TMI Blog2010 (4) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... nd DMPL/DIPL/appointed dealers of appellant have mutual interest in each other’s business, the burden of proving this would be on the Department. But in this regard, other than the difference between the Appellant’s price to DMPL/DIPL/appointed dealers and the price changed by DMPL/ DIPL/appointed dealers from their customers, no other evidence has been discussed - Hence, they are not related person. Freight expenses - Deduction of freight expenses incurred on return of empty bottles, as held by the Tribunal in case of Herbatsons Ltd. v. CCE, Mumbai and Pure Drinks (ND) Ltd. v. CCE are not includible in the assessable value of the goods. Cost of packing - The cost of 12 litre, 20 litre and 24 litre bottles, since it is an admitted fact that the same were being returned for re-use, the same will have to be treated as of durable and returnable nature and just because the bottles have to be discarded after 40 cycles of use, the same would not cease to be of durable and returnable nature. Freight expenses - As regards the freight expenses for transportation of the goods from factory to Depot the same would have to be included in the assessable value of the goods, sold from the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2.1 Some of the goods manufactured were sold to M/s. Drinkwell India Pvt. Ltd. (hereinafter referred to as DIPL) and M/s. Hello Marketing Pvt. Ltd. (hereinafter referred to as HMPL) who sold the goods in retail at much higher price than their purchase price from the Appellant, but the Appellant paid duty on their sale price to DIPL and HMPL, while according to Departments both DIPL and HMPL are related with the Appellant within the meaning of this term as defined in Section 4(4)(c) of Central Excise Act, 1944 (hereinafter referred to as the Excise Act) and duty should have been paid on the price at which the goods were sold by DIPL and HMPL. 1.2.2 During period from 13-4-98, some of the goods manufactured by the Appellant were sold to 15 appointed dealers. Whereas the Appellant discharged duty in respect of 24 litre and 12 litre bottles at assessable value of Rs. 15.60 and Rs. 8.50 per bottle respectively, the appointed dealers sold the same at prices of Rs. 50/- per bottle and Rs. 30/- per bottle respectively. According to Department, since the Appellant exercise complete control over the sale and distribution of their products by the appointed dealers, the duty should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessable value of the branded bottled water packed in 330 ml., 1 litre, 20/24 litre and 12 litre bottles. Sales by the Appellant from depot are made in retail and similarly the sales by DIPL and HMPL and by the authorised dealers are in retail. During the period of dispute, the law provided for assessment of excise duty on the wholesale price and since the depot price or the sale price of DIPL/HMPL/authorised dealer is retail price, for arising at the wholesale price, the margin between the wholesale price and retail price has to be abated from the retail price. The Department wants to charge duty on the MRP price which is not correct. As held by the Tribunal, in case of Swaraj Mazda Ltd. v. CCE, Chandigarh reported in 2001 (137) E.L.T. 547 retail sale price is to be adopted by the Central Excise authorities only after suitable adjustments to make it correspond to wholesale price. (2) During the period from September 1996 to April 1997 and May 1997 to July 1997, the Appellant were showing the assessable value and paying duty thereon without including the trade tax/sales tax and distribution expenses incurred by the delivery agents which has been allowed by the Commissioner (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from depot, the deduction of transport expenses from factory gate to depot could not be allowed. (2) Deduction on account of packing in respect of 12 litre and 20/24 litre bottles is not admissible and has been wrongly allowed by CCE (Appeals) as the bottles have certain life spam and have to be discarded after about 40 cycles of use. (3) During the period from 13-4-98, the sales were through appointed dealers. But since the Appellant had compete control over the distribution and sale of the goods as they were appointing the delivery agents, the transactions between the Appellant and their authorised dealers cannot be said to be at arm s length. Therefore, the price charged by the dealers from the customers would be the correct assessable value and from this price, the deduction of delivery charges is not permissible which has been wrongly allowed by CCE (Appeals). 2.3 In rejoinder Shri A.R. Madhav Rao pointed out that the transport cost of the goods from the factory gate to depot is already included in the assessable value of goods and, therefore, there is no question of adding the same again to the assessable value. 