Budget 2014: Fiat case resolved, pay excise duty on final sale price

NEW DELHI: Automakers, white good makers and other manufacturers will not have to pay excise duty on the discounts they offer to their consumers. Finance minister Arun Jaitley has corrected a significant anomaly in the excise law created by the controversial 'Fiat judgment', as part of slew of measures to boost the country's manufacturing sector.

The budget has said that excise duty would be levied on the final sale price. The controversial Supreme Court ruling in the Fiat case had impacted the manufacturing sector, particularly automobile, consumer durables, FMCG and chemicals sectors, in a big way with the excise department raising retrospective tax demands on discounts given to customers.

The apex court had on August 29, 2012 ruled that if a company sells its product at a loss for a long period of time because of commercial considerations or competitive pressures, then price is not the sole consideration and excise duty should be paid on manufacturing cost plus a 'reasonable' profit margin.

Though the government had, as a corrective measure, restricted the application of this ruling by a directive to one year, the industry had been pitching for a change in law for certainty. "This is good news for the industry which was facing huge litigation after the Fiat decision a couple of years back, particularly in the auto sector," said Pratik Jain, partner at KPMG.