Corporates entering new markets may soon get to sell their wares below production cost without having to worry about the excise duty implications.
Faced with concerns expressed by industry post the landmark Supreme Court ruling in the Fiat India case, the Finance Ministry plans to set up a committee to look at the issues thrown up by this ruling.
The committee, which will be set up sometime in April, will see to it that the concerns of industry and the Supreme Court can be aligned and there is no mismatch on this front, CBEC Chairperson Praveen Mahajan said here today.
This would come as a relief for industry. The apex court had in the Fiat India case ruled that the car manufacturer had to fork out excise on the basis of cost of production plus a notional mark-up.
Fiat India had paid excise on the sale price charged from distributors for the completely/semi knocked down kits of Uno cars. This sale price was below the production cost.
The tax authorities rejected the price declared by Fiat and demanded payment of excise on a value including the cost of production along with reasonable profits. The apex court later upheld the contention of the tax authorities.
There is apprehension among industry that the apex court judgment may usher in an element of subjectivity in excise valuation. This is because tax authorities could question the veracity of prices declared by manufacturers.
Manish Mishra, Executive Director, Khaitan & Co, a law firm, said that the committee needs to come up with a balanced view to maintain the sanctity of transaction value principles.
At the same time, the committee should also ensure that assessees do not circumvent the legal provisions to avoid payment of excise duty on appropriate value, he said.