# COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. MIS. FIAT INDIA (P) LTD. & ANR

- **Citation:** [2012] 12 S.C.R. 975
- **Court:** Supreme Court of India
- **Decided:** 2012-08-29
- **Case number:** Civil Appeal Nos. 1648-1649 of 2004
- **Bench:** H.L. Dattu, Anil R. Dave
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-central-excise-mumbai-v-mis-fiat-india-p-ltd-anr-28084
- **Pages:** 58

## Headnote

Central Excise Act, 1944 - ss. 4(1)(a) and 4(1)(b) -
Applicability - Assessee declaring wholesale price in terms
A
B
of s. 4(1)(a) of the cars manufactured by them - Revenue C
determining the value of the goods as per s. 4(1)(b) rlw.
Valuation Rules - Notice issued by Revenue to assessee
alleging short levy and demanding differential duty - The
adjudicating authority as well as the appellate authority
confirming the show cause-cum-demand notice - Appellate D
Tribunal allowing the appeal of the assessee - On appeal,
held: The fundamental criterion for computing the value of an
excisable article is the normal price at which the excisable
article is ordinarily sold by the manufacturer, where the buyer
is not a related person and the price is the sole consideration E
- If there is anything to suggest to doubt the normal price,
recourse to s. 4(1)(b) could be made - In the present case,
the assessee sold its goods at a lower price than the
manufacturing cost and profit to penetrate the market - This
would constitute extra-commercial consideration - Thus price F
is not the sole consideration - Therefore assessing authority
was justified in invoking clause (b) of s. 4(1)- Since s. 4(1)(b)
is applicable, valuation is required to be done on the basis
of 1975 Valuation Rules prior to 1.7.2000 and thereafter in
accordance with 2000 Valuation Rules - The court cannot G
take exception of the assessable value of the excisable goods
quantified by the assessing authority - Central Excise
(Valuation) Rules 1975 -
Central Excise Valuation
(Determination of Price of Excisable Goods) Rules, 2000.
975
H
976
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A
Interpretation of Statutes - Legislative intent - Whenever
legislature uses certain terms of well-known legal significance
or connotations, courts to interpret them as used or
understood in popular sense, if not defined under the Act or
the Rules framed thereunder -
The normal rule of
B interpretation is that words used by legislature are generally
a safe guide to its intention - Where statute's meaning is clear
and explicit, words cannot be interpolated.
Precedent - A case is only an authority for what it actually
decides and not for what may seem to follow logically from it.
c
Words and Phrases:
'Value', 'Normal Price', 'Ordinarily Sold' and 'Sole
Consideration' - Meaning of, in the context of s. 4(1)(a) of
0
Central Excise Act.
'Transaction value' - Meaning of, in the context of Central
Excise Act.
'Popular sense' - Meaning of, in the context of
E Interpretation of Statutes.
The respondents-assessee were the manufacturers
of motor cars i.e. Fiat Uno-model. The assessees have
filed several price declarations, declaring wholesale price
F of their cars for sale through wholesale depots during the
period 27 .5.1996 to 4.3.2001. The revenue issued 11
show-cause notices for the period from June 1996 to
February 2000, alleging that the assessee had not paid
the correct duty on the cars, and demanded differential
duty on the assessable value determined as per s. 4(1)(b)
G of Central Excise Act, 1944 rlw. (Valuation) Rules. The
assessee replied that they had declared the assessable
value or normal price in terms of s. 4(1)(a) of Central
Excise Act, 1944 and determination of the assessable
value as per s. 4(1)(b) r/w. the Valuation rules, 1975 would
H not arise; that when normal price is available, the
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 977
.
FIAT INDIA (P) LTD. & ANR.
recourse to any other method of valuation is incorrect and A
improper; that due to competition in the market, they kept
the price of the cars low and were forced to sell their cars
at a loss; and that the assessable value declared by them
should be accepted even if it is below manufacturing cost
and thus there is no short levy or short payment of duty. B
The Adjudicating Authority confirmed the show
cause-cum-demand notices holding that the cost of the
production of the car was much higher than the price at
which it was sold in the market

## Text

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[2012] 12 S.C.R. 975
COMMISSIONER OF CENTRAL EXCISE, MUMBAI
v.
MIS. FIAT INDIA (P) LTD. & ANR.
