Supreme Court directs Fiat India to pay Rs 400 crore as excise duty

The Supreme Court, today has slammed Fiat India and Premier Automobiles with a penalty amounting to Rs 400 crore and Rs 49 crore respectively to clear excise duty backlog. 

This outstanding excise duty, is with regards to the joint venture between Fiat and Premier Automobiles, which existed in 1996. During this venture Fiat was importing CKD kits of its then popular hatchback Uno, and disposing them in the market at much below its cost price.

The tax authority had levied excise duty on the cost of manufacturing Uno hatchbacks in India between 1996 and 2001. The company contested the excise department's charge to pay duty on the cost price.

The Italian car maker and its Indian joint venture partner contested this by arguing that the selling price was lower than the cost price, and therefore, paid lower than assessed valued. The tax authority claimed that the company sold cars at lower than its cost price to penetrate the market.

The tax authority had found that the wholesale price declared by the company is much less than the cost of production and, therefore, the price declared by them could not be treated as a normal price for the purpose of quantification of assessable value.

The apex court also therefore held that excise duty has to be paid on cost basis and not on sale price. The ruling will have wider implications as it gives clarity on the fact that valuation under the central excise laws, lays down that central excise duty is chargeable on manufacture or production of goods and not on sale.

Supreme Court Justice HL Dattu, in his order, set aside the order passed by the tribunal and upheld the tax department's claim. The tax department was being represented by Bishwajit Bhattacharyya , additional solicitor-general of India, while for Fiat, the case was argued by senior counsel Joseph Vellapally and V Lakshmi Kumaran.