Case: Commnr. Of Central Excise, Mumbai Vs. M/S. Fiat India (P) Ltd.

The respondents-assessees are the manufacturer of motor cars, i.e. Fiat Uno model cars. The said goods are excisable under chapter sub-heading No. 8703.90 of the Central Excise Tariff Act, 1985. The said business was initially managed by M/s Premier Automobiles Ltd. However, M/s Premier Automobile surrendered its central excise registration on 6.4.1998. Thereafter, M/s Ind Auto Ltd. (now M/s Fiat India Ltd.) carried on the said business after obtaining fresh central excise registration. The assessees have filed several price declarations in terms of Rule 173C of the Central Excise Rules, 1944 (hereinafter referred to as ‘the 1944declaring wholesale price of their cars for sale through whole sale depots during the period commencing from 27.05.1996 to 04.03.2001.3. The authorities under the Central Excise Act, 1944 (hereinafter referred to as ‘thehad made enquiries on 20.12.1996 and 31.12.1996, under Sub-rule 3 of Rule 173C of the 1944 Rules read with Section 14 of the Act. They had prima facie found that the wholesale price declared by the assessees is much less than the cost of production and, therefore, the price so declared by them could not be treated as a normal price for the purpose of quantification of assessable value under Section 4(1)(a) of the Act and for levy of excise duty as it would amount to short payment of duty.4. Since further enquiry was required to be conducted regarding the assessable value of the cars, the Assistant Commissioner, Central Excise, Kurla Division, vide his order dated 03.01.1997, had inter alia directed for the provisional assessment of the cars at a price which would include cost of production, selling expenses (including transportation and landing charges, wherever necessary from 28.09.1996) and profit margin, on the ground that the cars were not ordinarily sold in the course of wholesale trade as the cost of production is much more than their wholesale price, but were sold at loss for a consideration, that is, to penetrate the market which has been confirmed by the assessee vide its letter dated 30.10.1996 and during the course of enquiry under Section 14 of the Act read with sub Rule (3) of Rule 173C of the 1944 Rules. He had further directed the respondents to execute B-13 bond for payment of differential duty with surety or sufficient security, that is, 25% of the bond amount. Thereafter, respondents executed B-13 bond for Rs. 7.70 crores. However, the respondents showed their inability to submit 25% bond amount as a bank guarantee and requested the Revenue authorities to reduce the same. On such request, the Commissioner, vide letter dated 23.04.2007, directed the respondents to execute bank guarantee equivalent to 5% of the bond amount. Accordingly, the respondent furnished a bank guarantee of Rs. 38 lakhs which was subsequently renewed and later fresh bank guarantees in lieu of original were submitted by the respondents.5. The Preventive and Intelligence Branch of the Kurla Division sometime in the year 1997-98 had conducted investigation into the affairs of the respondents, whereby it was found that the respondents were importing all the kits in CKD/SKD condition for manufacturing the cars and the cost of production of a single car was Rs. 3,98,585/- for manufacture from SKD condition and Rs.3,80,883/- for manufacture from CKD condition against the assessable value of Rs. 1,85,400/-. In the investigation, it was also revealed that the respondents had entered into a spin-off agreement vide Deed of Assignment dated 30.03.1998, whereby M/s Fiat India Ltd. would be liable for any excise liability accruing from 29.09.1997 onwards, in respect of the Cars in issue.6. After completion of the investigation, the Commissioner of Central Excise, Mumbai-II, had appointed Cost Accountant M/s Rajesh Shah and Associates on 25.01.1999 under Section 14A of the Act to conduct special audit to ascertain the correctness of the price declared by the respondents. The Cost Accountant had calculated the average price of the Fiat UNO Car by adding material cost (import, local, painting and others), rejection at 1% of total cost and notional profit at 5% of total cost for the period from April, 1998 to December, 1998 vide his report dated 31.03.1999, which came to Rs. 5,04,982/- per car.7. In the meantime, the Superintendent of Central Excise, Kurla Division had issued 11 show cause notices to assessees for the period from June 1996 to February 2000, inter alia, making a demand of differential duty on the assessable value calculated on the basis of manufacturing cost plus manufacturing profit minus MODVAT availed per car, and the duty which the respondents were actually paying on the assessable value. It is alleged in the show cause notices that the respondents have failed to determine and pay the correct duty on Fiat UNO cars while clearing them. It is further stated that the assessees have not taken into account the cost of raw material, direct wages, overheads and profits for calculating the assessable value of the cars which were declared in the invoices and declarations for the purpose of Section 4 of the Act. In this regard, the assessees were required to show cause as to why the correct duty due on the said goods along with interest should not be recovered from them under Rule 9 of the 1944 Rules read with Sections 11A and 11AB of the Act, the goods should not be confiscated and penalty imposed under Rule 9 read with Rule 52-A and Rule 173Q of the Rules, and further, penalty equal to the amount of duty should not be imposed under Section 11AC of the Act.8. Assessees had replied in detail to the show cause-cum-demand notices. The assessees had submitted that they have declared assessable value or normal price in terms of Section 4(1)(a) of the Act. The assessees apart from others had also stated that the proper interpretation of Section 4(1)(a) of the Act would mean that the assessable value should be the normal price at which such goods are ordinarily sold in wholesale trade where price is the sole consideration; that they are not getting any additional consideration over and above the assessable value declared by them; that there is no flow back of money from the buyers and dealings between the assessees and their buyers are at arms length and since the price declared by them is proper as per Section 4(1) (a) of the Act, the question of determining the assessable value as per Section 4(1)(b) read with Central Excise (Valuation) Rules, 1975 (hereinafter referred to as ‘the 1975 Valuation Rules) would not arise. In other words, the assessees, relying on various decisions of this Court, had