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TMI Blog2015 (8) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 4 of the Central Excise and Salt Act, 1944. 3. Apart from undertaking manufacturing activities, the appellant at times also receives goods from customers for repair in case of defects noticed by the customers. The customers either reject the entire lot or a particular box etc. if they notice any defect, so that their time is not wasted in checking each and every item and thus, goods are sent back to the appellant. On receipt of such consignments, the appellant checks the same for defects indicated and undertakes necessary repairs. Thereafter, the finished products are returned to customers. The appellant was filing the necessary D-3 declarations for receipt of such returned goods and was maintaining the register required in Form V for the said purposes and was thereafter returning such repaired items under the provisions of Rule 173H without payment of duty thereon. 4. A Show Cause Notice dated 2.4.2002 was issued wherein it was alleged that the appellant is not eligible for the various deductions claimed on account of volume discount, sales tax and cash discount. Besides this it was also alleged that the appellant has removed new finished excisable goods instead of old/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the dues." 6. When it came to cash discount, the Tribunal upheld the finding of the Commissioner on the following basis:- "10. Regarding cash discount, it is not in dispute that the duty has been demanded in respect of cash discount which was not actually passed on to the customers. The learned Advocate has relied upon the decision in Pace Marketing Specialities Ltd, supra, wherein it has been held by the Tribunal that cash discount is a discount allowed for prompt payment for the goods and when this discount is reduced from the invoice price, transaction value at the time of delivery of goods is obtained, otherwise, the invoice price is a future price and as the assessable value is to be determined with regard to time of removal financing and other cost cannot form part of the assessable value. With due regard, we find ourselves unable to agree with this view. The measure for valuation under New Section 4 of the Central Excise Act (with effect from 1.7.2000) is the "transaction value" and not the "deemed value" which was the case under the Old Section 4 of the Act. Under Old Section 4 the value shall be deemed to be the normal price, that is to say, the price at which su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinarily sold in the course of wholesale trade. Now under New Section 4, one has not to look as to what is the price at which goods are ordinarily sold in the course of wholesale trade. The price actually paid or payable is to be taken up as the assessable value. In the present matter, the transaction value has to be taken for the purpose of assessment of duty under Section 4 of the Central Excise Act and as admittedly no cash discount has been given to the customers, the actual price paid by them shall be the assessable value. 12. Accordingly, we reject the appeal as far as it relates to the allowance of deduction on account of cash discount. In respect of volume discount and sales tax and duty liability in respect of returned goods, the matter is remanded to the jurisdictional Adjudicating Authority for re-adjudication in terms of our direction. We leave the issue regarding imposition of penalty open to be decided by the Adjudicating Authority." 7. Shri Lakshmikumaran, learned counsel for the appellant, has argued that Section 4 of the Central Excise and Salt Act, 1944 as amended in 2000, has made no change in the situation qua cash discount as it obtained under the old Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to be - (a) The wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production, or if a whole the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists, or (b) Where such price is not ascertainable, the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sold or is not capable of being sold at place at any other place nearest thereto. Explanation-In determining the price of any article under this section, no abatement or deduction shall be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid." 12. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods is not ascertainable for the reason, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed. (2) Where, in relation to any excisable goods the price thereof for delivery at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price. (3) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3. (4) For the purposes of this section, - (a) "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent; (b) "place of removal" means- (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) a depot, premises of a consignment agent or any other pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder such Act, or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), already paid on the raw material or component parts used in the production or manufacture of such goods) from the duty of excise under such Act is for the time being in force, the duty of excise computed with reference to the rate specified in such Act, in respect of such goods as reduced so as to give full and complete effect to such exemption; and (ii) in any other case, the duty of excise computed with reference to the rate specified in such Act in respect of such goods. (e) "wholesale trade" means sales to dealers, industrial consumers, Government, local authorities and other buyers, who or which purchase their requirements otherwise than in retail." 13. Section 4, as it reads after the amendment of 2000, is as follows:- "4. Valuation of excisable goods for purposes of charging of duty of excise.