2018 (11) TMI 1136 – CESTAT CHENNAI – TMI – Valuation – prototypes – Department contends that the valuation under Section 4(1)(b) r/w Rule 11 and Rule 8 should be applied – Held that:- At no stretch of imagination, the assessable value of similar model vehicle can be ₹ 71,14,198/-. It is to be noted that under Rule 126 of Central Motor Vehicle Rules, 1989, a prototype of every motor vehicle shall be subject to testing by designated Government Departments or Research Associations or Testing Institutes to ascertain the compliance of provisions of the Act and Rules. The said Act itself uses the word ‘prototypes’. Only after certification by such authorities can the manufacturer of motor vehicles manufacture and market the motor vehicles. The similar model vehicles which are commercially manufactured can be said to be copies of the prototypes. It cannot be then said that these prototypes are consumed in further manufacture of motor vehicles. Thus Rule 8 of Central Excise Valuation R
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8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and arrive at 110% of the cost of production under CAS-4. To this, the respondents vide letter dated 20.4.2009 submitted CAS -4 statement and arrived the value of one motor vehicle as ₹ 71,14,198/- for the period December 2008 and April 2009. Similarly, they had submitted CAS-4 pertaining to 14 vehicles removed during June 2009 and November 2009. It was contended by them that Rule 8 was not applicable in their case and that they had adopted the future sale price of the motor vehicles in terms of Rule 4 and had discharged appropriate duty. It appeared to the department that the assessable value adopted by the respondents was not correct and show cause notice was issued proposing to demand duty, interest and for imposing penalties. After due process of law, the Commissioner vide impugned order held that the valuation is to be done under Rule 4 and that Rule 11 r/w Rule 8 is not applicable. The ass
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ubsequently under Rule 4 of Central Excise Valuation Rules 2000. He argued that Rule 4 uses the word such goods and the value of the prototypes cannot be the same as motor vehicles which are commercially marketed. As prototypes vehicles are distinct from the similar motor vehicle models sold subsequently, adoption of the value of such vehicles for valuation of prototypes cannot be in accordance with Rule 4 of Central Excise Valuation Rules 2000. The adjudicating authority has drawn support from the Order-in-Original No.18/2010 dated 28.10.2010 passed by the Commissioner, Pune. Since the order is passed by an authority equivalent to the adjudicating authority who has decided the impugned order, it cannot have a binding precedent value. Further, the adjudicating authority has wrongly relied upon the ratio of the judgment of Hon ble High Court of Bombay in the case of Indian Drug Manufacturers Association Vs. Union of India – 2008 (222) ELT 22 (Bom.). The said case is relating to the valu
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ion 4(1)(b) r/w Rule 11 and Rule 8 ibid namely 110% of the cost of production and should not have resorted to Rule 4. He therefore prayed that the demand proposed in the show cause notice may be confirmed. 4. The ld. counsel Shri Raghavan Ramabhadran appeared and argued the matter on behalf of the respondents. He submitted that the prototypes were cleared to their unit at Nasik on returnable basis for extensive testing at the testing track facility located therein so as to determine their quality and road worthiness. On successful and satisfactory testing, the respondent undertakes production of the motor vehicles in line with the prototypes. After the testing process, the prototype models are scrapped / destroyed or kept as display pieces. Thus goods were cleared by the respondent for testing on payment of excise duty. For this purpose, the price at which the vehicles are likely to be sold after commencing commercial production was adopted by the respondent in terms of Rule 4 of Centr
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nt filed appeal before Commissioner (Appeals). By Order-in-Appeal dated 21.2.2015, the Commissioner (Appeals) allowed the appeal filed by the appellant setting aside the demand. These decisions have been accepted by the department and there are no appeals filed against such decisions passed by the adjudicating authority as well as Commissioner (Appeals). However, the ld. counsel fairly submitted that in another proceedings, the Commissioner of Central Excise, Pune has confirmed the demand vide order dated 30.3.2012. It is submitted that the adjudicating authority has rightly dropped part of the demand and waived the penalties. 5. Heard both sides. 6. As pointed out by ld. AR, since there is no appeal filed by the respondents, the issue with regard to excisability and marketability of the prototypes does not require any further analysis. The issue that has to be looked into is only with regard to the valuation of the prototypes. The department contends that the valuation under Section 4
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ule 8 of Central Excise Valuation Rules 2000 will not apply to such a situation. We find that the Commissioner has gone deeply into the analysis of what is prototype and the valuation to be adopted for such prototypes. He has also relied upon the Order-in-Original No. 18/2010 dated 28.10.2010 passed by the Commissioner of Central Excise, Pune in the appellant s own case, wherein the proceedings were dropped. We find that the department having accepted the decision passed by the Commissioner in the said Order-in-Original as well as the decision passed in Order-in-Appeal dated 21.2.2015, they cannot insist that Rule 11 r/w Rule 8 has to be applied in the present proceedings. 7. From the above discussions, we find no grounds to interfere with the impugned order passed by the Commissioner of Central Excise. The appeal filed by the department is dismissed. (Pronounced in court on 12.09.2018) – Case laws – Decisions – Judgements – Orders – Tax Management India – taxmanagementindia – taxman
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