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TMI Blog1989 (9) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... 27-42/Pat./89-A dated 9-3-1989 of the Collector approving 15 price lists filed by the respondents. In fact by this order the Collector approved 16 price lists, however, the department has not filed any appeal against the approval of the price list No. Ex/P/Strip/87-88/26. 3. The relevant facts are as follows:- The respondents M/s. Incab Industries Ltd. who supply goods on a contract basis to various buyers including Indian Railways submitted price lists by reducing the value declared in the earlier price lists by 8%. The said reduction is consequent to the Railway Board s letter No. 85/F(3)/1/D/VI/4 dated 15-1-1987 and 16-1-1987, requesting the respondents to pass on the benefit of Modvat credit obtained by them to the Railways. 4. On the basis of above facts show cause notices were issued to the respondents proposing to disallow their claim to reduce the assessable value by 8%. On consideration of their reply the Asstt. Collector approved the price lists after disallowing the respondents claim to reduce the assessable value by 8%. While doing so he relied on an earlier Order No. V(85)70/411/87 dated 15-12-1987 passed by him in the respondents case only. 5. The responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have reduced the price of finished goods resulting in a benefit to the consumer but it does not result in reducing the assessable value. He submitted that by adopting the present procedure the assessee is taking the benefit of Modvat twice. On the one hand he is taking the Modvat credit for utilising it towards payment of duty on the end product and on the other hand he is also reducing the assessable value with the result that the net excise duty payable by the respondents is reduced resulting in the evasion of duty. 9. As against the above Shri Mukherjee submitted that they entered into DGS D rate contract with Railways, BHEL, and Kirloskers. The price at which the products are to be sold to these organisations is fixed by contracts on the basis of which purchase orders are placed on them. The price lists are filed on the basis of the purchase orders. The price mentioned in the contract invariably is exclusive of excise duty as the excise duty is paid by the Railways and is separately mentioned in the contract itself. After the introduction of Modvat the Railways insisted that Modvat benefit should be passed on to them. In pursuance of this there were negotiations and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such class of buyers; (ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; (iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products"), as the Central Government may, by notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereinafter referred to as the specified duty ) paid on the goods used in or in relation to the manufacture of the said final products (hereinafter referred to as the inputs ) and for utilising the credit so allowed towards payment of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the said notification, subject to the provisions of this section and the conditions and restrictions that may be specified in the Notification : RULE 57G. Procedure to be observed by the manufacturer. - (1) Every manufacturer intending to take credit of the duty paid on inputs under Rule 57A, shall file a declaration with the Assistant Collector of Central Excise having jurisdiction over his factory, indicating the description of the final products manufactured in his factory and the inputs intended to be used in each of the said final produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f duty on the final product subject to following the procedure under the rules. It does not directly effect or reduce the assessable value automatically. It is no doubt true that it will result in reduction in the cost of final product to the extent of the credit, but it does not automatically reduce the assessable value which is to be determined in accordance with Section 4. The assessable value has to be determined in accordance with Section 4 of the Act and Section 4 only and Modvat credit has no direct impact on the assessable value. 17. As stated in the earlier paragraphs the benefit under Modvat is given to avail the credit of duty paid on the inputs while paying duty on the final product. It has and it cannot have any effect on the assessable value which is to be determined in accordance with Section 4 of the Act. Further, the assessable value is to be determined in accordance with the provisions of the Act, and the Modvat credit is provided by the rules and the rules cannot have any overriding effect on the provisions of the Act. 18. It may be that in a given case the manufacturer may revise the contract price at which the goods are sold as a result of reduction in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally ask for reduction in the assessable value of the product as a result of obtaining Modvat credit, as under the rules, the benefit under Modvat is available only to deduct the duty paid on the inputs while paying duty on the final product, by following the procedure prescribed under the rules. Secondly, the modification, revision, reduction in the price as a result of revision of contract price requires the prior approval of the proper officer under Rule 173C 2(vi) and in the absence of which it cannot be the assessable value. 19. From the foregoing discussion it follows that the assessable value cannot be reduced automatically as a result of obtaining Modvat credit by the manufacturer. 20. The respondents contended that the reduction in the assessable value mentioned in the price-list is based on a letter of Railways under which the price of the product is revised. We are unable to accept this contention, as neither before us nor before the lower authorities, the original contracts entered into between the respondents and the Railways is placed. We do not know what are the terms of the contract? We do not know whether the terms of the contract can be altered specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X
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