced or manufactured in a factory and used within the factory in the manufacture of other goods. Similarly when good manufactured by one division/plant are transferred to and consumed by another division/plant, of the same organization or related undertaking for manufacturing another product(s), such goods are also said to be captively consumed. However, in those cases where the goods are not captively consumed but sold, as in the present case, and where the provisions of Section 4(1)(b) of the Central Excise Act, 1944 apply, I find that valuation will have to be done as per the provisions of Rule 11, since no other Valuation Rules apply. The case laws cited by the noticee are all related to valuation of goods captively consumed. Cadbury India Ltd - 2006 (200) ELT 353 (SC): Valuation (Central Excise) - cost of production of captively consumed goods to be determined strictly in accordance with CAS-4 Hindustan Lever Ltd Vs CCE Bhopal - 2013(291) ELT 268 (Tri.Del): Valuation (Central Excise) - cost of production - Determination of Clearances of bulk Surf Excel Powder and clearan....
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....t reference to evidence or material State of Orissa Vs Maharaja Shri B P Singh Deo, 1970 (76) ITR 690 (SC): The Agricultural Income Tax Tribunal gave no reasons in its order for affirming the decision of the Assistant Collector. It appears to have been of the view that once the assessing authorities reject the material placed before them as being unreliable those authorities con proceed to levy whatever tax they may levy. It failed to bear in mind the scope of the power of the assessing authorities to levy assessment on the basis of best judgment. I find that these case laws are not relevant to the present case because, as already discussed earlier, I find that Rule 11 of the Valuation Rules has been correctly applied to the present case. I have already discussed how Rule 8 of the Valuation Rules does not apply and even by the best judgment method, Rule 11 applies. In order to arrive at the correct quantification of duty, the Department has correctly taken assistance of the report of the 'Cost Accountant' to ascertain the correct price that requires to be adopted during the relevant period. Further, in order to further determine the correct method....
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....of finished goods lying and determine the cost of sales vis- à-vis assessable value for various models. I find that the Cost Auditor has only determined the value as per AS-2. But in order to determine the transaction value as per Section 4(3)(d), other factors like advertising and publicity, marketing and selling expenses, warranty expenses, storage, outward handling expenses etc along with profit has to be included. Even otherwise, in the course of normal business, any prudent business entity will factor in all these expenses and profits percentage before determining the sale price of the goods. I further find that even though the assessee is manufacturing Tata Brand Cars, Power trains etc, the full cost of advertising and sale promotion expenses etc has been taken from the financials while working out differential duty. I see no incongruity in this. The assessee has a vehicle supply agreement with Tata Motors and so they will not incur any advertising and sale promotion expenses on Power trains and Tata Motor car brands. Hence these expenses are purely for Fiat brand cars. 1, hence, find that the valuation method adopted in the SCN for ....
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.... 1501163065 72,44,41,316 2010-11 Palio 1.1 31 1,53,08,327 52,13,642 Palio 1.3 150 8,41,41,150 3,70,08,600 Palio 1.6 147 8,49,18,813 2,59,47,999 Punto 1.4 708 27,50,26,848 27,36,56,868 Punto 1.3 2544 81,78,12,048 87,36,47,760 Punto 1.2 8642 345,09,83,934 374,31,95,880 SDE 90 PS 12 16,19,865 17,54,292 Total 12234 472,98,10,985 671410000 5941343084 496,04,25,041 2011-12 Palio 1.1 3 16,25,133 518700 Palio 1.3 32 19684960 7941760 Palio 1.6 32 19764384 5437728 Punto 1.2 545 180949810 191866160 Punto 1.2 15 4980270 5280720 Punto 1.3 10815 4431922110 4677087345 Punto 1.3 144 59010336 &nb....
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....ded to the comes to Rs 78,04,90,000/-. And the excise duty is sought to be demanded on the value of Rs 94,55,78,995/- thereby making the differential duty as Rs 11,60,95,800/- for the said year in respect of this model. Similar discrepancies can be pointed for each year. A note on the annexure to Show cause notice reads "The expenses shown in column 5,6,7 & 8 are taken from the Company's balance Sheet." The figures shown in the balance sheet of the company would be relating to entire activities of the company and not of some model which revenue have sought to pick and make the show cause notice absurdly. Even the production an clearance figures have not been taken correctly for amortizing these expenses rationally. The production/ clearance figure do not tally with the figures as indicated in the cost auditor reports. 4.4 As per the cost auditor report the figure for Clearance during the period of show cause notice are as follows : S No Model Qty Value COP Difference 2009-10 (March 2010) 1 Indica 1405 752 271691 212967 58724 2 Linea 1.3 727 540946 446813 ....
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....o 1.1 3 172900 541711 -368811 12 Palio 1.3 32 246160 615155 -368995 13 Palio 1.6 32 169929 617837 -447908 14 Punto 1.2 545 352048 332018 20030 15 Punto 1.2 15 352048 332018 20030 16 Punto 1.3 10815 432463 409794 22669 17 Punto 1.3 144 432463 409794 22669 18 Punto 1.4 175 401464 397723 3741 Total 51664 19 SDE 75 PS 37959 144804 117238 27566 20 SDE 75 PS 146584 117238 29346 21 SDE 90 PS 20 148991 128000 20991 22 Fire 1.2 8V 231 214907 66114 148793 23 Fire 1.2 8V 13 214907 66114 148793 24 Fire 1.4 8V 862 129967 75413 54554 25 Fire 1.4 16V 360 143950 85344 58606 26 SDE 75 PS MSIL 12545 ....