submitted that when normal price is available then recourse to any other method of valuation is incorrect and improper. They had also submitted that Section 4 of the Act nowhere mandates that price should always reflect the manufacturing cost and profits and, therefore, the price declared by them requires to be accepted. The assessees had further submitted that since they have launched new models of the cars which require import of the cars in kit-form (CKD and SKD), thereafter they were assembled and sold. This cost of imports, assembly and overheads lead to increase in overall cost of production of their cars. Further, they were facing intense competition from Maruti car manufacturers which required them to keep the price of their cars at a lower price. Therefore, they were forced to sell their cars at a loss in order to compete and attract buyers in the market. The assessees had also stated that the amount quantified in the show cause-cum-demand notices is excessive since they were based on the initial costs in 1996 which has continuously come down due to the continuous process of indigenisation of imported components. They would further submit that this strategy of indigenisation of imported components is very common to automobile industry. The assessees had further submitted, the order of provisional assessment was erroneous as well not sustainable in the eyes of the law. They further submitted that the assessable value declared by them should be accepted even if it is below manufacturing cost. The assessees had also contended that there is no short levy or short payment of duty.9. After receipt of the reply so filed, the adjudicating authority vide his order-in-original dated 31.01.2002 has proceeded to conclude that themain consideration was to penetrate the market, therefore, the price at which they were selling the Cars in the market could not be considered to be a normal price as per Section 4 of the Act. He has also observed that the cost of production of the Fiat UNO Cars is much higher than the price at which the assessees are selling them to the general public; that the price is artificial and arrived at without any basis just to capture the market and drive out the opponents from business; that the Fiat UNO Cars in issue are equipped with powerful Fire Engine and superior quality gadgets and that when normal price cannot be ascertained as per Section 4(1) (a) of the Act, the alternate procedure under the Valuation Rules, i.e. cost of production and profit has to be applied. He also observed, by referring to the decisions of this Court in Bombaycases, that all costs incurred to make goods saleable/marketable should be taken into account for determining the assessable value and that the loss incurred by the assessees to penetrate the market should be borne by them and in the process Government should not lose revenue. He further found the basis of the price arrived at by the Cost Accountant in its report as authentic and acceptable, but adopted the average price of Rs.4,53,739/- reached by the Range Superintendent for different models of Cars in the show cause-cum-demand notices as more reasonable and appropriate. Accordingly, he had confirmed the show cause-cum-demand notices issued and, thereby, had directed the respondents to pay the difference in duty.10. The assessees had carried the matter in appeal before the First Appellate Authority, being aggrieved by the order passed by adjudicating authority. The appellate authority by its orders dated 11.09.2002 and 30.09.2002 has sustained the order passed by the adjudicating authority and rejected the appeals.11. The assessees, being aggrieved by the order so passed, had carried the matter in appeal before the Tribunal. The Tribunal vide its judgment and order dated 21.11.2003, has reversed the findings and conclusions reached by the First Appellate Authority and the Adjudicating Authority and, accordingly, allowed the appeals on the ground that there is no allegation that the wholesale price charged by the assessee was for extra commercial consideration and that dealing of the assessees and their buyers was not at arms length or that there is a flow back of money from the buyers to the assessees and, therefore, the price declared by the assessees is the ascertainable normal price in view of the decision of this Court in Commissioner of Central Excise, New Delhi v. Guru Nanak Refrigeration Corporation, 2003 (153) ELT 249 (SC). It is the correctness or otherwise of the findings and conclusions reached by the Tribunal is the subject matter of these appeals.

Court's reasoning:
In the instant cases, the department never accepted the declared value. It is for this reason, provisional assessments were completed instead of accepting declared price by the assessee under Rule 9B of the Rules inter alia holding that during the enquiry, the assessees had admitted that they did not have any basis to arrive at the assessable value but they are selling their goods at ‘lossonly to penetrate the market. Secondly, as we have already noticed that for nearly five years the assessee was selling its cars in the wholesale trade for a ‘lossand therefore, the conditions envisaged under Section 4(1)(a) of the Act, namely; the normal price, ordinarily sold and sole consideration are not satisfied. We further hold that the decision incase (supra) will also not assist the assessees for the reason that the issue that came up for consideration is entirely different from the legal issue raised in these civil appeals. Before we conclude on this issue, we intend to refer to the often quoted truism of Lord Halsbury that a case is only an authority for what it actually decides and not for what may seem to follow logically from it. We may also note the view expressed by this Court in the case of Sushil Suri vs. Central Bureau of Investigation & Anr. (2011) 5 SCC 708 , wherein this Court has observed,case depends on its own facts and a close similarity between one case and another is not enough because either a 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 broad resemblance to another case is not at allWe do not intend to overload this judgment by referring to other decisions on this well settled legalour view, since the assessing authority could not do the valuation with the help of the other rules, has resorted to best judgment method and while doing so, has taken the assistance of the report of the ‘Costwho was asked to conduct special audit to ascertain the correct price that requires to be adopted during the relevant period. Therefore, we cannot take exception of the assessable value of the excisable goods quantified by the assessing authority.