2012 Supreme(SC) 569

Supreme Court of India
H.L. DATTU, ANIL R. DAVE
Commissioner of Central Excise, Mumbai
Versus
M/s. Fiat India (P) Ltd. & Another
Civil Appeal Nos. 1648-1649 of 2004
Decided on : 29-08-2012

IMPORTANT POINTS
Hardship to the party concerned is not a consideration for interpreting statues.
Excise duty payable on manufacture; sale is not a necessary condition for charging duty.
Selling cars at lower price to penetrate market constitutes extra commercial consideration and not the sole consideration.
When valuation cannot be done under any other rule, rule 7 of Rules 2000 can be resorted to for applying best judgment.

Headnote:(a) Interpretation of statute – Hardship to the party concerned – No consideration for distorting the language of the statutory provisions. (Para 22)

       (b) Central Excise Tariff Act, 1985 – Section 3 – Excise duty payable on manufacture – Sale is not a necessary condition for charging duty – Duty is payable even when goods are used within the factory or goods are captively consumed within factory for further manufacture. (Para 23)

       (c) Central Excise Tariff Act, 1985 – Section 4 – Excise duty leviable on the actual market value of the goods or the nearest equivalent thereof – Selling price of goods to a buyer may not reflect actual value of goods – By legal fiction in section 4(1) market value considered to be value of the goods. (Para 26)

       (d) Legal fiction – Created by deeming provision – Something not in fact true or in existence, shall be considered to be true or in existence. (Para 26)

       (2012) 1 SCC 500; (1987) Supp. (1) SCC 350 – Relied upon

       (e) Central Excise Tariff Act, 1985 – Section 4 – Value of goods – Deemed to be ‘normal price’ at which goods are ‘ordinarily sold’ – To a buyer, not being ‘related person’ – In course of ‘wholesale trade’ price being ‘sole consideration’ for sale – Central Excise duty is payable on the basis of assessable value arrived on the basis of Section 4 and Central Excise Valuation Rules. (Para 29, 30)

       (1966) A.C. 182; (1973) 1 SCR 172 – Relied upon

       (f) Central Excise Tariff Act, 1985 – Section 4(1)(a) – Normal price – 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 – Extra commercial consideration in fixing a price – Not amounting to normal price – Instantly price of cars sold by respondents not based on the manufacturing cost and manufacturing profit, but at a lower price to penetrate the market – Lowering the price in competition – Full commercial cost of manufacturing and selling the cars not reflected in the lower price – Therefore, merely because cars are not sold to related persons and the element of flow back directly from the buyer to the seller is not alleged, the selling price cannot be accepted as ‘normal price’ for sale of cars – The case falls under section 4(1)(b). (Para 31, 32, 43)

       (2002) 10 SCC 344; (2006) 9 SCC 556; (1991) 3 SCC 467; (2002) 8 SCC 338; (1984) 1 SCC 467; (1995) 2 SCC 90; (1998) 3 SCC 681; (2007) 8 SCC 89; (2005) 13 SCC 564; (2005) 6 SCC 58; (2002) 10 SCC 344; (2006) 1 SCC 267; 2007 (215) ELT 348 (SC) – Relied upon

       1997 (91) E.L.T. 540 (SC); 1998 (97) E.L.T. 395 (SC); (1967) 20 STC 430; 1996 (81) E.L.T. 195 (SC); (2007) 218 E.L.T. 641 (SC); 1977 (1) ELT 177 (SC); 1987 (27) ELT 553 (SC); (2011) 5 SCC 708 – Referred

       2003 (153) ELT 249 (SC); 2005 (186) ELT 257 (SC) – Distinguished

       (g) Central Excise Tariff Act, 1985 – Section 4(1)(b) – `Loss making price’ continuously for a period of more than five years while selling more than 29000 cars – Cannot be the normal price – Section 4(1)(b) applies. (Para 43)

       (h) Central Excise Tariff Act, 1985 – Section 4(1) – Respondent contending that cars are sold at same lower price to all purchasers without exception – Hence this is the ordinary selling price and the transaction value – Cars sold below the manufacturing cost and manufacturing profit – Cannot be termed the price in the usual course of business. (Para 50)

       (2001) 1 SCC 315; (2006) 12 SCC 583; (2009) 3 SCC 365; (1998) 3 SCC 163; (2002) 10 SCC 344; (2006) 9 SCC 556 – Relied upon

       (i) Words and Phrases – Consideration – Means a reasonable equivalent or other valuable benefit passed on by the promisor to the promisee or by the transferor to the transferee –Indian Contract Act – Section 2(d) – Sole consideration – ‘Sole’ makes consideration stronger so as to make it sufficient and valuable having regard to the facts, circumstances and necessities of the case. (Para 58)

       (1875) LR 10 Ex. 153 – Relied upon

       (j) Central Excise (Valuation) Rules, 1975 – Rule 5 r/w Section 4(1)(b), Excise Tariff Act – Selling cars at lower price to penetrate market – Constitutes extra commercial consideration and not the sole consideration – Section 4(1)(a) of Excise Tariff Act does not apply – Section 4(1)(b) applies which requires valuation on basis of Rule 5. (Para 60)

       (k) Central Excise Tariff Act, 1985 – Section 4 – Amendment – Instantly price is not the sole consideration – Therefore transaction value shall not be the assessable value – Assessable value has to be arrived at under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 – No infirmity in demand of Revenue. (Para 61)

       (l) Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 – Rule 7 – Best Judgment valuation – Valuation not possible with help of other rules like 4, 5, and 6 – Assessing authority resorting to Rule 7 – Applying best judgment – No infirmity. (Para 70)

       Facts of the case:

       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 declaring wholesale price of their cars for sale through whole sale depots during the period commencing from 27.05.1996 to 04.03.2001.

       The authorities 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.

       The adjudicating authority confirmed the show cause-cum-demand notices issued and, thereby, had directed the respondents to pay the difference in duty.

       The assessees carried the matter in appeal before the First Appellate Authority who sustained the order passed by the adjudicating authority and rejected the appeals.

       The assessees carried the matter in appeal before the Tribunal who reversed the finding of the Commissioner (Appeals) and thereby, allowed the appeals filed by the respondents-assessees.

       Finding of the Court:

       There is no infirmity in demand raised by the Revenue.

       Result: Appeals allowed.