(Civil Appeal Nos. 1648-1649 of 2004)
AUGUST 29, 2012
[H.L. DATTU AND ANIL R. DAVE, JJ.]
Central Excise Act, 1944 - ss. 4(1)(a) and 4(1)(b) -
Applicability - Assessee declaring wholesale price in terms
A
B
of s. 4(1)(a) of the cars manufactured by them - Revenue C
determining the value of the goods as per s. 4(1)(b) rlw.
Valuation Rules - Notice issued by Revenue to assessee
alleging short levy and demanding differential duty - The
adjudicating authority as well as the appellate authority
confirming the show cause-cum-demand notice - Appellate D
Tribunal allowing the appeal of the assessee - On appeal,
held: The fundamental criterion for computing the value of an
excisable article is the normal price at which the excisable
article is ordinarily sold by the manufacturer, where the buyer
is not a related person and the price is the sole consideration E
- If there is anything to suggest to doubt the normal price,
recourse to s. 4(1)(b) could be made - In the present case,
the assessee sold its goods at a lower price than the
manufacturing cost and profit to penetrate the market - This
would constitute extra-commercial consideration - Thus price F
is not the sole consideration - Therefore assessing authority
was justified in invoking clause (b) of s. 4(1)- Since s. 4(1)(b)
is applicable, valuation is required to be done on the basis
of 1975 Valuation Rules prior to 1.7.2000 and thereafter in
accordance with 2000 Valuation Rules - The court cannot G
take exception of the assessable value of the excisable goods
quantified by the assessing authority - Central Excise
(Valuation) Rules 1975 -
Central Excise Valuation
(Determination of Price of Excisable Goods) Rules, 2000.
975
H
976
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A
Interpretation of Statutes - Legislative intent - Whenever
legislature uses certain terms of well-known legal significance
or connotations, courts to interpret them as used or
understood in popular sense, if not defined under the Act or
the Rules framed thereunder -
The normal rule of
B interpretation is that words used by legislature are generally
a safe guide to its intention - Where statute's meaning is clear
and explicit, words cannot be interpolated.
Precedent - A case is only an authority for what it actually
decides and not for what may seem to follow logically from it.
c
Words and Phrases:
'Value', 'Normal Price', 'Ordinarily Sold' and 'Sole
Consideration' - Meaning of, in the context of s. 4(1)(a) of
0
Central Excise Act.
'Transaction value' - Meaning of, in the context of Central
Excise Act.
'Popular sense' - Meaning of, in the context of
E Interpretation of Statutes.
The respondents-assessee were the manufacturers
of motor cars i.e. Fiat Uno-model. The assessees have
filed several price declarations, declaring wholesale price
F of their cars for sale through wholesale depots during the
period 27 .5.1996 to 4.3.2001. The revenue issued 11
show-cause notices for the period from June 1996 to
February 2000, alleging that the assessee had not paid
the correct duty on the cars, and demanded differential
duty on the assessable value determined as per s. 4(1)(b)
G of Central Excise Act, 1944 rlw. (Valuation) Rules. The
assessee replied that they had declared the assessable
value or normal price in terms of s. 4(1)(a) of Central
Excise Act, 1944 and determination of the assessable
value as per s. 4(1)(b) r/w. the Valuation rules, 1975 would
H not arise; that when normal price is available, the
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 977
.
FIAT INDIA (P) LTD. & ANR.
recourse to any other method of valuation is incorrect and A
improper; that due to competition in the market, they kept
the price of the cars low and were forced to sell their cars
at a loss; and that the assessable value declared by them
should be accepted even if it is below manufacturing cost
and thus there is no short levy or short payment of duty. B
The Adjudicating Authority confirmed the show
cause-cum-demand notices holding that the cost of the
production of the car was much higher than the price at
which it was sold in the market; that the price was
artificial to capture the market and therefore the price at C
which they were sold cannot be said to be 'normal price'
as per Section 4 of the Act; and that when normal price
cannot be ascertained as per s. 4(1 )(a), the alternate
procedure under the Valuation Rules, 1975 i.e. cost of
production and profit has to be applied. The assesses D
were directed to pay the difference in duty. The order of
the Adjudicating Authority was confirmed by the First
Appellate Authority.