- (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the remova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to 1973, after the amendment in 1973, or after the amendment of 2000, is that excisable goods have to have a determination of "price" only "at the time of removal". This basic feature of Section 4 has never changed even after two amendments. The "place of removal" has been amended from time to time so that it could be expanded from a factory or any other premises of manufacture or production, to warehouses or depots wherein the excisable goods have been permitted to be deposited either with payment of duty, or from which such excisable goods are to be sold after clearance from a factory. In fact, Section 4(2) pre- 2000 made it clear that where the price of excisable goods for delivery at the place of removal is not known, and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery is to be excluded from such price. This is because the value of excisable goods under the Section is to be determined only at the time and place of removal. Even after the amendment of Section 4 in 2000, the same scheme continues. Only, Section 4(2) is in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or prior to the removal of the goods. The calculations are made at the end of the year and the Bonus at the said rate is granted only to a particular class of Dealers. This is computed after taking stock of the accounts between MRF and its dealers. It is not in the nature of a discount but is in the nature of a Bonus or an incentive much after the invoice is raised and the removal of the goods is complete. In the circumstances, we are of the opinion that MRF is not entitled to deduction under this head." We are, however, of the respectful opinion that the said reasoning cannot be accepted in view of the clear finding recorded by the Assistant Collector that this system of discount is prevalent in the industry and is known and understood at the time of removal of particular goods, though the amount is quantified later. In view of the said finding and in the light of the clarificatory Order in Bombay Tyre International, we hold that this claim has been rightly allowed by the Assistant Collector. So far as the prompt payment discount is concerned, it is payable under a scheme called 'prompt payment discount scheme' which is applicable only to up-country non-RCS dealers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much as cash discount is something which is "known" at or prior to the clearance of the goods, being contained in the agreement of sale between the assessee and its buyers, and must therefore be deducted from the sale price in order to arrive at the value of excisable goods "at the time of removal". 19. We were referred to the Central Board of Excise and Customs Bulletin for the period January-March, 1975 in which the Board laid down:- "Cash Discounts That is, discounts for prompt payment of price of goods on delivery, are admissible in arriving at the assessable value if they are available to all buyers. This aspect has been dealt with in detail under the heading "price". "...Some assessee may give to all his buyers cash discount, that is a discount for prompt payment. In other words, they charge a somewhat lesser price where there is cash payment, but charge a higher price (i.e. without deduction of the cash discount) if the payment is not made in cash. In such cases, the cash discount, if allowed, will be admissible on the principle that only the net price obtained after deduction of the cash discount is the price of the goods." "Illustrations. (iv) Assessee A sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 4, that is, Section 4 before its amendment in the year 2000. This Court held that the amended Section 4 would require that such amount of 75% is not deductible as sales tax because, according to this Court, only sales tax that is "actually paid" could be deducted post Section 4 as amended in 2000. This Court said:- "It is evincible from the language employed in the aforesaid circular that set off is to be taken into account for calculating the amount of sales tax permissible for arriving at the "transaction value" under Section 4 of the Act because the set off does not change the rate of sales tax payable/chargeable, but a lower amount is in fact paid due to set off of the sales tax paid on the input. Thus, if sales tax was not paid on the input, full amount is payable and has to be excluded for arriving at the "transaction value". That is not the factual matrix in the present case. The assessee in the present case has paid only 25% and retained 75% of the amount which was collected as sales tax. 75% of the amount collected was retained and became the profit or the effective cost paid to the assessee by the purchaser. The amount payable as sales tax was only 25% of the normal s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the said amount could not be deducted as only amounts payable to the State Government as sales tax can be deducted. This was so held on an interpretation of the last part of the definition of "transaction value". The facts of the present case are concerned with the first part of the definition of "transaction value" which has to be read with Section 4(1)(a) as has been stated above. 25. This judgment does not in any manner deviate from the settled legal position so far as cash discounts are concerned as has been laid down in Union of India v. Bombay Tyre International (supra) and Government of India v. MRF (supra). In fact, as has been pointed out earlier, this judgment did not concern itself with the "price" of excisable goods that must be ascertained only at the time of removal from the factory gate. Since this Court was only concerned with whether or not certain amounts by way of sales tax were or were not to be deducted from "price", the said judgment has little application to the facts of the present case. 26. In view of what has been said above, it is clear that "cash discount" has therefore to be taken into account in arriving at "price" even under Section 4 as a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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