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TMI Blog1984 (4) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... s they have fixed ex-factory price for these goods and excise duty is payable by them under Section 4(l)(a) of the Act on the ex-factory wholesale cash price. Their case is that they have appointed 22 main dealers all over India and 99 per cent of the sales are made to these dealers directly at the factory gate and only 1 per cent to the consumers in retail. The ex-factory price as shown in the price list furnished by the petitioners to the department under Rule 173(c) does not include the three items which the petitioners terms as delivery charges transit insurance charges' and commission (margin). It is common ground that the Superintendent Central Excise, issued show cause notices to the petitioners under Section 11A of the Act, claiming that these items also ought to have been included in the assessable value of the goods for levying the correct excise duty. The petitioners submit that these items are not liable to be included in the assessable value of the goods, in view of the decision of the Supreme Court reported in 1983 E.L.T. 1896 (Supreme Court) Union of India v. Bombay Tyres International Limited. 3. So far as the item of commission (margin) is concerned, the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise common questions of law and fact, they are being disposed of by this common judgment. 5. The respondent has resisted the petitions on a number of grounds which do not find place in the impugned orders. We shall have occasion to refer to this aspect a little later. He has raised a preliminary objection to the maintainability of the writ petitions on the ground that the petitioners have not exhausted the remedies available to them under the Act before approaching this Court. On merits Shri Natu who appears for him has resisted the petitioners claim on the following grounds : (i) The sales in question do not generally fall under the substantive part of Section 4(1) (a) proper but under proviso (iii) thereto; (ii) 'Delivery charges' are distinct, from the cost of transportation from the factory gate to the place of delivery as contemplated by Section 4 (2) of the Act. In fact, Section 4(2) is not applicable to the sales in question, inasmuch as according to the petitioners price at the factory gate is known to them; (iii) For the same reasons as -given in item (ii) transit insurance will also form part of the assessable value; (iv) The commission recovered by the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders. Here we may point out that Shri Natu raised the preliminary objection only after the arguments of the petitioners were concluded in their entirety indeed he himself had also covered the entire ground of the respondents on merits. In the circumstances, we hold that it is now too late in the day of Shri Natu to press for dismissal of the writ petitions on the ground urged by him. We overrule this particular objection of the respondent and proceed to decide the case on merits. 8. Before going to the merits we would like to clear the pitch on one rather unusual aspect. A perusal of the impugned orders will show that the respondent, while reaching the finding that the petitioners are liable to pay the excise duty on the three items under consideration has purported to rely on the Supreme Court decision in Bombay Tyres International. The petitioners also rely on this very decision. According to the interpretation put by the respondent on this decision the petitioners are not entitled to deduct delivery charges and transit insurance, which according to him are distinct from transport charges. So far as the petitioners claim that the commission does not form part of assessable val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s us to the heart of the question before us, namely whether the Supreme Court decision in Bombay Tyres entitles the respondent to include the three items or any of them in the assessable value. At the outset we must make it clear that the wholesale price at the factory gate, as shown by the petitioners in their price lists does not include any of these items. It was the Superintendent Central Excise, who has ferreted out these items from the bills issued by the petitioners to their dealers. The show cause notices allege that these items should also have been added to the wholesale prices shown by the petitioners in the price lists, as according to him, the items form part of the assessable value. The correct position thus is that the petitioners never included any of these items in the ex-factory price, much less claimed their deductions; it is the Department's stand that these items should be added to the price figuring in the petitioners list furnished under rule 173(c). As it is, the department had already levied excise duty on the basis of the amounts shown in the price lists. The show cause notices now seek to make good the amount short levied on these items. 11. Section 4 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items cannot legitimately form part of the assessable value determine on the basis of the wholesale price at the factory gate as contemplated by the main provision of section 4(1)(a) of the Act. 13. In a few cases where the wholesale price for delivery at the factory gate may perhaps be not known (which admittedly is not the stand set up by the respondent in his impugned orders or show cause notices), Section 4(2) will squarely apply and in that case the petitioners could not be compelled to pay the transit charges and transit insurance, as permitted under Section 4(2). We have to appreciate that the price of an article is related to its value (using this term in general sense) and several components which enrich the value and give marketability to the article in the trade, get blended into the value. The expenses incurred over such factors which contribute to the value of an article naturally go to form part of the assessable value. Needless to emphasize that the expenses incurred over transport of the goods that are already sold at the factory gate for a known price, do not contribute to the enrichment of the value as such and cannot obviously form part of the assessable value. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealers is not that of principal and agent but that of a seller and buyers. It has been further held that the main dealers are not related persons within the meaning of Section 4(4)(c) of the Act and that the transactions between the two parties is on principal to principal basis. Shri Vishwanathan, who is the Manager of the petitioners Company (Finance and System) has filed an affidavit on 26th March, 1985 to the effect that all agreements are entered into by the Company with the main dealers at Madras Head Office only, that no agreements whatever are separately made in respect of vehicles lifted from the Bhandara factory and that the same form of agreement which came up for consideration at the hands of the Madras High Court is applicable to Bhandara transactions also. No doubt, Shri Natu vehemently opposed the petitioners request for filing this affidavit. However in the interest of justice and also because it does not cause any prejudice to the respondent on merits we have taken the affidavit on record. The respondent has also filed an additional lengthy affidavit in reply. 17. We have already observed above that in as many as three of the impugned orders the respondent has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re materially different from those of the agreement before us. The case is decided on its own facts and is clearly distinguishable from the present one. We need not detain ourselves any longer. 20. All the propositions formulated by Shri Natu condensed in para 5 (supra) stand disposed of by what we have said above. In passing we may refer to Shri Natu's submission that this Court may not grant any relief to the petitioners for the reason that the stakes involved are pretty high. We would not have perhaps paused to take note of this submission but for the repeated pains taken by Shri Natu to impress this aspect on us. We would only like to assure him that we have done our very best to understand the case of department. After all if the stakes are high indeed as they are so not only for the Department but also for the assessee. This factor will not deter us from doing our plain duty of administering even handed justice between parties whosoever they be. We leave the point here. 21. Once the main part of Section 4(1) (a) is held to be the proper basis for determination of the assessable value it automatically follows that whatever margin the main dealers (who are buyers from the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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