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....ned from the local Chapter of ICWAI." 4.6 In the 2014, Board again issued the Circular No 979/03/2014-CX, dated 15.01.2014 stating as follows: "3.1 Calculations of manufacturing cost may be carried out using CAS-4 standards . Information submitted by the manufacturer ,duly certified by a Chartered or Cost Accountant should normally be accepted . Only where a decision to investigate a case has been taken at the level of the Commissioner and it is considered necessary in the interest of investigation, steps such as ordering Cost Audit of the Unit or summoning of the Costing data should be undertaken." 4.7 interestingly in violation of all the directions given by the Board, this case has proceeded without even any reference to the CAS-4. As per CAS-4, Cost of Production: Cost of production shall consist of Material Consumed, Direct Wages and Salaries, Direct Expenses, Works Overheads, Quality Control cost, Research and Development Cost, Packing cost, Administrative Overheads relating to production. Further as per this standard treatment of abnormal expenses have to be dealt in following manner: "5.17 Abnormal and non-recurring cost: Abnormal and non-recurrin....
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....id circular No. 692/8/2003-CX., dated 13-2-2003 issued by the CBEC. As such it cannot now take a contrary stand." 4.8 However we take the note of the cost of production determined by the Cost Auditors appointed by the Commissioner in terms of Section 14 A of the Central excise Act, 1944. Though we agree that the report records that has determined the Cost as per AS-II, nevertheless it is opinion of the experts in the matter and has been sought by the revenue themselves in terms of the Circular of 2014 issued by the revenue. In the said Circular referring to the decision of the FIAT India, Board has categorically clarified stating as follows: "2. The first issue is whether the declared transaction value can be rejected in all cases where the transaction value is lower than the manufacturing cost and profit . The Hon'ble Supreme Court has not ruled that transaction value can be rejected in all cases where the declared value is lower than the manufacturing cost and profit . At paragraph 66 in the FIAT judgment , the Hon'ble Court has declined to hold its earlier judgment in case of Collector of Central Excise , New Delhi Vs Guru Nanak Refrigeration Corpn [ 2003(153....
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.... 11.53 617637 6.92 NA NA Punto1.2 NA 300852 NA 321467 6.85 332018 3.28 393668 18.57 Punto1.3 NA 399703 NA 399327 -0.09 409794 2.62 454302 10.86 Punto1.4 NA 379161 NA 388456 2.45 397723 2.39 424752 6.8 Linea1.3 603945 446813 -26.02 431631 -3.4 455164 5.45 515117 13.17 Linea 1. 568628 418850 -26.34 420796 0.46 451448 7.28 440962 -2.32 I find that the ratio at which the cost of production of Palio cars has increased over the years is much higher than the ratio for the other Fiat Car models manufactured by the assessee. With no evidence of any plan to stop production and selling of Palio brand cars from 2008 onwards itself being on record, the above analysis clearly implies that in the case of Palio models, the ....
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....ich was not a prudent business entity and continuously incurred losses on account of business practices." Though we do not agree with the above statement of the Commissioner in the impugned order, but we only observe that that being so reasonable manufacturing profit was to be determined for addition to the manufacturing cost. In para 50 & 51, Hon'ble Apex Court has in the case FIAT has observed: "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 five years at a loss price and claims that it had to do only to compete with the other manufacturers of cars and also to penetrate the market. If such sales are taken as sales made in the ordinary course, it would be anathema for the expression 'ordinarily sold'. There could be instances where a manufacturer may sell his goods at a price less than the cost of manufacturing and manu....
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....on commercial basis that should necessarily reflect a dealing in the usual course of business, and it is not possible to characterise it as not arising out of agreement made at arms 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." From the table in para 4.4, which is based on the cost auditor report we do not find that the transaction value at which most of the models of the cars have been sold to the independent buyers, have been suppressed much below the cost of production as determined by the cost auditor. Hence even going by this decision we do not find any merits in any of the observations made in the impugned order for rejection of the transaction value. In respect of any models for which the demand has been made. 4.10 In the year 2014, Rule 6 of Central Excise Valuation Rules, 2000 was amended by insertion of the following proviso : Provided that where price is not....
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.... more than the cost of wholesale price, so why the differential duty on the basis of costs of production of the goods should not be recovered from it. The reasoning in the show cause notice was adopted by the Assistant Collector in confirming demand as well as by the Collector in rejecting the appeal. But the Tribunal set aside the order of the Collector and allowed the appeal by the order impugned in the appeal before us by the Revenue. 5. A perusal of the show cause notice shows that it does not contain an allegation that the wholesale price to the buyers was for consideration other than the one at which it purported to be sold or that it was not at arms length. There is also no allegation that there was any flowback of the money from the buyer to the assessee. In the absence of these factors it cannot be contended that normal price was not ascertainable. There is no valid reason to doubt the genuineness of the sale price. It can therefore safely be concluded that the goods were sold at the normal price within the meaning of Section 4(1)(a) of the Act. In our view, the Tribunal is right in accepting the wholesale price as the correct price following the judgment of the C....