Customs, Excise and Service Tax Appellate Tribunal E
reversed the findings of the Adjudicating Authority and
Appellate Authority and allowed the appeal of the
appellants holding that there was no allegation that the
wholesale price charged by the assessee was for extraco mm e rc i a I consideration and that dealing of the F
assesses and their buyers was not at arms length or that
there was a flow back of money from the buyers to the
assesses and, therefore, the price declared by the assesse
is the ascertainable normal price. Hence the present
appeals by the Revenue.
G
Allowing the appeals, the Court
HELD: 1.1. Since excise is a duty on manufacture,
duty is payable whether or not goods are sold. Duty is
payable even when goods are used within the factory or H
978
SUPREME COURT REPORTS
(2012] 12 S.C.R.
A goods are captively consumed within factory for further
manufacture. Excise duty is payable even in case of free
supply or given as replacement. Therefore, sale is not a
necessary condition for charging excise duty. [Para 23]
[1003-H; 1004-A-B]
B
1.2. Section 4 of the Central Excise 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 exercisable
goods and the value is further defined in express terms
C by the said Section. In every case, the fundamental
criterion for computing the value of an excisable article
is the normal price at which the excisable article is sold
by the manufacturer, where the buyer is not a related
person and the price is the sole consideration. If these
D conditions are satisfied and proved to the satisfaction of
the adjudicating authority, then, the burden which lies on
the assessee under Section 4(1)(a) would have been
discharged and the price would not be ignored and the
transaction would fall under the protective umbrella
E contained in the Section itself. [Para 24] [1004-C-F]
1.3. To determine the value, the legislature has
created a legal fiction to equate the value of the goods
to the price which is actually obtained by the assessee,
F when such goods are sold in the market, or the nearest
equivalent thereof. 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
G selling price or nearest ascertainable price in the market,
as the case may be, is considered to be the value of
goods. [Para 26] [1006-F-G; 1007-A-B]
Bangaru Laxman v. State (through CBI) and Anr. (2012)
H 1 SCC 500: 2011 (13) SCR 268; J.K. Cotton Spinning and
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 979
FIAT INDIA (P) LTD. & ANR.
Weaving Mills Ltd. v. U.0.1 (1987) Supp. (1) SCC 350 -
A
relied on.
1.4. Whenever the legislature uses certain terms or
expressions of well-known legal significance or
connotations, the courts must interpret them as used or B
understood in the popular sense if they are not defined
under the Act or the Rules framed thereunder. Popular
sense means "that sense which people conversant with
the subject matter, with which the statute is dealing,
would attribute to it." [Para 27] [1007-C-D]
c
1.5. The normal rule of interpretation is that the words
used by the legislature are generally a safe guide to its
intention. "No principle of interpretation of statutes is
more firmly settled than the rule that the court must
deduce the intention of Parliament from the words used o
in the Act." 'Where the statute's meaning is clear and
explicit, words cannot be interpolated.' [Para 28] [1007D-F]
S. Narayanaswami v. G. Pannerselvam and Ors. (1973)
1 SCR 172 - relied on.
E
Westminster Bank Ltd. v. Zang (1966) A.C. 182 -
referred to.
1.6. The expression 'normal price' occurring in
Section 4(1)(a) and (b) means the price at which goods
F
are sold to the public. Where the sale to public is through
dealers, the 'normal price' would be the 'sale price' to the
dealer. 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 G
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.
H
980
SUPREME COURT REPORTS
[2012) 12 S.C.R.
A Normal price, therefore, is the amount paid by the buyer
for the purchase of goods. [Paras 31 and 43] [1008-E-F;
1014-A-C]
Ashok Leyland Ltd. v. Collector of Central Excise, Madras
B (2002) 10 SCC 344; Commissioner of Central Excise
Ahemedabad v. Xerographic Ltd. (2006) 9 SCC 556; Burn
Standard Co. Ltd. and Anr. v. Union of India (1991) 3 SCC
467: 1991 (2) SCR 960; Tata Iron and Steel Co. Ltd. v.
Collector of Central Excise Jamshedpur (2002) 8 SCC
C 338: 2002 (3) Suppl. SCR 244 ; Union of India and Ors.
v. Bombay Tyre International Ltd and Ors. (1984) 1 SCC
467: 1984 (1) SCR 347; Metal Box India Ltd. v. CCE (1995)
2 SCC 90:1995 (1) SCR 136; Calcutta Chromotype Ltd. v.
CCE (1998) 3 SCC 681 :1998 (2) SCR 570; Commissioner
of Central Excise v. Bal/arpur Industries Ltd. (2007) 8 SCC
D 89: 2007 (9) SCR 650; Siddhartha Tubes Ltd. v. CCE
(2005) 13 sec 564: 2005 (5) Suppl. SCR 859; CCE v.
