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2018 (5) TMI 915 - SC - Central ExciseValuation - Distinction between Normal Value and Transaction Value - inclusion of packing charges, wear and tear charges, facility charges, service charges, delivery and collection charges, rental charges, repair and testing charges - whether the aforesaid charges realised by the Assessees are liable to be taken into account for determination of value for the purpose of levy of duty in terms of Section 4 of the CEA 1944 as amended with effect from 1st July, 2000? Held that - The price charged for a manufactured article at the stage when the article enters into the stream of trade in order to determine the value/transaction value for computation of the quantum of excise duty payable does not come into conflict with the essential character or nature of the levy. The measure is the value and value is related to price. The price charged at the stage of clearance, in addition to manufacturing cost and manufacturing profit, can include certain value additions and inclusions which enrich the value of the product to make it suitable for sale or to facilitate such sale. At this stage, impost has nothing to do with the sale. The impost is on manufacture. But it is the value upto the stage of the first sale that is taken as the measure. Doing so does not introduce any inconsistency between the nature and character of the levy and the measure adopted. The amendment to Section 3 by substitution of the words a duty of excise on all excisable goods by the words a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods is conspicuous. The amendment of Section 3 to the Act not only incorporates the essentials of a changed concept of charging of tax on additions to the value of goods and services at each stage of production but also engrafts in the statute what was judicially held to be permissible additions to the manufacturing cost and manufacturing profit. Regarding decision in the case of Acer India Ltd (2004 (9) TMI 106 - SUPREME COURT OF INDIA). - Held that - The observations made in paragraph 84 thereof to the effect that transaction value defined in Section 4(3)(d) of the Act would be subject to the charging provisions contained in Section 3 of the Act will have viewed in the context of a situation where an addition of the value of a non-dutiable item was sought to be made to the value of a dutiable item for the purpose of determination of the transaction value of the composite item. This is the limited context in which the subservience of Section 4(3)(d) to Section 3 of the Act was expressed and has to be understood. If so understood, we do not see how the views expressed in paragraph 84 of Acer India Ltd. (supra) can be read to be in conflict with the decision of Bombay Tyre International Ltd. (1983 (10) TMI 51 - SUPREME COURT OF INDIA). The measure of the levy contemplated in Section 4 of the Act will not be controlled by the nature of the levy. So long a reasonable nexus is discernible between the measure and the nature of the levy both Section 3 and 4 would operate in their respective fields as indicated above. The view expressed in Bombay Tyre International Ltd.(1983 (10) TMI 51 - SUPREME COURT OF INDIA) is the correct exposition of the law in this regard. Further, we hold that transaction value as defined in Section 4(3)(d) brought into force by the Amendment Act, 2000, statutorily engrafts the additions to the normal price under the old Section 4 as held to be permissible in Bombay Tyre International Ltd. (1983 (10) TMI 51 - SUPREME COURT OF INDIA) besides giving effect to the changed description of the levy of excise introduced in Section 3 of the Act by the Amendment of 2000. Infact, we are of the view that there is no discernible difference in the statutory concept of transaction value and the judicially evolved meaning of normal price . There is no discernible difference in the statutory concept of transaction value and the judicially evolved meaning of normal price .
Issues Involved:
1. Whether the charges realized by the Assessees for providing containers and other services are liable to be included in the value for the purpose of levy of duty under Section 4 of the Central Excise Act, 1944. 2. Whether Section 4 of the Central Excise Act, 1944, and the definition of "transaction value" in clause (d) of subsection (3) of Section 4 are subject to Section 3 of the Act. 3. Whether Sections 3 and 4 of the Central Excise Act operate in different fields and what is their real scope and ambit. 4. Whether the concept of "transaction value" makes any material departure from the deemed normal price concept of the erstwhile Section 4(1)(a) of the Act. Detailed Analysis: Issue 1: Inclusion of Charges in Value for Duty Levy The Assessees, manufacturers of industrial gases and other products, charge customers for various services related to containers. The issue is whether these charges should be included in the value for duty levy under Section 4 of the Central Excise Act, 1944. The court held that the measure of the levy is the price charged in respect of a transaction at arm's length. Inclusions that enrich the value of the article until its clearance are permissible additions to the price for determining the value under the old Section 4 and the transaction value under the amended Section 4 effective from 1.7.2000. Issue 2: Relationship Between Sections 3 and 4 The court examined whether Section 4 and the definition of "transaction value" are subject to Section 3 of the Act. The court concluded that the measure of the levy in Section 4 is not controlled by the nature of the levy in Section 3. As long as a reasonable nexus exists between the measure and the nature of the levy, both sections operate in their respective fields. The court reaffirmed that the views expressed in Bombay Tyre International Ltd. (1984) are correct, emphasizing that the measure of the levy can include value additions to the manufactured article prior to clearance. Issue 3: Scope and Ambit of Sections 3 and 4 The court clarified that Sections 3 and 4, despite being interlinked, operate in different fields. Section 3 deals with the nature of the levy, which is excise duty on manufacture, while Section 4 pertains to the measure of the levy, which is the value or transaction value of the manufactured goods. The court reiterated that the measure of the levy can include various value additions that enrich the product until its first sale, aligning with the principles established in Bombay Tyre International Ltd. Issue 4: Concept of "Transaction Value" vs. "Normal Price" The court addressed whether the concept of "transaction value" under the amended Section 4 represents a material departure from the "normal price" concept under the erstwhile Section 4(1)(a). The court found no significant difference between the statutory concept of "transaction value" and the judicially evolved meaning of "normal price." The amendment in 2000, which introduced the term "transaction value," essentially incorporated permissible additions to the normal price, as judicially recognized in Bombay Tyre International Ltd. Conclusion: The court answered the reference by holding that the measure of the levy in Section 4 is not controlled by the nature of the levy in Section 3. The "transaction value" defined in Section 4(3)(d) includes all value additions to the manufactured article prior to clearance, consistent with the principles established in Bombay Tyre International Ltd. The court found no conflict between the decisions in Bombay Tyre International Ltd. and Acer India Ltd., clarifying that the latter's observations were context-specific. The court affirmed that both Sections 3 and 4 operate in their respective fields, with a reasonable nexus between the measure and the nature of the levy.
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