CESTAT Mumbai Allows Mahindra & Mahindra's Appeals On Valuation Of Prototype Vehicles Sent For Testing

The Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Mahindra & Mahindra Ltd. correctly valued prototype commercial vehicles cleared to its own unit for testing on the basis of comparable goods and not at 110% of their cost of production.

The tribunal held that the valuation method under Rule 8 of the Central Excise Valuation Rules, 2000, which applies where goods are used in the manufacture of another article, was not attracted on the facts of the case.

A bench comprising Judicial Member S.K. Mohanty and Technical Member M.M. Parthiban allowed the appeals filed by Mahindra & Mahindra Ltd. against an order passed by the Commissioner (Appeals).

Mahindra & Mahindra manufactures prototype commercial vehicles. During the relevant period, it cleared those vehicles to another of its manufacturing units for testing after paying central excise duty. The company determined the assessable value under Section 4(1)(b) of the Central Excise Act, 1944, read with Rule 4 of the Central Excise Valuation Rules, 2000.

The Revenue contended that because the vehicles were transferred to the company's own unit, they should instead be valued at 110% of their cost of production under Rule 8.

While the adjudicating authority dropped the proceedings, the Commissioner (Appeals) allowed the Revenue's appeals, prompting the company to approach the tribunal.

The tribunal noted that it had already decided an identical issue in Mahindra & Mahindra's own cases. Since the facts in the present appeals were identical, it found no reason to take a different view.

Referring to its earlier decision, the tribunal noted that prototype vehicles are required to undergo testing before a manufacturer can commercially produce and market them. It held that such vehicles cannot be regarded as being consumed in the manufacture of motor vehicles. Consequently, Rule 8 of the Central Excise Valuation Rules did not apply in the present case.

Holding that Mahindra & Mahindra had correctly determined the value of the prototype vehicles on the basis of comparable goods under Rule 4, the tribunal set aside the Commissioner (Appeals)' order and allowed the appeals.

For Appellant: Advocate Kiran Chavan

For Revenue: Advocate Rajiv Ranjan, Authorized Representative