Supreme Court dismisses review petition on Excise Valuation

Excise valuation basis manufacturing cost plus profit upheld by Supreme Court where sales are made at below manufacturing cost to penetrate market

The Supreme Court (“Court”) has dismissed the review petition filed by Fiat India Private Limited on the issue of valuation under the Central Excise Act, 1944.  The Court, vide order dated November 27, 2012, observed that there was no reason to interfere with its original order dated August 29, 2012.

Key observations of the Court in the Original order

The Court had upheld the best judgement valuation by the revenue authorities (“RA”) on manufacturing cost plus profit basis, where the goods were sold at below manufacturing cost for market penetration, though no additional

money consideration was received from the buyer.  The Court

had observed as follows:

·          Sale at a lower price to penetrate market will constitute extra-commercial consideration and not sole consideration

·          Price is not sole consideration where:

o    Sale is influenced by considerations other than price

o    Lower price fixed to penetrate market and to compete with other manufacturers

·          If an unusually low price is charged because of extra-commercial considerations, the price charged cannot be taken to be fair and reasonable, arrived at on purely commercial basis