2002 (11) TMI 96 - SC - Central Excise

Whether the price declared by the assessee was not full commercial value because the moulds etc. which were got produced by Pieco and were supplied free to the assessee resulted in an element of consideration passing from Pieco to the assessee? Held that - The appellant itself has stated that clause (a) of sub-section (1) of Section 4 does not apply the only provision under which the price can be fixed is clause (b) of sub-section (1) of Section 4 of the Act. That could be done in accordance with the Central Excise (Valuation) Rules 1975. From a perusal of the order under challenge it does not appear that the Tribunal proceeded to fix the price under any of the Rules. In the circumstances we are of the view that the price of goods fixed by the Tribunal cannot be sustained. As the case was remanded taking note of the complaint that permissible deductions were not allowed to the assessee and the determination of the price by the Tribunal is found by us to be without any legal basis we leave it to the assessing authority to determine the price in accordance with the afore-mentioned provisions of law. Therefore set aside the order under challenge insofar as it relates to fixation of the price for the purposes of assessable value. The Collector Central Excise shall now determine the assessable value duly considering the question of permissible deduction as per the direction of the Tribunal and in accordance with the law namely under Section 4(1)(b) of the Act read with the Rules in the light of what is stated above.

Summary

Issues:
- Assessment of assessable value of tape recorders for excise duty purposes.

Analysis:
The case involves an appeal against the order of the Customs, Excise and Gold (Control) Appellate Tribunal regarding the assessable value of tape recorders manufactured by the appellant under the brand name 'Philips'. The appellant received moulds and parts for tape recorders from Pieco (Philips) at no cost. The Excise authorities and the Tribunal rejected the price declared by the appellant, stating that the goods' value was not correctly assessed due to the free supply of moulds by Pieco. The Tribunal remanded the case to the adjudicating authority for considering deductions and set the price based on the rate at which Pieco sold the goods to its dealers. The appellant challenged these findings before the Supreme Court.

The appellant argued that the rejection of the declared price was unjustified, but the Court disagreed. It noted that Pieco played a significant role in developing the moulds at its own cost, which were then provided to the appellant for free. This arrangement indicated that the transaction did not reflect the full commercial value of the goods. The appellant also contested the Tribunal's method of fixing the assessable value based on Pieco's dealer prices. The Court agreed with the appellant on this point, stating that the Tribunal's approach lacked legal justification. The Court highlighted that the assessable value must be determined under Section 4 of the Central Excises & Salt Act, 1944, and the relevant Rules, not solely based on buyer-to-dealer prices.

The Court clarified that since the appellant acknowledged that Section 4(1)(a) did not apply, the assessable value should have been determined under Section 4(1)(b) of the Act, following the Central Excise (Valuation) Rules, 1975. As the Tribunal did not adhere to these provisions while fixing the price, the Court set aside the Tribunal's order regarding the assessable value. The Court directed the assessing authority to reevaluate the assessable value, considering permissible deductions and in accordance with the law, specifically Section 4(1)(b) of the Act and the relevant Rules.

Ultimately, the Court disposed of the appeal, instructing the Collector, Central Excise, to determine the assessable value by following the Tribunal's direction on permissible deductions and the legal provisions outlined in the judgment. The Court concluded the matter without awarding any costs to either party.