AUDI AUTOMOBILES VS. COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX INDORE

2026 INSC 858Page 1 of 12

Civil Appeal Nos.10504-10506 of 2017

Non-Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal Nos.10504-10506 of 2017

Audi Automobiles & Ors.

... Appellants

Versus

Commissioner of Central Excise

and Service Tax, Indore

… Respondents

J U D G M E N T

K. VINOD CHANDRAN, J.

The issue raised in the above cases is in a narrow compass

as to whether the extended period of limitation under the proviso

to Section 11A is available to the Central Excise and Service Tax

Department (for short, ‘the Department’).

2. We heard Ms. Charanya Lakshmikumaran, learned AoR

appearing for the appellants and Ms. Nisha Bagchi, learned

Senior Counsel appearing for the respondent-Department.

3. A preliminary objection was raised by Ms. Bagchi that the

appeal would not come within the contours of Section 35L of the

Central Excise Act, 1944, the issue agitated having no relation to

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any question involving the rate of duty of excise or to the

valuation of goods for purposes of assessment. The learned

Senior Counsel relied on SAIL v. Directorate General of Anti-

Dumping & Allied Duties1 and Commissioner of Customs v.

Motorola (India) Ltd.2.

4. In our opinion, the issue raised has an inextricable link with

the value of goods for purposes of assessment, despite the same

being held against the assessee and the controversy is also with

respect to the extended period of limitation. The issue raised

herein, of limitation under the proviso to Section 11A, is on the

ground of the assessee having not wilfully misrepresented or

wilfully suppressed the valuation of the ‘body-built vehicle’, by

reason of inclusion of only the cost of manufacture of chassis and

not the assessable value declared by the manufacturer. True,

the assessee could also have agitated the issue before the

jurisdictional High Court, but we are not inclined to relegate the

matter after almost a decade of the case pending before this

Court, especially when value of goods for purposes of

1 (2017) 13 SCC 1

2 (2019) 9 SCC 563

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assessment is the core issue dealt with in the Show Cause Notice

(SCN).

5. The appellants are engaged in body building of motor

vehicles as a job work. The manufacturers entrust them with the

chassis on which the body is built by the appellant. At the time

of clearance of the chassis for the purpose of body building,

excise duty is paid by the manufacturer on the valuation of the

chassis, worked out in terms of Rule 8 of the Central

Excise Valuation (Determination of Price of Excisable

Goods) Rules, 2000, which is 110 % of the cost of its manufacture.

After completion of the body building, the completed motor

vehicle, with the body built, is returned to the manufacturer and

at the time of clearance by the job worker; the appellants herein,

excise duty is computed after availing CENVAT credit of duty

paid on the chassis, on the sum total of the cost of the

manufacturer, the directly received raw materials, the job work

charges and the profit of the job worker. The excise duty of the

body built, is worked out on the basis of the actual cost of

manufacture of chassis without adding 10% additional cost,

which according to the assessee represents the profit margin of

the manufacturer. The question arose as to whether 10% profit

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Civil Appeal Nos.10504-10506 of 2017

of the manufacturer, included first in terms of Rule 8 of the

Valuation Rules; which is part of the value of the intermediate

product i.e. chassis, can be deducted or not.

6. The submissions of the learned Counsel for the assessee is

that the matter had been in a flux after the decision in M/s Ujagar

Prints and Others (II) v. Union of India and Others3, as clarified

in M/s Ujagar Prints and Others (III) v. Union of India and

Others4. The matter was settled only by the decision of a Larger

Bench of the Central Excise Tribunal (CESTAT) in Eicher Motors

Ltd. v. Commissioner of Central Excise, Indore5.

7. We are not convinced that the matter was settled by the

larger bench of the CESTAT, since it followed M/s Ujagar Prints

and Others (II)3 & M/s Ujagar Prints and Others (III)4, wherein

a Constitution Bench answered a reference from Empire

Industries v. Union of India6. The Tribunal held so in paragraph

10 and 11 as under: -

10. On a close reading of the above order in Ujagar Prints

III it would appear that the clarification squarely covers the

dispute involved in the instant case as to the assessable

3 (1989) 3 SCC 488

4 (1989) 3 SCC 531

5 2008 (228) E.L.T. 43

6 1985 (20) ELT 179 (SC)

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Civil Appeal Nos.10504-10506 of 2017

value of the chassis at the hands of Bhagirath as a job

worker and the final goods i.e. a complete motor vehicle.

