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TMI Blog2002 (9) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... able goods which is under the control and supervision of Inspectors of Excise at the factory level who in turn are under the control of the Superintendent of Excise. Accordingly, the Petitioners have been paying the excise duty on the goods removed at the factory gate regularly. The above-referred Notices principally claimed that the Petitioners had been selling their tractors from the depots at much higher prices containing amounts beyond reasonable expenditure on account of the transportation, insurance etc. The duty paid on these tractors was however only on the price at the factory level resulting into short payment of excise duty. The Notices call upon the Petitioners to show cause to the Assistant Collector of Central Excise as to why the differential amounts should not be recovered under Section 11A of the said Act. Appeal against the decision of the Assistant Collector lies to the Collector of Central Excise. 3.The Superintendent of Central Excise, who issued the Notices, is joined as Respondent No. 4 to the Petition. The Assistant Collector is Respondent No. 3. The Collector of Central Excise is Respondent No. 2 and the Union of India is Respondent No. 1. Mr. Setalvad, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factory gate without including the aforesaid amounts and that this was incorrect in view of Rule 6(a) of Central Excise (Valuation) Rules, 1975; (iv) that the Petitioners had not included in the assessable value (1) after sales-service charges, (2) dealer's margin, (3) marketing and selling expenses, and (4) excess freight; (v) that the Petitioners had concealed the invoice value." The Notice alleged that there was an under-assessment due to incorrect application of Section 4 of the said Act for the above-referred reasons and, therefore, called upon the Petitioners to show cause under Section 11A of the said Act. The Notice stated that the amount of demand will be notified subsequently. 6.The Petitioners filed a detailed Reply to this Notice on 30th September, 1985 and submitted that firstly the differential amount had not been quantified in the Notice. It was pointed out that the Petitioners had been regularly filing their monthly returns and maintaining the production registers. They had been filing classification list and price list which were checked thoroughly by the officers of the Respondents right from the production stage. It was then submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insurance, etc. This annexure accepted that a few tractors i.e. about 20% were sold at the factory gate at Kandivali but it was alleged that the same was done only to show that the prices are ascertainable at factory gate under Section 4(1)(a) of the said Act. It was alleged that this was with an ulterior motive to reduce the duty liability. It was contended in the annexure that if the sales are on principal to principal basis, it appeared that the dealers were paying to the Petitioners an excess amount although the dealers were themselves rendering after sale service and spending for advertisement, etc. It was, therefore, submitted that the claimed expenses on account of advertising, marketing, after sale services, etc. ought to be added to the assessable value apart from post-manufacturing expenses incurred by their sales organisation. It was claimed that there was a short payment to the tune of Rs. 3,59,45,487.40. It was also threatened as to why a penal action under the said Act should not be initiated apart from the recovery under Section 11A. Detailed charts supporting the claim were also enclosed along with this annexure. It is at this stage that the Petition was filed chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such class of buyers; (ii) Where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; (iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. Explanation. - For the purposes of this sub-clause, the amount of the duty of excise payable on any excisable goods shall be the sum total of - (a) the effective duty of excise payable on such goods under this Act; (b) the aggregate of the effective duties of excise payable under other Central Acts, if any, providing for the levy of duties of excise on such goods, and the effective duty of excise on such goods under each Act referred to in clause (a) or clause (b) shall be, - (i) in a case where a notification or order providing for any exemption (not being an exemption for giving credit with respect to, [or reduction of duty of excise under such Act on such goods equal to, any duty of excise under such Act, or the additional duty under Section 3 of the Customs Tariff Act, 1975, already paid] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven, the assessable value was deemed under Section 4(1) to be the normal price at which goods were ordinarily sold at the time and place of removal. The place of removal was defined to mean a factory or any other premises of production, the only other exception being a warehouse wherein excisable goods were permitted to be deposited without payment of duty. Thus, assessable value was equated with the normal price, at which the goods are ordinarily sold by the assessee to a buyer at arms length in the course of wholesale trade at the place of removal. The sales in retail were wholly irrelevant in determining the value. The proviso (i) to Section 4(1)(a) made another exception where goods were sold by the assessee at different prices to different classes of buyers. Then in that case, subject to the existence of other circumstances specified in Section 4(1)(a), each such price was deemed to be the normal price of the goods in relation to each such class of buyers. In the present case, we are admittedly not concerned with a situation falling under proviso (i) to Section 4(1)(d). Sub-section (2) of Section 4 made another exception i.e. where in relation to any excisable goods the price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istant Collector to re-fix the assessable value. It was the order of the Tribunal which was challenged in Appeal before the Apex Court. 