Providing relief to the industry, the excise department has said that cases before August 2012, where manufacturers have sold goods below the production cost to promote sales, will not be reopened.
"For the period prior to the date of the (Supreme Court) judgement, in cases where a show cause notice has been issued on the grounds of the FIAT judgement alone, there may not be a case for invoking the extended period of limitation. In such cases, only the normal period of limitation will apply," the Central Board of Excise and Customs said in a circular.
The circular was issued in the context of the Supreme Court's decision of August, 2012 - in the case of CCE, Mumbai versus Fiat India (P) Ltd - which held that where products are sold at considerable losses for an unduly long period of time for the purpose of market penetration, the transaction value can't be accepted for levying excise duty.
Following the decision, field authorities of the excise department are asking assessees to furnish cost data of various products for the previous years.
Pratik Jain, Partner (Indirect tax) KPMG said the circular would come as a relief to industry, particularly because "it has been clarified that department should not go beyond a normal period of limitation (ie extended period of 5 years can't be invoked) if notice is being issued on the basis of Supreme Court decision alone".
It has also been clarified, he said, that the FIAT decision can't be applied in all cases, where goods are being sold at loss and due care must be taken at the level of Commissioner to see if facts of the case are similar to the decision.
Commenting on the circular, Harishanker Subramaniam, Partner & National Leader (Indirect Tax), EY said the CBEC has correctly instructed the field officers that in all cases mere fact that transaction values were below cost of production cannot be the basis of rejection.
"So across the board investigations that we have seen on the ground is incorrect and hopefully will stop," he said, adding that it brings relief to the industry vis-a-vis ongoing investigations and even where notices have been issued at the level of appellate authorities.
The dispute in the Fiat case pertained to the valuation of car for levying the excise duty. While the company insisted that it should be levied on the price being charged, the Revenue Department had calculated the duty on the basis of fair price.