If in the illustration given by the Supreme Court the value

of grey cloth in the hands of processor is Rs.20/- and the

value of the final product is Rs.30/- - comprising of the

value of the grey cloth plus value of the job work plus the

manufacturing profit and expenses, it would follow that the

value of complete motor vehicle would be the value of

chassis i.e.110% of the cost of manufacture, say,

Rs.3,30,000/- plus value of the job work done by Bhagirath,

say, Rs.1,00,000/- plus the manufacturing profit and

expenses of Bhagirath, say, Rs.70,000/- again, that is, in all,

Rs.5,00,000/- which would be the correct assessable value

of the complete vehicle. The value of the complete motor

vehicle cannot be arrived at de hors the additional 10% of

the cost of manufacture which is part of the value of the

intermediate product i.e. chassis. In other words, the

assessable value of complete motor vehicle cannot be

determined on the basis of the cost of chassis without

including the additional 10% of the manufacturing cost of

chassis, which is part of the statutorily fixed value of the

chassis (in case of non-sale) in terms of Rule 8 of the Excise

Valuation Rules.

11. Ujagar Prints II and Ujjagar Prings III came to be

considered in CCE, Indore Vs. S. Kumars Ltd.-2005 (190)

ELT 145 (SC). Referring to the former the Supreme Court

observed that Ujagar Prints II was an unconditional

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Civil Appeal Nos.10504-10506 of 2017

approval of the ratio in Empire Industries and so far as

processors are concerned, the assessable value of the

processed goods would have to be the same whether they

manufactured the goods and then processed it or process

the goods given to them for job-work before returning the

same to the manufacturer/owner. The common norm was

the wholesale price. However, Ujagar Prints III introduced

the concept of deemed price in place of wholesale price

and to this extent Ujagar Prints III was a deviation from the

formula approved earlier. Referring to the clarificatory

order, it was observed: -

This clarification, in fact, was a deviation from the

formula approved in Empire Industries. In other words,

it was not the wholesale price at the merchant

manufacturing stage which would be the assessable

value of the processed goods, but the value of the

processed fabrics on the basis of a deemed sale of the

factory gate of the processor. The actual wholesale price

was jettisoned in favour of a deemed sale price by the

processor to the merchant manufacturer.

[Underlining by us for emphasis]

8. Before the CESTAT, it was argued that M/s Ujagar Prints

and Others (II)3 & M/s Ujagar Prints and Others (III)4 only

declared that the value of the raw materials, the processing

charges and profits of the job workers were to be added to the

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Civil Appeal Nos.10504-10506 of 2017

cost of the chassis and specifically clarified that the profits of the

manufacturers (traders’ profits therein); who gets the body built

(who gets the fabrics processed), need not be added because

those would be post manufacturing profits. Reliance was also

placed on Pawan Biscuits Co. Pvt. Ltd. v. CCE7 and General

Engineering Works v. CCE8. Both these decisions were

distinguished on facts by the larger Bench of the CESTAT.

9. Pawan Biscuits Co. Pvt. Ltd.7 manufactured biscuits on job

work basis for Britania, using the raw materials supplied by

Britania. The relationship between the parties, as per the

agreement, was that of principal and principal and not principal

and agent. Especially since Pawan Biscuits7 was at liberty to

manufacture and sell biscuits under other brands. However, it

was held that assessable value of biscuits manufactured by the

assessee would include the cost of the raw material supplied by

Britania in addition to Pawan Biscuits manufacturing cost and

profit. However, the profit of Britania and expenses incurred by

Britania after the manufacture of the biscuits would not be

includable.

7 (2000) 6 SCC 489

8 2007 (212) E.L.T. 295 (S.C)

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Civil Appeal Nos.10504-10506 of 2017

10. In General Engineering Works8, the question raised was

with respect to waste/scrap being generated to the extent of 5%,

when manufacturing ‘points’ and ‘crossings’ on behalf of the

Railways, on job work basis, using the raw material supplied by

the Railways. The issue was whether in computing the value of

‘points’ and ‘crossings’, the value of scrap had to be added.