Bisleri International (P) Ltd. (2005) 6 SCC 58: 2005 (1)
Suppl. SCR 841; Procter and Gamble Hygiene and Health
Care Ltd. v. Commissioner of Central Excise, Bhopal
E (2006)1 sec 267: 2005 (5) Suppl. SCR 496 - relied on.
"Advanced Law Lexicon" by P. Ramanatha Aiyar -
referred to.
1,,7 In the show cause notices issued, the Revenue
F doubts the normal price of the wholesale trade of the
assessees. They specifically allege, which is not
disputed by the assessees, that the 'loss making price'
continuously for a period of more than five years while
selling more than 29000 cars, cannot be the normal price.
G It is true that in notices issued, the Revenue does not
allege that the buyer is a related person, nor do they
allege el~ment of flow back directly from the buyer to the
seller, but certainly, they allege that the price was not the
sole consideration and the circumstance that no prudent
H businessman would continuously suffer huge loss only
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 981
FIAT INDIA (P) LTD. & ANR.
to penetrate the market and compete with other A
·.manufacturer of more or less similar cars. A prudent
businessman or woman and in the present case, a
company is expected to act with discretion to seek
reasonable income, preserve capital and, in general,
avoid speculative investments. [Para 43] [1014-F-H; 1015B
A-8]
Union of India v. Hindalco Industries 2003 (153) ELT 481
- relied on.
1.8 If there is anything to suggest to doubt the normal
C
price of the wholesale trade, then recourse to clause (b)
of sub-section (1) of Section 4 of the Act could be made.
The 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
D
not based on the manufacturing cost and manufacturing
profit, but have 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
E
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
F
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.
[Para 43] [1015-8-E]
G
1.9 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. The
word 'ordinarily', by no stretch of imagination, can
include extra-ordinary or unusual. In the instant cases,
H
982
SUPREME COURT REPORTS
[2012) 12 S.C.R.
A the assessees sell their cars in the market continuously
for a period of five years at a loss price and claim 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
B be anathema for the expression 'ordinarily sold'. In the
instant cases, since the price charged for the sale of cars
is exceptional, a meaning cannot be given which does
not fit into the meaning of the expression 'ordinarily sold'.
In other words, in the transaction under consideration,
c the goods are sold below the manufacturing cost and
manufacturing profit. Therefore, such sales may be
disregarded as not being done in the ordinary course of
sale or trade. [Para 50] [1019-A-C, E·F]
0
Eicher Tractors Ltd. Haryana
v. Commissioner of
Customs, Mumbai (2001) 1 SCC 315: 2000 (4)
Suppl. SCR 597; /spat Industries Ltd. v. Commissioner of
Customs,Mumbai (2006) 12 SCC 583: 2006 (6) Suppl.
SCR 733; Varsha Plastics Private Limited and Anr. v. Union
of India and Ors. (2009) 3 SCC 365: 2009 (1) SCR 896;
E Rajkumar Knitting Mills (P) Ltd. v. Collector of Customs,
Bombay (1998) 3 SCC 163; Ashok Leyland Ltd. v. Collector
of Central Excise, Madras (2002) 10 SCC 344 - referred to.
1.10 For the purpose of Section 4(1 )(a) all that has to
F 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
G under Section 4(1)(a) of the Act. This is the price which
has been charged by the manufacturer from the
wholesale purchaser or sole distributor. What has to be
seen is that the sale made at arms length and in the usual
course of business, if it is not made at arms length or in
H the usual course of business, then that will not be real
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 983
FIAT INDIA (P) LTD. & ANR.
value of the goods. The value to be adopted for the
A
purpose of assessment to duty is not the price at which
the manufacturer actually sells the goods at his sale
depots or the price at which goods are sold by the dealers
to the customers, but a fictional price contemplated by
the Section. [Para 50] [1019-F-H; 1020-A-B]
B
Rajkumar Knitting Mills (P) Ltd. v. Collector of Customs,
Bombay (1998) 3 SCC 163 - relied on.
