After the Supreme Court judgment in the Fiat India case in August 2012, excise authorities had been sending notices to various automobile companies, among others, arguing they were evading excise duty by selling vehicles at a discount. Since discounting is market practice, and industry represented government, the Budget came out with a clarification on this.
The clarification read, “Provided that where price is not the sole consideration for sale...and they are sold...at a price less than manufacturing cost...and no additional consideration is flowing directly or indirectly from the buyer to such assessee, the value of such goods shall be deemed to be the transaction value.”
While that sounds fair and the excise authorities correcting a problem that arose out of the Fiat judgment, Rajeev Dimri, partner, BMR & Associates, points out: “The Supreme Court in the Fiat judgment had held market penetration by way of predatory pricing as constituting ‘additional consideration’.”
In other words, thanks to possible inadequate drafting of the notification, the industry is back to the Fiat judgment.
Similarly, where the taxman has issued orders on transfer pricing additions to income, and where the assessee has reached an Advance Pricing Agreement (APA), the finance minister’s speech said a ‘roll-back’ was to be introduced — the same profit margins agreed to in the APA would be applied to transactions ‘in specified circumstances’. The explanatory memorandum clarifies the roll-back will be allowed ‘on a case to case’ basis.