Cost accountant report helps to solve decade-old excise case

The excise department had discovered that the company was importing car kits in completely knocked down (CKD) and semi-knocked down condition and the cost of production of a single car was Rs 3,80,883 (CKD) and Rs 3,98,585 (SKD), respectively, against the assessable value of Rs 1,85,400.

Fiat India officials did not comment on the order. However, a source said that the order pertained to a different Fiat company. The tax department's contention was that cars were imported at a higher price but were sold at loss for a consideration - to penetrate the market, a fact confirmed by the company.

Arguing the case, Bishwajit Bhattacharyya, Additional Solicitor General of India, said the price at which the goods were sold by Fiat India clearly indicated that these goods were not "ordinarily sold" in terms of Section 4 (1) (a) of the Central Excise Act as the company had sold the cars at 100% loss for five years. "This judgment will bring about clarity and certainty in valuation under the central excise laws," said Bhattacharyya.

The order will have wide implications as the tax department will now feel vindicated on its stand that the central excise duty is chargeable on manufacture or production of goods and not on the sale of goods.

In his order, Justice Dattu said the assessing authority could not calculate the valuation with the help of other rules and resorted to the "best judgment method" while taking the assistance of 'cost accountant', who was asked to conduct a special audit to ascertain the correct price. "Therefore, we cannot take exception of the assessable value of the excisable goods quantified by the assessing authority."

https://articles.timesofindia.indiatimes.com/2012-08-31/mumbai/33520893_1_fiat-india-excisable-goods-assessable-value