1997 (9) TMI 216 - AT - Central Excise

Summary

Issues:
- Dispute over deduction of secondary packing cost
- Dispute over deduction for average freight and transit insurance
- Interpretation of calculation method for average freight and transit insurance
- Admissibility of deductions in excisable products pricing
- Applicability of Baroda Meters case on deductions
- Jurisdiction of manufacturer and buyers in determining deductions
- Authority of adjudicating body to alter deduction percentages

Detailed Analysis:

The appeal before the Appellate Tribunal CEGAT, New Delhi stemmed from a disagreement over the Order-in-Appeal issued by the Collector of Central Excise (Appeals), Bombay, which had overturned a previous Order-in-Appeal by the Assistant Collector, Bombay-III. The Respondent, engaged in manufacturing excisable products, had filed price lists seeking deductions, including for average freight and transit insurance, which were initially approved provisionally. However, a dispute arose following the Supreme Court judgment in the Bombay Tyres Intt. case and a subsequent clarificatory order. The Assistant Collector disallowed the deduction for secondary packing cost and adjusted the claimed deductions for average freight and transit insurance. The Collector (Appeals) reversed the Assistant Collector's decision, prompting the department to challenge the order.

The key contention revolved around the calculation method for average freight and transit insurance deductions. The Respondent had determined the average freight percentage based on the previous year's actuals by dividing the total freight paid by the net sale proceeds, resulting in 1.95%. However, the Assistant Collector disagreed, suggesting that the calculation should be based on gross sale proceeds instead of net proceeds, leading to a reduced percentage of 1.43%. The Tribunal emphasized that the quantification of deductions, such as average freight, is a matter between the manufacturer and buyers unless fraud or manipulation is proven. The Tribunal underscored that the specific amounts collected by the manufacturer as deductions should be honored, regardless of the percentage calculated.

In light of the Baroda Meters case precedent, the Tribunal reiterated that deductions declared by the manufacturer and collected from buyers are permissible unless fraudulent intent is established, which was not the case here. The Tribunal concluded that the adjudicating authority lacked the jurisdiction to alter the percentage of deductions, emphasizing that the actual figures collected by the manufacturer should be deducted to determine the assessable value. Consequently, the Tribunal found no grounds to interfere and dismissed the appeal, affirming the Collector (Appeals) decision in favor of the Respondent.