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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 ..... ically under the procedure of self-removal of excisable 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 U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that though the retail price included excise duty, freight and dealer's margin, excise duty had been paid at 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Daman and Ludhiana when compared to those at Bombay was on much higher side up to Rs. 5,000/- per tractor and it contained the amount beyond the reasonable expenditure on account of transportation, 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 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. Explanation. - In this sub-clause, "packing" means the wrapper, container, bobbin, pirn, spool, reel or warp beam or any other thing in which or on which the excisable goods are wrapped, contained or wound; (ii) does not include 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) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-clause (b) in Section 4(4). This sub-clause (ba) reads as follows :- "(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." 12.The main question, therefore, which is required to be decided in this Petition, is as to whether the Department was justified in demanding excise duty on the basis of the higher price, at which the tractors were sold by the Petitioners from their depots, whether on wholesale basis or retail under the law as it stood at that point of time. Now, as noted earlier, under the statutory provisions as they stood at the time when the impugned Notices were given, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges on account of (i) delivery and collection charges, (ii) cylinder deposit, and (iii) rentals and these should form part of the assessable value. The Appellant had carried the matter to the Tribunal. The Tribunal noted that the price at the factory gate was ascertainable and assessment should, therefore, be made in terms of that price. However, with respect to the goods sold at depots, it also observed that the Appellant had not come forward to offer concrete evidence of actual freight charges, etc. It, therefore, directed that if ex-factory prices were not ascertainable and the goods were assessed ex-depot, then it would be for the manufacturer to claim on the basis of actual evidence and remanded the matter to the Assistant 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gate price, it cannot be said that ex-factory price was ascertainable. He relied upon charts annexed to the Show Cause Notice in that behalf. He, therefore, submitted that the Respondents were right in holding that correct ex-factory price was not ascertainable and, therefore, the ratio in the case of Indian Oxygen Ltd. (supra) will not apply to the present case. Now, as far as the aforesaid submission of Mr. Sethna is concerned, even as per the Show Cause Notices issued by the Respondents, it is an admitted position that 20% of the sales were from the factory that is at the place of removal and it is accepted that the Petitioners paid excise duty on them at the ex-factory price. Now, it is laid down by the Apex Court in 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tune of 20% were sold at the factory gate and, therefore, it is not possible to accept the submission of the Respondents that the factory gate price was not ascertainable. Once the factory gate price is ascertainable, in our view, the dicta of the Apex Court in the case of Indian Oxygen Ltd. (supra) will squarely apply. 17.Mr. Setalvad further pointed out that the same was the view in fact taken by another Division Bench (Coram : N.D. Vyas v. S.S. Nijjar, JJ.) in the case of the Petitioners themselves in Writ Petition No. 4412 of 1988 decided on 2nd September, 1996 in the case of Mahindra & Mahindra Ltd. v. The Union of India & Ors. That was a case concerning the factory of the Petitioners situated at Nasik and it was 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and (iv) profit to the Dealers. The Company may depending on the needs of the Dealer's territory, require that the Dealers at the time of purchase of the products (covered by the Second Schedule) from the Company, pay additional amount, as determined by the Company, as the cost of the Dealers for the service obligations during the warranty period. That will be repaid to the Dealers on receipt of the satisfactory documentation that the obligation with regard to service has been met." 19.Mr. Sethna submitted that these clauses, in fact, were a key evidence regarding undervaluation in connivance with the dealer. He submitted that in fact it were the dealers only who provided after sales service and gave the necessary 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 Agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale is effected for different prices to different classes of buyers under the first proviso to Section 4(1)(a) that it then stood. However, that is not the case here. It is now after the addition of sub-section (1)(a) that it is possible to have different prices at different places of removal. Similarly, it is now after the addition of sub-clause (iii) that a depot has been specifically included in the places of removal from where the excisable goods are to be sold after the clearance from the factory. This position has been brought about to overcome the difficulties which existed in the absence thereof. However, under the law, as it stood prior to these amendments, once the price at the factory gate was ascertainable, which it was in the present case, it could not be said that the Petitioners were indulging into any under-voicing or were evading the excise duty when they were selling their products at a higher price through their depots. The additions over the factory gate price while selling the products through the depots would be irrelevant for the purposes of determining the excise duty. The two Show Cause Notices are, therefore, bad in law and are required to be interfered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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