11. The facts in both the cited decisions are quite distinct and

not comparable to the present case, where the chassis

manufactured is cleared on the assessable value of the chassis,

being 110% of the cost of manufacture, in which event the 10%

value definitely has to be included, when the job worker

supplies the completed motor vehicle, with ‘body built’ to the

manufacturer, along with the value of the raw materials and

expenses incurred by the job worker and profits generated in

the job work. What was not includable, even as per M/s Ujagar

Prints and Others (II)3 & M/s Ujagar Prints and Others (III)4

was the anticipated profit in sale of the completed motor vehicle

by the manufacturer and the expenses incurred by the

manufacturer after receipt of the competed vehicle from the job

worker.

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12. Hence, it is based on M/s Ujagar Prints and Others (III)2

that the finding was rendered. The assessee was liable to include

10% included in the valuation under Rule 8, on which the

manufacturer pays duty at the time of supply to the job worker.

When the job worker computes excise duty on the deemed sale,

at its gate, that 10% has to be included since it has gone into the

cost of the vehicle on which excise duty is already paid and

credit utilised. Hence, we are not inclined to find that the matter

was in a flux, since the Constitution Bench decision applied

squarely. The Larger Bench of the CESTAT, meeting the

submissions of the assessee regarding the various Tribunal

decisions cited in their support, observed that it does not cut any

ice; rightly so.

13. However, the issue also is with respect to the penalty that

can be levied based on the extended limitation period under the

proviso to Section 11A of the Act. Reliance can be usefully

placed on the decisions in Larsen & Toubro Ltd. v. CCE9,

Continental Foundation Joint Venture Holding v. CCE10, CCE

v. Kolety Gum Industries11.

9 (2007) 9 SCC 617

10 (2007) 10 SCC 337

11 (2018) 12 SCC 245

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14. Larsen & Toubro Ltd.9, was a case in which a SCN was

issued proposing recovery of duty and levy of penalty without

any allegation of suppression, which was later withdrawn and a

second SCN on the same premise, for the same period, was

issued with an allegation of suppression of facts, merely to

invoke the extended limitation period. It was held that extension

of the period of limitation entails both civil and criminal

consequences and therefore reasons thereof must be

specifically stated in the SCN, in the absence of which, the Court

would be entitled to raise an inference that the case was not one

where the extended period of limitation could be invoked. Isn

the first SCN, there was no such allegation raised.

15. Continental Foundation Joint Venture Holding10

explained the words employed in the proviso to Section 11-A. It

was held that as far as ‘fraud’ and ‘collusion’ are concerned, the

intent to evade duty is built into these words and ‘misstatement’

or ‘suppression’ of facts are clearly qualified by the word ‘wilful’,

which also means with an intent to evade duty. Even

‘contravention of any of the provisions of this Act or Rules’ is also

qualified by the immediately following words ‘with intent to

evade payment of duty’. Therefore, there cannot be a

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suppression or misstatement of fact, which is not wilful and yet

constitute a permissible ground for invocation of proviso to

Section 11-A. Therein, on facts, it was found that there were

circulars issued by the department, which were in favour of the

assessee and the view expressed by the CEGAT in a case, was

later held to be incorrect in a Larger Bench decision.

16. More importantly, for our purpose, it was held that ‘when

the facts are known to both the parties, omission by one party to do

what he might have done would not render its suppression’. In the

instant case, we already noticed that the manufacturer cleared

the chassis at 110% of its cost of manufacture, which was known

to the Department. Hence, if 10% was not added when

computing the duty at the time of clearance by the job worker,

the department ought to have taken immediate action under sub-

section (1). The proviso cannot be invoked to extend the period

of limitation.

17. The order of the Tribunal which affirmed the order of the

original authority and the appellate authority are set aside. We

make it clear that the assessee’s liability to include the entire

cost price on which excise duty is paid by the manufacturer on

supply of chassis for body building, at the time of its supply of

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Civil Appeal Nos.10504-10506 of 2017

the built motor vehicle is unassailable, which for the subject year

is not leviable for reason of limitation having run to the peril of

the revenue. The demand raised was for the period 01.11.2004

to 31.03.2007. The SCN dated 30.04.2008 was beyond the one-

year period provided under Section 11-A (1).

18. The appeals are allowed.

19. Pending application(s), if any, shall stand disposed of.

.……………………………... J.

(J. B. PARDIWALA)

..………….…………………. J.

(K. VINOD CHANDRAN)

NEW DELHI;

AUGUST 13, 2026.