2003 (12) TMI 92 - AT - Central Excise

Mixture of soft drink concentrate and sugar - Valuation of syrup for Central Excise duty including sale price to related party, deduction of discounts, inclusion of lease charges for dispensing machine - HELD THAT - In the present case, the assessee is selling part of the goods to unrelated dealers and part of the goods through a related person. Central Excise Law contains special provisions in relation to the valuation of goods sold to or through related persons prior to the introduction of new provisions in 1-7-2000 and thereafter. However, the special provision is applicable only in cases where the goods were exclusively sold to or through related persons and not otherwise. This is clear from the wording of the provisions themselves. In any event, even if the valuation was sought to be made based on the sale price of the related person, there was no warrant to refuse deduction of discount. Assessable value under the law is the net price received by the assessee or its related person and not the gross price. It is well settled that all discounts by whatever name they are called are eligible for deduction from the gross price for the purpose of assessment of the goods, provided the discounts are known in advance and are not returnable. Uniformity is not a criterion at all. In the present case no contention has been raised that these discounts were not actually given or that they were returnable. In fact, the discounts were given in the invoices at the time of sales themselves. Therefore, the denial of the discounts was clearly against settled law. We find no authority for the inclusion of the lease charges on the dispensing machine in the assessable value of syrup. Sale of syrup and leasing of dispensing machine are two separate activities. Considerations for them are also separate. There is no warrant in law for the inclusion of the consideration for different activity in the assessable value of excisable goods, definition of 'transaction value' in the new section notwithstanding. It is clear from a perusal of that definition that what is included is any additional amount charged as price, by reason of or in connection with the sale of the goods under assessment, and not amounts charged in connection with or by reason of sale of other goods or provision of other services. Therefore, there was no justification for inclusion of lease charge also. In view of what has been stated above, the impugned order is not sustainable. It is set aside and the appeal is allowed with consequential relief, if any, to the appellant.

Summary

Issues involved: Valuation of syrup for Central Excise duty including sale price to related party, deduction of discounts, inclusion of lease charges for dispensing machine.

Valuation based on sale price to related party: Central Excise authorities fixed assessable value at sale price of marketing subsidiary without allowing deduction of discounts. Appellants argued that prices to independent buyers should constitute assessable value for all goods, as those prices were commercial. Revenue authorities did not dispute commercial nature of prices to distributors.

Deduction of discounts: Appellants contended that discounts offered by subsidiary should be deducted while assessing for Central Excise duty. They argued that discounts need not be uniform, only known at time of sale, and non-returnable. Discounts were clearly stated in sale invoices.

Valuation of goods sold to related persons: Appellants argued that special provisions for related persons applied only when goods were exclusively sold to or through related persons, not in cases of partial sales to related and unrelated parties. Central Excise Valuation Rules were deemed inapplicable.

Inclusion of lease charges: Appellants opposed inclusion of lease charges for dispensing machine in assessable value of syrup, citing separate nature of leasing activity from syrup manufacturing and sales. They relied on a Supreme Court decision to support their argument.

Judgment: The Tribunal found the valuation order unsustainable. It was set aside, and the appeal was allowed in favor of the appellant. The special provision for related persons was deemed inapplicable in this case, and discounts should have been deducted. Inclusion of lease charges for dispensing machine was unjustified, as it was a separate activity from syrup sales.