9911796707
TMI Blog1979 (12) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... between the Company's factory and the destination where the goods were consigned, a uniform freight rate of 0.25 paise per kg. was charged to the Company's customers as transport and insurance charges. Under this scheme the Company also gave an option to its customers throughout India either to lift the goods from the Company's factory at Bombay free of freight and insurance charges or leave it to the Company to effect delivery to its customers on payment of the uniform freight charges at 0.25 paise per kg. which would be borne by the customers. Accordingly, on 3rd April, 1974 when this policy to charge transportation charges at a uniform rate was introduced, a new price list showing the value of the petitioner's product, exclusive of freight and insurance charges during transit was brought into effect. This uniform rate of 0.25 paise per kg. recovered by the Company from its customers expressly constitutes freight plus insurance amount which the Company recovers separately.from its customers and in addition to the price of consigned material. The company's printed price list introduced with effect from 3rd April, 1974 and their invoices distinctly and separately show the delivery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng cost and profit and could not be included in the assessable value for the purpose of assessment of excise duty and no excise duty could be levied thereon. After a personal hearing given to the Company by the Assistant Collector of Central Excise, the latter passed his impugned order dated 18th October, 1975 holding that- "...there was not a single sale of the products at the factory gate and therefore to ascertain the value one goes to next nearest stage which happens to be the sales in Bombay Market. These sales are loaded with the costs like insurance and freight. As such the correct assessable value will be inclusive of equalised freight charges." 6. By the said order, the Assistant Collector modified the Company's price lists "to the extent of equalised freight charges which could be considered as loaded to the declared assessable value", and accordingly ordered the payment of the amount Rs. 4,61,702.28. 7. Against the Assistant Collector's order, dated 18th October, 1975, the Company preferred the requisite appeal to the Appellate Collector of Central Excise who by his order dated 5th February, 1976 dismissed the Company's appeal on the ground that "the so-called deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g costs, the same are to be excluded for the purpose of determination of the value on which excise duty is made applicable. The Company had received the said charges of 0.25 paise per kg. as a part of the wholesale cash price from its customers and, therefore, the same was chargeable to excise duty. 9. The question that arises for consideration in this petition as to whether the uniform rate of 0.25 paise per kg. separately charged by the Company to all its customers is a post-manufacturing expense or not. The old Section 4 which is the pertinent section in this case provided for determination of value for the purpose of duty and reads as under:- "Where under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be 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 ... **** Explanation. - In determining the price of any article under this section no abatement or deduction shall be allowed except in respect of the trade discount and the amount of duty payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise duty. If the price charged by the wholesale dealer who purchases the goods from the manufacturer and sells them in wholesale to another dealer were taken as the value of the goods, it would include not only the manufacturing cost and the manufacturing profit of the manufacturer but also the wholesale dealer's selling cost and selling profit and that would be wholly incompatible with the nature of excise. It would also violate the concept of the factory-gate sale which is the basis of determination of value of the goods for the purpose of excise. 12. The decision of the Supreme Court in Voltas case and in Atic Industries' case have been followed by the Division Bench of this Court in Indian Tobacco Co. Ltd. v. Union of India and others - 1979 E.L.T. (J476) where it was held that Section 3(1) is the charging section which creates the liability to pay the excise duty while the provisions of Section 4 are in the nature of machinery provision, with the result that anything said therein must be read so as to carry out the basic concept of excise duty and not so as to militate against that concept. At para 12 of the Report, it was observed as under :- "........In other words, Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore to ascertain the value one goes to next nearest stage which happens to be the sales in Bombay Market. These sales are loaded with the costs like insurance and freight. As such the correct assessable value will be inclusive of equalised freight charges." The impugned appellate order also proceeds on the basis that there are no factory-gate sales. 14. These aspects make it abundantly clear that there were no factory gate sales and that the Company recovered from its customers the freight and insurance charges separately from the price of the goods. Regarding the effect of equalised freight the same is to be found in the decision of the Division Bench of this Court in Indian Tobacco Company's case (supra) where it was held that where goods are sold at uniform price at all places including factory-gate the deduction of freight is admissible as the manufacturer may have struck an average in regard to freight while fixing the wholesale price. At para 17 of the report it was observed an under :- ".... as regards freight though it is true that in both types of delivery generally effected by the petitioner-Company to its wholesalers a uniform price is being charged, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secy. of State for India in Council - AIR 1938 PC 15. That decision has been referred to by the Supreme Court in Volta's case (supra). In Ford Motor Company's case the appellants who imported Ford Motor Vehicles from Canada to India, where they had amonopoly of the supply of those vehicles, sold them only to authorised dealers or distributors, each of whom was sole agent for a retail seller of the vehicles in a particular district. The appellants obtained from the distributors information as to their requirements and placed consolidated orders accordingly with the manufacturers in Canada. The retail price charged by the distributors to the public was that stated in a price list issued by the appellants and current at the time of the arrival of vehicles in India, and the price payable by the distributors to the appellants was the same price less a discount of 20 per cent. The distributors had to pay that price before obtaining delivery, which was given "free on rail". On arrival in India, the vehicles were not completely assembled, and were so delivered to the distributors, and agreement allowance against the price being made by the appellants. On the question whether section 30(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged 0.25 paise per kg. will have to be investigated by the Excise Authority and to the extent to which such expenses are attributable to its post-manufacturing activity, the requisite deduction shall be given by the Excise Authorities after making proper calculations. Mr. Dalal stated that in the Indian Tobacco Company's case (supra) also, the matter had been referred by the Division Bench to the Excise Authorities in order to enable the latter to ascertain the exact extent of deduction of expenses to which the petitioner would be entitled. In the matter before me there is no point or purpose in sending the matter back to the Excise Authorities, for there is nothing to send back. The Company has throughout shown the uniform freight and insurance of 0.25 paise per kg. recovered from its customers separately in all its invoices and price lists. It has never shown this amount as a part of the price. Duty is not leviable on such freight and insurance separately recovered as it is a post-manufacturing activity. The particulars given by the petitioner-company regarding freight and insurance expenses during the relevant period, viz., 3rd April, 1974/4th September, 1974 are as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X
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