1.11 When there is fair and reasonable price
stipulated between the manufacturer and the wholesale
C
dealer in respect of the goods purely 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 D
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 E
Section 4(1)(a) of the Act. [Para 51] [1020-D-F]
,
1.12 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. [Para 53]
[1021-D-E]
Currie v. Misa (1875) LR 10 Ex. 153 - referred to.
Webster's Third New International Dictionary
(unabridged); CorpusJuris Secundum (p.420-421 and425);
F
G
Salmond on Jurisprudence - referred to.
H
984
SUPREME COURT REPORTS
[2012] 12 $.C.R.
A
1.13 'Consideration' means a reasonable equivalent
or other valuable benefit passed on by the promisor to
the promisee or by the transferor to the transferee.
Similarly, when the word 'consideration' is qualified by the
word 'sole', it makes consideration stronger so as to
B make it sufficient and valuable having regard to the facts,
circumstances and necessities of the case. [Para 58]
[1022-G-H; 1023-A]
1.14 Since under new Section 4(1 )(a), the price
should be the sole consideration for the sale, it will be
C 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
o is what exactly has been done in the instant cases and
after analysing the evidence on record it is found that
extra-commercial consideration had entered into while
fixing the price of the sale of the cars to the customers.
When the price is not the sole consideration and there
E are some additional considerations either in the form of
cash, kind, services or in any other way, then according
to Rule 5 of the 1975 Valuation Rules, the equivalent
value of that additional consideration should be added
to the price shown by the assessee. If the sale is
F influenced by considerations other than the price, then,
Section 4(1 )(a) will not apply. In the instant case, the main
reason for the assessees to sell their cars at a lower price
than the manufacturing cost and profit is to penetrate the
market and this will constitute extra-commercial
G consideration and not the sole consideration.
The duty
of excise is chargeable on the goods with reference to
its value then the normal price on which the goods are
sold shall be deemed to be the value, provided: (1) the
buyer is not a related person and (2) the price is the sole
consideration. These twin conditions have to be satisfied
H for the case to fall under Section 4(1)(a) of the Act. In the
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 985
FIAT INDIA (P) LTD. & ANR.
instant cases, the price is not the sole consideration
A
when the assessees sold their cars in the wholesale
trade. Therefore, the assessing CJUthority was justified in
invoking clause(b) of Section 4(1) to arrive at the value
of the exercisable goods for the purpose of levy of duty
of excise, since the proper price could not be
B
ascertained. Since, Section 4(1)(b) of the Act applies, the
valuation requires to be done on the basis of the 1975
Valuation Rules. [Para 60] [1023-C-H; 1024-A-C]
1.15 Each removal is a different transaction and duty C
is charged on the value of each transaction. Section 4
after amendment, 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)
D
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
E
Goods) Rules 2000 which is also made effective from 1st
July, 2000. Since the price is not the sole consideration
for the period even after 1st July, 2000, the assessing
authority was justified in invoking provisions of the Rules
2000. [Para 61] [1024-F-H; 1025-A]
F
1.16 Under Section 4(1)(b) of the Act, 1944, any
goods which do not fall within the ambit of Section 4(1)(a)
i.e. if the 'normal price' cannot be ascertained because
the goods are not sold or for any other reason, the G
'normal price' would have to be determined in the
prescribed manner i.e. prior to 1st day of July, 2000, in
accordance with Rules, 1975 and after 1st day of July
2000, in accordance with Rules, 2000. [Para 69] [1030-GH; 1031-A]
H
986
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A
1.17 A bare reading of Rules 3, 4, 5, 6 and 7 of 1975
Valuation Rules does not give any indication that the
adjudging authority while computing the assessable
value of the excisable goods, ;had to follow the rules
sequentially. The rules only provides for arriving at the
B assessable value under different contingencies. Again,
Rule 7 of the Valuation Rules which provides for the best
judgment assessment gives an indication that the
assessing authority while quantifying the assessable
value under the said Rules, may take the assistance of
c the methods provided under Rules 4, 5 or 6 of the
Valuation Rules. Therefore, it is not correct to say that the
assessing authority before invoking Rule 7 of the 1975
Valuation Rules, ought to have invoked Rules 4, 5 and 6
of the said Rules. Since the assessing authority could
0 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 'Cost
Accountant' who was asked to conduct special audit to
ascertain the correct price that requires to be adopted
E during the relevant period. Therefore, the Court cannot
take exception of the assessable value of the excisable
goods quantified by the assessing authority. [Para 70)
[1031-F-H; 1032-A-B]
2. A case is only an authority for what it actually
F decides and not for what may seem to follow logically
from it. "Each 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
G the temptation to decide cases 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 all decisive." [Para
66) [1029-C-E]
H
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 987
FIAT INDIA (P) LTD. & ANR.
