EICHER MOTORS LTD., Vs. CCE

JUDGEMENT

(1.) THESE appeals came up for hearing before the Larger Bench on reference by a Division Bench.

(2.) BEFORE referring to the term of reference, in order to appreciate the significance of the issue involved, it may be appropriate to briefly indicate the factual background giving rise to the dispute as follows: M/s. Eicher Motors Ltd. (in short 'Eicher') is engaged in the manufacture of chassis and ultimate sale of complete motor vehicle viz. bus and truck. M/s. Bhagirath Coach & Metal Fabricators Pvt. Ltd. (in short 'Bhagirath') is engaged in the body building for motor vehicles. Eicher supplies chassis to Bhagirath for building the bodies of bus/truck on job work basis. At the time of clearance - not being sale to Bhagirath - central excise duty is paid by Eicher on the value of the chassis worked out in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 i.e. 110% of the cost of manufacture of chassis. On receipt of the chassis, bodies of bus or truck are fabricated and mounted, atop the chassis, using some more raw materials received directly by Bhagirath though on the account of Eicher. After completing the job, the complete motor vehicle is returned to Eicher. At the time of clearance at their end, Bhagirath pays excise duty after availing the cenvat credit of the duty paid on the chassis as well as the directly received raw materials referred to above. However, the excise duty of the body built vehicle is worked out on the basis of actual cost of manufacture of chassis and not 110% of its cost. According to Bhagarith, the additional ten percent (of the cost of manufacture) represents the profit margin of the manufacturer i.e. Eicher which is not to be included in determining the assessable value of the body built vehicle. The point at issue is whether in determining the value of the motor vehicle, the actual cost of chassis manufactured by the principal manufacturer at its end, among other things (about which there is no dispute), is to be taken into account - as contended on behalf of the assessee, or the value of the motor vehicle is to be worked out on the basis of 110% of the cost of chassis in accordance with Rule 8 read with Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, (in short, Excise Valuation Rules) as contended on behalf of the Revenue.

(3.) WHEN the appeals came up for hearing before the Division Bench, reliance on behalf of the appellants was placed on a Bench decision of the Tribunal in Bhilwara Processors v. CCE 2004 (178) ELT 185 wherein it was held - dealing with the case of processed fabric - that the assessable value of processed fabric is to be arrived at on the basis of the cost of grey fabric supplied, and the notional valuation as envisaged in Rule 8 of the Excise Valuation Rules is not appropriate for determining the cost of the product. Doubting the correctness of the decision in Bhilwara Processors Ltd. the Division Bench referred the appeals to Larger Bench on the following questions: