Judgment:
2. Main issue in this appeal is the duty liability of about Rs. 7 crores (Rupees Seven Crores only) on appellant M/s Bhagirath Coach and Metal Fabricators Pvt. Ltd. That demand has been made on the basis that assessable value adopted was low, while discharging duty on motor vehicles manufactured by it.
3. Facts of the case are that the applicant M/s Bhagirath Coach and Metal Fabricators Pvt. Ltd. receives duty paid chassis from M/s Asha Motors, builds body on the chassis and clears the same on payment of duty. The duty payment on the body built vehicle is on the basis of cost of production (assessable value). The appellant adopted the commercial cost of chassis for working out cost of production. But revenue seeks to adopt the excise assessable value of chassis in place of its commercial cost. Revenue's contention is that Rule 8 of Central Excise Rules provides for adopting 110% of the cost of production as assessable value of captively consumed goods and the assessable value of chassis was so re-fixed while assessing the chassis.
4. The submission of the learned counsel for the appellant is that the method of input valuation canvassed by the revenue is contrary to settled law. He refers to the decision of this Tribunal in the case of Bhilwara Process Pvt. Ltd. wherein an identical issue was answered by us.
5. Learned JCDR would contend that the cost of any item, for all purposes, will have to be the same and the cost of chassis taken in the hands of its manufacturer should be adopted for the respondent also. He has referred us to para 24 of the judgement of the Hon'ble Supreme Court in the case of Dai Ichi Karkaria case . Learned JCDR has also pointed out that similarly placed other manufacturers like Tata Motors were adopting the assessable value of chassis for the purpose of valuing the body built vehicle also. A further point made is that the appellant is taking canvat credit equivalent to full duty paid on chassis.
6. We find that our observations in Bhilwara Process Pvt. Ltd. case clearly apply to the present dispute. We read para '6' of that order: We have perused the records and have considered the submissions made by both sides. We find merit in the appellants' submission that assessable value for processed fabric is to be arrived by adding the processing charges and processing profit to the cost of the grey fabric supplied. This position is clear from the observation of the Apex Court in the case of Pawan Biscuits Co. (Pvt.) Ltd. 'the cost of raw material supplied by Britannia will have to be included in addition to the appellants manufacturing costs and profit of raw material'. (Emphasis supplied). Treating Central Excise assessable value as equivalent to cost of goods evidently creates problems. In many cases like MRP or tariff value based valuation or Rule 8 Valuation, assessable value is a nominal value and does not reflect cost of the item. Such a notional valuation would not be appropriate in determining the cost of an item. In these circumstances, we are of the view that the issue raised in the appeal is covered in favour of the appellant by the aforesaid decisions of the Apex Court. Duty demand and penalty imposed under the impugned order are not sustainable. The impugned order is therefore, set aside and the appeal is allowed with consequential relief, if any, to the appellants.
7. We are also of the prima-facie view that the observations of the Apex Court in the Dai Ichi Karkaria judgement is not in favour of the Revenue, The rule laid down in para 24 of the judgement of the Hon'ble Supreme Court is that "value should be reckoned as it would be reckoned by a man of commerce". The taxing statues have deeming provisions relating to valuation. Excise and Customs Law are replete with such provisions like valuation under Tariff value, valuation in terms of MRP and valuation in terms of a fixed percentage of cost of production (as in the present case). None of these is the way people in commerce reckon value. These are merely resorts taken by statues to reduce disputes.
8. In view of what is stated above, we are of the opinion that, prima-facie duty demand made is not sustainable. In view of that, stay applications are allowed and recovery of amounts stayed till disposal of the appeals.