Sushi/ Suri vs. Central Bureau of Investigation and Anr.
A
(2011) 5 SCC 708: 2011 (8) SCR 1; Union of India v.
Bombay Tyre International 1983 (14) ELT 1896 (SC) - relied
on.
Commissioner of Central Excise, New Delhi v. Guru
8
NanakRefrigeration Corporation 2003 (153) ELT 249 (SC);
CCE v. Bis/eri International Pvt. Ltd. 2005 (186) ELT 257 (SC)
- distinguished.
A.K. Roy and Anr. v. Voltas Ltd. 1977 (1) ELT 177
(SC); Assistant Collector of Central Excise and Ors. v. M.R.F. c
Ltd. 1987 (27) ELT 553 (SC) - referred to.
· E/gi Equipment Pvt. Ltd. v. CCE, Coimbatore 2007 (215)
ELT 348 (SC); Philips India Ltd. v. Collector of Central Excise,
Pune 1997 (91) E.L.T. 540 (SC); VST Industries Ltd. v.
D
Collector of Central Excise, Hyderabad 1998 (97) E.L.T. 395
(SC); Devi Das Gopa/ v. State of Punjab (1967) 20 STC 430;
Basant Industries v. Addi. Collector of Customs, Bombay
1996 (81) E.L.T. 195 (SC); CCE v. Rajasthan Spinning and
Weaving Mills (2007) 218 E.L.T. 641 (SC) - Cited.
E
Case Law Reference:
2007 (215) ELT 348 (SC)
Cited
Para 16
1997 (91) E.L.T. 540 (SC)
Cited
Para 17
F
1998 (97) E.L.T. 395 (SC)
Cited
Para 17
(1967) 20 STC 430
Cited
Para 18
1996 (81) E.L.T. 195 (SC)
Cited
Para 19
(2007) 218 E.L.T. 641 (SC)
Cited
Para 19
G
2011 (13) SCR 268
Relied on
Para 26
(1987) Supp. (1) sec 350
Relied on
Para 26
(1973) 1 SCR 172
Relied on
Para 28
H
988
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A
(2002) 1 o sec 344
Relied on
Para 31
s(2006) 9 sec 556
Relied on
Para 32
1991 (2) SCR 960
Relied on
Para 33
B
2002 (3) Suppl. SCR 244
Relied on
Para 34
1984 (1) SCR 347
Relied on
Para 35
1995 (1) SCR 136
Relied on
Para 36
1998 (2) SCR 570
Relied on
Para 37
c
2007 (9) SCR 650
Relied on
Para 38
2005 (5) Suppl. SCR 859
Relied on
Para 39
2005 (1) Suppl. SCR 841
Relied on
Para 40
D
(2002) 1 o sec 344
Relied on
Para 41
2005 (5) Suppl. SCR 496
Relied on
Para 42
2003 (153) ELT 481
Relied on
Para 43
E
2000 (4) Suppl. SCR 597
Referred to
Para 45
2006 (6) Suppl. SCR 733
Referred to
Para 46
2009 (1) SCR 896
Referred to
Para 47
(1998) 3 sec 163
Referred to
Para 48
F
(2002) 10 sec 344
Referred to
Para 49
1983 (14) ELT 1896 (SC)
Relied on
Para 62
1977 (1) ELT 177 (SC)
Referred to
Para 62
G
1987 (27) ELT 553 (SC)
Referred to
Para 63
2003 (153) ELT 249 (SC)
Distinguished Para 64
2005 (186) ELT 257 (SC)
Distinguished Para 64
H
2011 (8) SCR 1
Relied on
Para 66
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 989
FIAT INDIA (P) LTD. & ANR.
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
A
1648-1649 of 2004.
From the Judgment & Order dated 21.11.2003 of the
Customs, Excise and Service Tax Appellate Tribunal, West
Regional Bench at Mumbai in Appeal Nos. E/3695 & E/302/
B
02.
B. Bhattacharya, ASG, Ashok Bhan, Rahul Kaushik, K.
Swami Krishna Kumar, Ajay Singh, Judy James (for B. Krishna
Prasad) for the Appellant.
