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TMI Blog2007 (6) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... known as rental charges), and (c) freight to the different distribution agencies. The allegation is that the company had not declared these elements in invoices pertaining to the clearance of their goods (misc. edible preparations) deliberately to evade payment of Central Excise Duty. 3. The show cause notice has a reference to a statement recorded on 24-1-2002 of Shri Rahul Rastogi, Finance Manager of the Company. 4. The order-in-original passed earlier on 31-8-05 by the learned Asstt. Commissioner held that all the three elements are includible in the assessable value. Thus, the demand of Rs. 3,44,751/- was confirmed under Section 11A of the Act, imposing a like amount of penalty under Rule 25 of the Rules read with Section 11AC, and also confirming interest under Section 11AB of the Act. 5. Aggrieved by this order-in-original, the company went in appeal before the Commissioner (Appeals) who modified the order of the lower authority to the extent that demands confirmed under wear and tear charges stood dropped. He, however, ordered that the expenses on account of freight and commission charges are liable to be included in the transaction value. Accordingly, after adjusting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt these decisions weigh in favour of the Company. 6.2 Commission charges: The learned Commissioner (Appeals) had observed -if not wondered- that, no agreement was entered into by the company with its so-called "distributors" being referred to as "buyers". In the absence of any written agreement/contract between the parties he found that the transaction cannot be considered as if on principal to principal basis, paid to the so called distributors i.e. commission agents shall be liable to be included in the transaction value for payment of Central Excise Duty. 6.3 It was strongly contended by the learned authorized representative for the Company that the Department has adopted "double standard" while assessing goods: for the purpose of including commission, the Department applied Section 4(1)(a) which is the transaction value concept and for the purpose of including freight, the Department went for a different yard stick as Section 4(1)(b) read with Rule 7 was sought to be applied. 6.4 Opposing this observation, the learned Departmental Representative submitted that, there was no ambiguity as the transaction value had to be determined either at factory gate or at depot i.e. the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation :- Table-I Sales - Katra Shrine TYPE SHRINE KATRA PACK 18000 ml KO 18000 ml FX 18000 ml TU 18000 ml LI 18000 ml SP Cases per POM-'A' Selling Price/Cases-'B' 16.00 126.15 13.50 128.55 13.75 126.21 13.75 126.21 13.50 128.55 SP per POM-(AB) 2,018.32 1,735.37 1,735.37 1,735.37 1,735.37 Less Retailers Margin Landed Base for Dist. 2,028.32 1,735.37 1,735.37 1,735.37 1,735.37 Less : Shrine Discount Less Dist. Comm. 200.00 200.00 200.00 200.00 200.00 Landed Cost in Dist. 1,310.32 1,535.37 1,535.37 1,535.37 1,535.37 Less: Freight PME 70.00 709.00 70.00 70.00 70.00 Less : Rentals- POM PME 250.00 250.00 250.00 250.00 250.00 Balance Cum Sales Tax 1,498.32 1,215.37 1,215.37 1,215.37 1,215.37 Sales Tax @12.6% Balance Cum Excise 1,496.32 1,215.37 1,215.37 1,215.37 1,215.37 E. Duty @ 24.48% including 2 290.00 235.20 235.23 235.23 235.23 Total Excise Duty 290.00 235.23 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iler's margin and what not. In this context an extract of Shri Rahul Rastogi, Finance Manager of the Company's statement dated 24-12-2001 would read as under: "A Commission @ Rs. 200 per canister Rs. 150 per canister respectively is deducted from Kaba agency. The invoices show a sale value which is inclusive of dist. commission. It is his sale value indicated in the invoice which is reflected in the hooks of accounts and the commission is a deduction since the nature of expenses. This commission is given to those agencies to facilitate the sale of POM to retail outlets where we have not allowed the fountain machines for sale of fountain coke etc.. These agencies at Kaba & Srinagar are in the nature of commission agents". 7.3 In another statement recorded on 24-1-2002, Shri Rastogi states that the Company sells the POM containing canisters through their "distributor agencies", who are also called "whole-sale dealers/distributors". The Statement further reads: in respect of Commission, we do not "ralise" (sic) the dist. Commission from our distributors. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ursing this commission to Katra distributor only." 7.5 It may be seen here that in the case of Katra Distributor, the company raised the debit note for recovering the sale difference as the sale to Shrine Board was much below the "suggested price". This statement goes to prove that the Company extends its control on the price of their products far beyond the jurisdiction of their factory gate, demolishing their own theory that sales takes place at their factory gate. Though it is referred to as "suggested price", a perusal of the pricing master makes it crystal-clear that a precise pattern has been worked out, which jollywell amounts to a "dictated price". It was contended by the Revenue that, had it been a normal sale at the factory gate, in the ordinary course of trade, the company would not have gone ahead for compensating the transactions effected at distant stages by its buyers. This itself, according to him goes to prove that "sale at factory gate" is a myth created by the company deliberately to evade payment of duty. According to him by adopting this ingenious strategy, the company has managed to evade payment of excise duty. The contention is that the components of commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the "profit margin of the distributor". In this context it is relevant to recall the provisions of Section 4(1)(a) of the Act, which proclaims that price should be the sole criterion. Here, however we notice that it is not only the price but even the profit margin, which is admittedly a consideration. 7.8 It is also noticed that no payments made by the distributors (who are branded as "buyers" by the company) have ever been made invoice-wise. As demonstrated before us, only ad hoc payments have been made as per the ledger account. No correlation of these payment data particularly between the individual sale transaction and the payments made towards such transactions could be explained/demonstrated by the company's representative. The fact that, the Commission was paid stands clearly established from the record, confirming thereby that no sale was actually effected at the factory gate. 7.9 The only evidence adduced by the company for the existence of sale at their factory gate is in the form of invoices raised by them and the affidavits promptly filed by its "buyer". The stereo-typed affidavits do not inspire confidence, particularly since no written contract/agreement is fort ..... X X X X Extracts X X X X X X X X Extracts X X X X
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