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TMI Blog2018 (5) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... are provided by the Assessees to the customers on rent whereas in others the customers bring their own containers. For making available or for filling up the containers provided by the customers the Assessees charge the customers certain amounts under different heads viz. packing charges, wear and tear charges, facility charges, service charges, delivery and collection charges, rental charges, repair and testing charges. The Assessees treat the said amounts as their income from ancillary or allied ventures. 2. The issue arising is 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 Central Excise Act, 1944 (hereinafter referred to as "the Act") as amended with effect from 1st July, 2000. 3. Perceiving a conflict between the two decisions of this court in Union of India and Ors. v. Bombay Tyre International Ltd. and Ors. (1984) 1 SCC 467 and Commissioner of Central Excise, Pondicherry v. Acer India Ltd. (2004) 8 SCC 173, a two judge Bench of this Court by order dated 30th July, 2009 (2009) 14 SCC 596 referred the following questions for an answer by a la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by Finance Act 2000 (Act 10 of 2000 Relevant portion of Section 3 as substituted/amended (with effect from 12th May, 2000) by Section 92 of the Finance Act, 2000 (No.10 of 2000) 3. Duties specified in the First Schedule to be levied. - (1) There shall be levied and collected in such manner as may be prescribed,- (a) a duty of excise on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985; (b)............ 3. Duties specified in [the First Schedule and the Second Schedule] to the Central Excise Tariff Act, 1985] to be levied.- There shall be levied and collected in such manner as may be prescribed,- (a) a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); (b)............. Section 4 Section 4 as originally enacted (in the Central Excise and Salt Act, 1944), Section 4 as amended by Amendment Act No.22 of 1973 Section 4 as amended by Finance Act, 2000 with effect from 1.7.2000 Deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who sell such goods in retail; (b) where the normal price of such goods 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 subsection (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; or (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise under this Act and includes his agent; (b) persons shall be deemed to be "related" if - (i) they are interconnected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and distributor of the assessee, or a subdistributor of such distributor; or (iv) they are so associated that they have interest, directly or indirectly, in the business of each other. Explanation. - In this clause - (i)"inter-connected undertakings" shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and (ii)"relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956); (c) "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, from where such goods are removed; (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to have been originally accise", a word derived through the Dutch from the late Latin accensare, to tax; the modern form, which ousted accise" at an early date, being apparently due to a mistaken derivation from the Latin excidere, to cut out. It was at first a general word for a toll or tax, but since the 17th century it has acquired in the United Kingdom a particular, though not always precise, signification. The primary meaning of "excise duty" or "duty of excise" has come to be that of a tax on certain articles of luxury (such as spirits, beer or tobacco) produced or manufactured in the United Kingdom, and it is used in contradistinction to customs duties on articles imported into the country from elsewhere. At a later date the licence fees payable by persons who produced or sold excisable articles also became known as duties of excise; and the expression was still later extended to licence fees imposed for revenue, administrative, or regulative purposes on persons engaged in a number of other trades or callings. Even the duty payable on payments for admission to places of entertainment in the United Kingdom is called a duty of excise; and, generally speaking, the expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visory opinions only, but we do not think that we ought to regard them as any less binding upon us on that account. We accept, therefore, the general division between the Central and Provincial spheres of taxation which commended itself to the majority of the Court in that case................. They recognized that the expression 'duty of excise' is wide enough to include a tax on sales ; but where power is expressly given to another authority to levy a tax on sales, it is clear that "duty of excise" must be given a more restricted meaning than it might otherwise bear. On the other hand the fact that "duty of excise" is itself an expression of very general import is no reason at all for refusing to give to the expression "tax on sales" the meaning which it would ordinarily and naturally convey. In these circumstances the question at issue in the present appeal appears to us to lie within a very small compass. The duties of excise which the Constitution Act assigns exclusively to the Central Legislature are,- according to the 1939 F.C.R 18, duties levied upon the manufacturer or producer in respect of the manufacture or production of the commodity taxed. The tax on the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arily coincide with the time of manufacture. The stage of collection can and usually is a matter of administrative convenience and such stage, normally, is the stage of clearance of article when it, for the first time, enters the trade for sale. The above position was affirmed by the Privy Council in Governor-General in Council v. Province of Madras [A.I.R. (32) 1945 Privy Council 98] wherein it was, inter alia, held as follows: "The term " duty of excise " is a somewhat flexible one: it may, no doubt, cover a tax on first and, perhaps, on other sales: it may in a proper context have an even wider meaning. An exhaustive discussion of this subject, from which their Lordships have obtained valuable assistance, is to be found in the judgment of the Federal Court in 1939 F. C. R. 18. Consistently with this decision, their Lordships are of opinion that a duty of excise is primarily a duty levied upon a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax upon goods not upon sales or the proceeds of sale of goods. Here again, their Lordships find themselves in complete accord with the reasoning and conclusions of the Federal Court in the Boddu Paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein above to hold that "the levy of a tax is defined by its nature, while the measure of the tax may be assessed by its own standard. It is true that the standard adopted as the measure of the levy may indicate the nature of the tax but it does not necessarily determine it.". The further view expressed in Bombay Tyre International Ltd. (supra) is that merely because excise is a levy on manufactured goods the value of the excisable article for the purpose of levy cannot be limited to only the manufacturing cost plus manufacturing profit. This Court went on to hold that "a broader based standard of reference may be adopted for the purpose of determining the measure of the levy. Any standard which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the levy." 15. A reading of Section 4 of the Act, as originally enacted; as amended by 1973 Amendment; and as further amended by 2000 Amendment would clearly show that the value of the article for the purposes of levy of ad valorem duty was with reference to the price i.e. 'normal price' prior to the 2000 Amendment and thereafter with reference to the 'transaction value' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the article chargeable with duty from the factory or other premises aforesaid. The new Section 4 provides by sub-section (2) that where the price of excisable goods for delivery at the place of removal is not known and the value 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 has to be excluded from such price. The new Section 4 also contains sub-section (4)(d)(ii) which declares that the expression "value" in relation to any excisable goods, does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale. Now these are clear provisions expressly providing for deduction, from the price, of certain items of expenditure. But learned counsel for the assessees contend that besides the heads so specified a proper construction of the section does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that advertisement expenses, marketing and selling organisation expenses and after-sales service promote the marketability of the article and enter into its value in the trade. Where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate, the expenses incurred by the assessee upto the date of delivery under the aforesaid heads cannot, on the same grounds, be deducted. But the assessee will be entitled to a deduction on account of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold. The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery." (Underlining is ours) 20. We find no room whatsoever for any disagreement with the above view taken by this court in Bombay Tyre International Ltd. (supra). It is a view consistent with what was held by the Federal Court and the Privy Council in Central Provinces and Berar (supra),Boddu Paidanna (supra) and Province of Madras (supra) and the decisions that followed thereafter inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context that the decision of this Court in Acer India Ltd. (supra) has to be understood. 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. (supra). 23. Accordingly, we answer the reference by holding that 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 vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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