2016 (4) TMI 16 - AT - Central Excise

Under-valuation of the goods - place of removal under Section 4 of the Central Excise Act 1944 - Held that - The finding of the Adjudicating Authority that the appellant is required to pay duty on such goods sold from the depot at a higher price over and above price as declared in their declaration, is contrary to provision of Section 4(1)(a) of the Act, 1944 and the case laws. It is not in dispute that the appellant cleared the goods from their factory, at the price prevalent at the depot and therefore, the demand of duty cannot be raised for increase of the price after clearance of the goods from the depot. Thus, the demand of duty cannot be sustained. With regard to demand of duty for the period from 28.9.1996 to March 1999 the Adjudicating Authority observed on the basis table as mentioned in the impugned order, that there was difference in price between the columns Rate Charged from Customer from Depot and Declared Price of Goods in the factory at which duty paid at the time clearance /Sale Price (S.P.) . It is observed that S.P. is inclusive of duty. The appellant in their reply to show cause notice categorically stated that the duty element is required to be excluded in the invoice value of the depot. The appellant also submitted some of the copies of invoices to show that the price it depot is cum-duty price. It is noticed that as per Section 4 (3) (d) of the Act, 1944, value in relation to any excisable goods does not include excise duty, sales tax etc., Hence, the findings of the Adjudicating Authority that the factory price is inclusive of duty cannot be sustained. Denial of benefit of cash discounts from assessable value - Held that - It is not in dispute that the duty has been demanded in respect of cash discount, which was not actually passed on to the customer. The Hon ble Supreme Court in the case of Purolator India Ltd 2015 (8) TMI 1014 - SUPREME COURT set aside demand of duty on cash discount issue. The Hon ble Supreme Court allowed cash discount even after introduction of Transaction Value for the reason the cash discount for prompt payment as agreed by the buyer at the time of clearance of goods is a contractual price and it would be deducted from the sale price. It may be noted that the present case is prior to July 2000 and therefore, the appellant is eligible for deduction of cash discount from the assessable value.

Issues Involved:
1. Under-valuation of goods.
2. Determination of assessable value at factory gate vs. depot.
3. Applicability of cash discounts.
4. Exclusion of transportation charges from assessable value.
5. Limitation and imposition of penalties.

Issue-wise Detailed Analysis:

1. Under-valuation of Goods:
The main issue pertains to the alleged under-valuation of goods by the Assessee during the period from September 1995 to March 1999. The Adjudicating Authority bifurcated the demand into two periods due to a change in the definition of "place of removal" effective from 28.09.1996. The Assessee was accused of not determining the correct assessable value by claiming excess deductions for freight and forwarding charges and failing to consider the value collected from their depots.

2. Determination of Assessable Value at Factory Gate vs. Depot:
The Adjudicating Authority's decision was based on the price prevalent at the depot at the time of removal from the factory. The Tribunal clarified that the assessable value should be determined based on the price at the depot at the time of clearance from the factory, both before and after the amendment on 28.09.1996. The Assessee's practice of paying duty based on the depot price at the time of removal from the factory was upheld, aligning with Section 4(1)(a) of the Central Excise Act, 1944, and supported by precedents from the Hon'ble Supreme Court and Tribunal.

3. Applicability of Cash Discounts:
The denial of cash discounts from the assessable value was contested. The Tribunal referred to the Hon'ble Supreme Court's decision in Metal Box India Ltd, which allowed cash discounts even if not uniformly given to all customers. The Tribunal also cited the recent decision in Purolator India Ltd, which confirmed that cash discounts known at the time of clearance should be deducted from the sale price. The Assessee was thus entitled to cash discounts as admissible deductions.

4. Exclusion of Transportation Charges from Assessable Value:
The Revenue's appeal against the exclusion of excess transportation charges was based on the contention that the Assessee claimed more than the actual cost. The Tribunal upheld the Adjudicating Authority's decision to drop the demand, referencing the Hon'ble Supreme Court's ruling in Baroda Electric Meters Ltd, which excluded profits made on transportation from the assessable value. The Tribunal confirmed that only actual transportation costs should be excluded, provided they are shown separately in the invoice.

5. Limitation and Imposition of Penalties:
The Tribunal did not delve into the limitation issue as the appeal was decided on merit. Consequently, the imposition of penalties on the Assessee and others was deemed unwarranted, given that the demand of duty itself could not be sustained.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals filed by the Assessee and others, and rejected the Revenue's appeal. The decision emphasized the correct interpretation of assessable value, the admissibility of cash discounts, and the proper exclusion of transportation charges, aligning with established legal precedents.

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