3. We have carefully considered the submissions from bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MPL, DIPL and appointed dealers only in retail, as claimed by the Appellant and if so whether such retail prices are be adopted as the assessable value. 4. During the period of dispute, the Section 4 of the Central Excise Act, 1944 read as under. Section 4. Valuation of excisable goods for purpose of charging of duty of excise - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be - (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale : Provided that - (i) where, in accordance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; [(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory and,] from where such goods are removed; [(ba) time of removal , in respect of goods removed, from the place of removal referred to in sub-clause (iii) of clause (b), shall be deemed to be the time at which such goods are cleared from the factory;] (c) related person means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the assessee, and any sub-distributor of such distributor. Explanation - In this clause holding company , subsidiary company and relative have the same meanings as in the Companies Act, 1956 (1 of 1956); (d) value , in relation to any excisable goods, - (i) where the goods are delivered at the time of removal in a packed condition, includes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which should satisfy the following conditions - (a) It is the price at which the goods are sold in course of wholesale trade i.e. it should be the wholesale price; (b) It should be the price for delivery at the time and place of removal; (c) The transaction between the assessee and the buyer is at arm s length i.e. they are not related person within the meaning of this term, as defined in Section 4(3)(c). (d) The transaction is such that price is the sole consideration for sale and the same has not been influenced by any other consideration. 5.1 As, per Section 4(4)(e) of the Act, wholesale trade means sales to dealers, industrial consumers. Government, local authorities and other buyers who or which purchase their requirement otherwise than in retail. Thus, Section 4 itself makes a distinction between wholesale price and retail price and it is only the price of the goods in wholesale trade i.e. the wholesale price, which can be adopted as the assessable value. If at the time and place of removal, the sales are in retail only, from the retail price, the margin between wholesale price and retail price will have to be removed for arriving at the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utuality of interest in each other s business. But when the Department makes an allegation that the Appellant and DMPL/DIPL/appointed dealers of appellant have mutual interest in each other s business, the burden of proving this would be on the Department. But in this regard, other than the difference between the Appellant s price to DMPL/DIPL/appointed dealers and the price changed by DMPL/ DIPL/appointed dealers from their customers, no other evidence has been discussed. As held by Hon ble Supreme Court in case of CCE, Chandigarh v. Bharti Telecom Ltd. (supra), just because of large difference between the price at which Appellant sell their goods to HMPL/DIPL/appointed dealers and the price at which HMPL/DIPL/appointed dealers sell the goods to their customs, it cannot be concluded that the Appellant and HMPL/DIPL/appointed dealers of appellant are related persons - more so when the CCE (Appeals) has accepted that the HMPL/DIPL/appointed dealers of Appellant are selling the goods in retail and the price charged by them is retail sale price. Therefore, CCE (Appeals) s order holding that the Appellant and HMPL/DIPL/appointed dealers of appellant are related persons is a non-speakin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order is set aside and the appeals are remanded to CCE (Appeals), for de novo decision in accordance with our observations in this order. The Commissioner (Appeals), in particular, should decide the following points in accordance with our observations in this order - (a) Are the Appellant and HMPL/DIPL/appointed dealers of appellant, related person within the meaning of this term, as defined in Section 4(4)(c) of the Central Excise Act, 1944? This question with regard to the Appointed Dealers is to be examined on the basis of the Appellant s agreements with them. (b) Are the Appellant s sales of stock transferred goods to Depots in retail and similarly are the sales of HMPL/DIPL/appointed dealers of Appellant to their customers in retail and if so, what is the margin between wholesale price and retail price, which must be deducted from retail sale price to convert the same into wholesale price? (c) What is the actual nature of Distribution/Delivery charge and whether the same are includible in the assessable value in accordance with Hon ble Supreme Court s judgment in cases of UOI v. Bombay Tyre International (supra) and GOI v. Madras Rubber Factory L ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
