TOYOTA KIRLOSKAR MOTORS LTD. Vs. CCE

JUDGEMENT

(1.) CAPTIONED appeals are directed against orders in appeal upholding the orders of the original authority. Original authority had passed orders demanding duty on sales promotion expenditure incurred by the dealers of multi utility passenger vehicles (MUPVs) manufactured by M/s. Toyota Kirloskar Motors Ltd (the appellants) and the cost of transportation and transit insurance incurred by the appellants for transporting their product from their factory to the dealers' premises during the period 1.7.2000 to 31.12.2002. The total adjudication levies involved in the orders impugned is Rs. 3,80,56,927/ -. As all the appeals deal with the same issues, one of the appeals No. E/517/05 is taken up for detailed examination.

(2.) IN the order impugned in appeal No. E/517/2005, the Commissioner has affirmed the demand of duty to the tune of Rs. 83,68,355/ - and penalty of Rs. 50,000/ - on the appellants. The demand comprises the duty on freight and insurance incurred by the appellants and sales promotion expenses such as advertisement expenses incurred by the dealers. Demand on the freight and insurance collected by the appellant in the invoices for the sale of MUPVs is raised on the ground that the abatement of these elements could be allowed only if the same was the actual expenditure incurred for the particular consignments and shown separately in the invoices, in terms of Rule 5 of the Central Excise Valuation Rules, 2000 (CEVR).

(3.) THE Ld. Counsel for the appellants argued that the vehicles were sold for delivery at the factory gate in arms length transactions and the transaction value as contemplated in the Section 4(1)(a) was available for assessment in each transaction. The goods were exigible to duty only on the said value. In the Indian Oxygen Ltd. 1988 (36) ELT 723/730 (SC) case, the apex Court had decided that when the value for sale at the factory gate was available, that value would be the value relevant for assessment of excise duty. In the instant case, in all cases of sale, Section 4(1)(a) of the Central Excise Act was applicable and invocation of Rule 5 of Central Excise Valuation Rules was uncalled for. In the Indian Oxygen Ltd (supra) case it was decided that excise was a duty on manufacture and cost of transportation from the place of removal was not part of value The basic character of central excise levy had not undergone any change with the introduction of the concept of the transaction value with effect from 1.7.2000 for assessment. Therefore, the ratio of Indian Oxygen Ltd (supra), case applied and the value realized by the appellants excluding freight and insurance collected was the value relevant for assessment. Moreover, the appellants had submitted certificates obtained from Chartered Accountants which showed that the appellants had incurred a higher amount towards freight and insurance and had collected from the dealers a flat 2% of the invoice value when the goods were transported by road and 15% of the invoice value when the goods were transported by air. The authorities had denied the admissible deduction only on the ground that Rule 5 of CEVR provided for abatement only if the invoice reflected actual amount incurred towards freight and insurance. It was not disputed that the assessee had incurred a higher amount towards freight and insurance compared to the amount shown in the related invoices.