Case: Commissioner of C. Ex Vs. Mahindra Ugine Steel Company Ltd

2. The respondent is engaged in the manufacture of motor vehicle parts from the raw material supplied by the customers of the goods on labour charges basis. In essence, thus, the respondent undertakes the job work. After the manufacturing of the motor vehicle parts, the same are supplied to the customers who had placed the orders for the job work. The customers to whom the motor vehicle parts are supplied are used by those customers in the manufacture of motor vehicles on which full excise duty is paid. While arriving at the value of the motor vehicle on which the duty is to be paid, the cost of such motor vehicle parts is included. Therefore, to this extent it is not in dispute that ultimately the manufacturer of the motor vehicle pays the excise duty on the motor vehicle parts which are manufactured by the respondent on undertaking the aforesaid jobper the appellant/Department Rule 8 is applicable and therefore the value has to be 115% of the cost of production. Rule 8 reads as8: Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and fifteen per cent of the cost of production or manufacture of such goods.On the face of it Rule 8 will have no application to the facts of the present case. It is rightly pointed out by the CEGAT that for the applicability of this Rule two requirements are to be fulfilled. The first is that the excisable goods that the assessee manufactures are not sold by him and the second requirement is that these goods must be used for consumption either by him or on his behalf in the production or manufacture of other articles. In the present case, first condition is undoubtedly satisfied as the goods are not sold by the respondent. However, second condition is not at all met or fulfilled inasmuch as the goods are not used by the assessee for consumption either by him or on his behalf in the production or manufacture of other articles. As stated above, these goods are supplied to the manufacturer of the motor vehicles.

Court's reasoning:
Thus, this Rule would be applicable only in those cases that assessee is related in the manner specified in either of(ii),(iii) or (iv) of clause (b) of(3) of Section 4 of the Act and not in those cases where the person is related in the manner as stated in clause (i) thereof. In those cases where Rule 9 is applicable, for the purpose of valuation, normal transaction value at which such goods are sold by the related person, is to be taken as the value of the goods. Proviso becomes applicable only when goods are not sold by the related person at all and used or consumed for home production. As there is no sale transaction by the related person, question of value thereof will not be available and therefore, to arrive at the value in such a situation one has to fall back on Rule 8.However, if main Rule 9 is not attracted, question of applicability of proviso thereto does not arise.In the present case what we found is that a specific finding is arrived at by the Assistant Commissioner himself that the respondent who has manufactured goods on job work basis for M/s. Mahindra and Mahindra is treated as related to Mahindra and Mahindra in terms of Section 4(3)(b)(i) of the Act.Such a relationship is excluded from Rule 9 as(i) is conspicuously absent therefrom. On this ground alone proviso to the Rule 9 shall not be attracted at all. Therefore, from whatever angle the matter is looked with, Rule 8 would not apply here.Once we come to the conclusion that Rule 8 is not applicable in the case of the respondent, it is Rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule.