CX - Car manufacturer clearing cars for use by own officials - Rule 8 is not directly applicable & it would be more appropriate to determine value u/r 11 r/w Rule 4 and assessee has paid duty correctly by taking AV as was applicable for cars cleared to other customers: CESTAT
By TIOL News Service
MUMBAI, JAN 08, 2016: THE appellant-assessee is a car manufacturer. During 2002-03, the assessee cleared eight cars manufactured by them for their own use. While clearing the cars, they took the assessable value as was applicable for such cars being cleared to other customers and paid duty accordingly.
Revenue is not impressed. They issued a show cause notice on the ground that the value should be arrived at 115% of the cost of production under Rule 8 of the CE Valuation Rules, 2000.
The original authority did not find any merit in the allegations of the Revenue and so dropped the proceedings.
Aggrieved, Revenue filed an appeal before Commissioner (Appeals) who concluded that the value should be determined under Rule 11 read with Rule 8 of the CE Valuation Rules, 2000. He, therefore, confirmed the entire demand but waived the penalty on the ground that the matter relates to interpretation of law.
So, now, both the assessee and the Revenue are aggrieved with the portion of the order which is not in their favour.
The assessee submitted that before the lower authorities they have submitted a certificate indicating that even if the value is arrived at under Rule 8 i.e. cost of production plus 15% profit margin, even then the demand will work out to only Rs.27,566/-. Furthermore, in respect of two vehicles, the value is less than the value on which they had paid the duty. It is also submitted that even though the said certificate was produced before the Commissioner (Appeals) and he had taken a view that the value is to be determined under Rule 11 r/w Rule 8, even then in the last para, he confirmed the entire demand of Rs.3.26 lakhs. Reliance is placed on the Larger Bench decision in the case of Ispat Industries Ltd. 2007-TIOL-245-CESTAT-MUM-LB in support. So also, the department had invoked extended period of limitation when the reality is that there was no suppression of fact.
The AR submitted that the assessee has paid the duty on Rs.53.92 lakhs while the cost capitalized was Rs.55.72 lakhs (net of taxes) and the department added 15% on the amount of Rs.55.72 lakhs. He further submitted that the Chartered Accountant's certificate covers only seven vehicles while it is apparent that the assessee had cleared eight vehicles and since the details about the cost of production etc. were not made available to the department the larger period of limitation is justified.
The Bench observed -
+ In this case the cars cleared have not been utilized for further manufacture of goods but were used by the officials of the company in connection with the business. In our view, Rule 8 is not directly applicable and it would be more appropriate to determine the value under Rule 11 read with Rule 4 and the assessee has paid the duty correctly. [LB decision in Ispat Industries Ltd. (supra) relied upon]
+ We do not find any justifiable ground in the show cause notice so as to invoke the extended period. Even the Commissioner (Appeals) has dropped the penalty keeping in view the issue involved is interpretation of law. In our view, in the facts and circumstances of the case, invoking the extended period of limitation is not justified.
In fine, the assessee's appeal was allowed and the Revenue's appeal was dismissed.
(See 2016-TIOL-85-CESTAT-MUM)