14.The Apex Court in that matter noted that once the ex-factory price was available, the cost of transportation, etc., became irrelevant under the Excise Act. It further noted that we are concerned with a tax on manufacture and not with a tax on profit. Delivery and collection charges had nothing to do with the manufacture. The Court observed in paragraph 5 of this judgment as follows :- "…..It is necessary to reiterate the principle upon which the assessable value will have to be determined in this case. The cost of transportation from factory at Visakhapatnam and the depot at Vijayawada cannot be included normally in computation of the value. The value has to be computed under Section 4(1)(a) read with Section 4(4)(d)(i) of the Act, where the wholesale price is ascertainable at the factory gate, the question of transportation charges becomes entirely irrelevant. The cost of transportation from the factory gate to the place for delivery and transit expenses were not to be added to the wholesale price at factory gate for purposes of duty under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of A.K. Roy v. Voltas Ltd. reported in 1977 (1) E.L.T. (J 177), 182-3 (S.C.) that even a small percentage of sales would fix the wholesale price and that the retail price cannot be considered. In the instant case, once 20% of the sales were effected at the factory gate at a determined price, it cannot be said that the price at the factory gate could not be ascertained. 16.Mr. Sethna then submitted that the valuation of the tractors was liable to be done as per the earlier judgment of the Apex Court in the case of Union of India Ors. v. Bombay Tyre International Ltd. reported in 1983 (14) E.L.T. 1896 (S.C.) = 1984 (1) SCR 347. That was a case where the Apex Court laid down the circumstances wherein post manufacturing expenses are to be deducted while arriving at the assessable value. In fact, that very judgment was pressed into service before the Apex Court in the case of Indian Oxygen Ltd. (supra). Based on the observations in the case of Bombay Tyre (supra) at pages 391-392 of the Report, it was submitted that the expenses incurred on account of the several factors which have contributed to its value up to the date of sale, which apparently would be the date of deliv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as contended that an excise amount was being collected from depots at Silvassa (in the Union territory of Dadra and Nagar Haveli) and at Hosur to the tune of Rs. 3,000/-. In the matter also a Show Cause Notice was issued on a similar footing. The Petitioners had pointed out that the ex-factory price was ascertainable at the factory gate and the Division Bench accepted the submission that when the normal price was ascertainable at the factory gate, the stock had been transferred to the depot subject to certain additional expenses. That cannot amount to wrong pricing or non-availability of correct value at the factory gate. In that matter also the Respondents had tried to contend that the depots were related persons whereas the Petitioners had pointed out that they were in fact parts of the Petitioners organisation and the sales from the depots to the areas were effected on the basis of principal to principal. The Division Bench observed on page 23 of the unreported judgment as follows :- "The stand taken by the Department appears to be totally unjustified. To us it appears that in fact the Department has sought to fix a higher price for the deliveries which took place from depots ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry advertisement. Therefore, in that event, there was no reason to charge any such extra amount. He, therefore, submitted that this extra amount had to be made a part of the price and the assessable value. Now, as far as after sales services are concerned, in the case of M/s. Philips India Ltd. v. Collector of Central Excise reported in 1997 (91) E.L.T. 540 (S.C.), the Apex Court has held that the after sales services that a dealer is required to provide under such Agreement, enhanced the value of the product for the purchaser but such enhancement ensured not only for the benefit of the manufacturer but also enured for the benefit of the dealer. The guarantee specified that the goods could be repaired by the Appellants dealers during the guarantee period anywhere in the country. Thus one dealer may have to repair goods sold by another but had the advantage of goods sold by him being repaired by the dealers. Similarly advertisement by the dealer benefited the dealer also apart from benefiting the manufacturer. The Apex Court ruled out deduction of trade discount on this count accordingly. It cannot, therefore, be added to the assessable value. It is also relevant to note that while ..... X X X X Extracts X X X X X X X X Extracts X X X X
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