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TMI Blog2019 (4) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... demand for excise duty and the penalty. 4. However, another show cause notice dated 3.8.2001 was issued by the Commissioner of Central Excise, Aurangabad under Section 4 of the Act calling upon the appellant to show cause as to why penalty under Section 173Q and interest under Section 11AA should not be levied. After hearing the appellant, the Deputy Commissioner held vide order dated 26.02.2002 that Dharmada cannot be considered as trading receipts and was not part of the assessable value. Therefore, no duty was payable on the component of Dharmada. 5. Thereafter, in an appeal filed by Revenue, the Commissioner (Appeals), however, held that the Dharmada was liable to be included as a part of the assessable value and therefore the goods were liable to be assessed on the basis of their price plus Dharmada. The Central Excise and Service Tax Appellant Tribunal (for short "CESTAT"), in an appeal filed by the appellant, by judgment dated 6.1.2005 partly allowed the appeal and held that the duty amount needs to be recalculated. The CESTAT however rejected the appellant's contention that Dharmada was not part of the transaction value. The CESTAT purported to follow the judgment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the outset is that there is no dispute before us that though paid along with the sale price, the payment for Dharmada was made voluntarily by the purchasers and that upon receipt was made over to charity. There is no challenge that it is in fact not voluntary. There are certificates on record by the chartered accountant that shows the Dharmada collection was credited to a separate account and donated to a trust during the period of the show cause notices. 10. The only question that arises for decision is whether the amount included as Dharmada by a manufacturer and credited for charitable purposes is liable to be included in the assessable value of manufactured goods; the seller having merely acted as conduit between the purchaser and charity. 11. It is necessary to enquire into the nature of the transaction i.e. what was sold, the price that was paid and the transaction value for the purpose of arriving at the assessable value. WHAT WAS SOLD 12. The appellant manufactured and sold chewing tobacco to their customers. A price was paid by the customers as 'consideration' for these goods i.e. transfer of property of the goods to the customers. This is clear from the invoices. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount not paid as consideration for the goods can go to make transaction value. `Consideration' means, vide Garner's Dictionary of Legal Usage, 3rd Edition: `the act, forbearance or promise by which one party to the contract keep the promise of another'. The term valuable consideration refers to an act, forbearance or promise having an economic value. In this case, it is clear that only the money paid for the promise of transferring goods was the valuable consideration contemplated by the Excise Act and the Rules. The transaction value was the sale of goods and the consideration was the price or value paid for the goods. The transaction value must be construed accordingly. This fairly clears up the character of any other amount paid at the time of the transaction of sale of goods. Thus, if an amount is paid at the time of the sale transaction for a purpose other than the price of the goods, it cannot form part of the transaction value; also for the reason that such payment is not for the transaction of sale i.e. for the transfer of possession of goods. Any payment made along side such a transaction cannot be treated as consideration for the goods. DHARMADA 15. This takes us to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trustees, the discretion vested in the trustee to spend the amount over charities will not affect character of the deposit. 17. This Court also relied on CIT, West Bengal, Calcutta vs. Tollygunge Club Ltd., Calcutta (1977) 2 SCC 790 : (1977) 107 ITR 776. In that case, the Court considered the nature of a surcharge of eight annas over and above the admission fees into the enclosure of the club at the time of the races. The proceeds of this surcharge were to go to the Red Cross Fund and other local charities. This Court approved the decision of the Calcutta High Court and held that the "surcharge was not part of the price for admission but made for the specific purpose of being applied to local charities". It observed "the admission to the enclosure is the occasion and not the consideration for the surcharge taken from the race-goer. It rejected the contention that the payment was involuntary, observing "that does not render the payment of the surcharge involuntary, because it is out of his own volition that he seeks admittance to the enclosure". Applying the above decisions to the case before it, this Court held in Bijli Cotton Mills (supra) that Dharmada amounts cannot be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steel (supra). That was a case where the customer paid a surcharge on the price of steel. This surcharge was added to generate money for a steel development fund to implement schemes entrusted to the committee by the Central Government. The surcharge went to the committee for use in its various schemes and for the expenditure incurred towards discharge of the committee's function. 20. Nonetheless, the surcharge was part of the consideration paid by the customer for the price of steel. The notifications under which the surcharge was added clearly stated as follows: - (i) "The Committee may add an element to the exworks prices determined ........" and (ii) "The Committee may require members steel plants to add the elements listed below to their ex-works........." The purpose of this addition was to constitute a steel development fund for modernisation, research & development, diversification etc. for improving the quantum of technology and efficiency of production of iron and steel and their quality. 21. The other objects of the fund, were to implement specific schemes entrusted to the Committee by the Central Government and towards the Engineering Goods Export Assistance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. 5 Section 4 of The Central Excise Act, 1944 4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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