,
Joseph Vellapally, Tarun Gulati, Sparsh Bhargava, Rohan
C
Batra (for S. Hariharan), V. Lakshmi Kumaran, Alok Yadav,
Krishna Mohan, K. Menon (For Rajesh Kumar) for the
Respondents.
The Judgment of the Court was delivered by
D
H.L. DATTU, J. 1. These appeals, by special leave, are
directed against the judgment and order dated 21.11.2003
passed by the Customs, Excise and Service Tax Appellate
Tribunal, West Regional Bench at Mumbai (hereinafter referred
to as "the Tribunal") in Appeal Nos. E/3695/02 & E/302/02. By
E
the impugned judgment, the Tribunal has reversed the finding
of the Commissioner (Appeals) and thereby, allowed the
appeals filed by the respondents-assessees.
2. Facts ·in nutshell"are: The respondents-assessees are
the manufacturer of motor cars, i.e. Fiat Uno model cars. The
F
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, Mis Ind Auto Ltd.
G
(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 1730 of the
Central Excise Rules, 1944 (hereinafter referred to as 'the 1944
Rules') declaring wholesale price of their cars for sale through
H
990
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A 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 'the Act') had made enquiries on
8 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
C 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
o Commissioner, Central Excise, Kurla Division, vide his order
dated 03.01.1997, had inter a/ia 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
E 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
F 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 B13 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,
G 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
H bond amount. Accordingly, the respondent furnished a bank
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 991
FIAT INDIA (P) LTD. & ANR. [H.L. DATIU, J.]
guarantee of Rs. 38 lakhs which was subsequently renewed
A
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
B
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 ' 3,80,883/- for manufacture from CKD
condition against the assessable value of Rs. 1,85,400/-. In
C
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.
D
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
E
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
F
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,
G
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
H
992
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A 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
B 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
c goods should not be confiscated and penalty imposed under
Rule 9 read with Rule 52-A and Rule 1730 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-cumD 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
E 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
F 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,
G 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
H profits and, therefore, the price declared by them requires to
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 993
FIAT INDIA (P) LTD. & ANR. [H.L. DATIU, J.]
be accepted. The assessees had further submitted that since
A
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
B
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 c
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
0
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
E
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 the assessees' main consideration
was to penetrate the market, therefore, the price at which they
F
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
G
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
H
994
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A 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 Bombay Tyre's and MRF Tyre's cases, that all costs
incurred to make goods saleable/marketable should be taken
into account for determining the assessable value and that the
B 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/-
C 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.
D
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
E 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
F 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
G 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·
H Refrigeration Corporation, 2003 (153) ELT 249 (SC). It is the
COMMISSIONER OF CENTRAL EXCISE, MUMBAI v. 995
FIAT INDIA (P) LTD. & ANR. [H.L. DATIU, J.]
correctness or otherwise of the findings and conclusions
A
reached by the Tribunal is the subject matter of these appeals.
Submissions
12. Before we proceed to examine the relevant provisions,
it is necessary to notice the submissions made by learned
B
counsel on both sides. Shri. Bhattacharya, the learned ASG,
contends that the assessees are not fulfilling the conditions
enumerated in Section 4(1 )(a) of the Act and therefore, the
valuation has to be done in accordance with Section 4(1)(b) of
the Act read with the 1975 Valuation Rules. He would contend
C
that the price fixed by the assessees do not reflect the true
value of the goods as manufacturing cost and the profit is much
higher than the sale price. He would further contend that since
the price of the cars sold by the assessees do not reflect the
true value of goods and that sole reason for lowering the price
D
by the assessees below the manufacturing cost is just to
penetrate the market and compete with other manufacturers
and, therefore, such price cannot be treated as "normal price"
in terms of Section 4(1 )(a) of the Act. He would submit that
since the price of the cars sold by the assessees was not
E
ascertainable, the Revenue is justified in computing the
assessable value of the goods for the levy of excise duty under
Section 4(1)(b) of the Act and the relevant rules. The learned
counsel further contends that under Section 4(1)(a) of the Act,
value shall be deemed to be the normal price. A normal price,
F
as per Section 4(1 )(a), is the price at which the goods are
ordinarily sold. A loss making price cannot be the price at which
goods are ordinarily sold and the loss making price cannot be
the normal price. Shri Bhattacharya would heavily rely on the
decision of this Court in Union of India v.