Supreme Court - Daily Orders
M/S. D.J. Malpani vs Commissioner Of Central Excise, Nashik on 29 July, 2015
Bench: A.K. Sikri, Rohinton Fali Nariman
1
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5282/2005
M/S. D.J.MALPANI APPELLANT(S)
VERSUS
COMMISSIONOER OF CENTRAL EXCISE, NASHIK RESPONDENT(S)
WITH
CIVIL APPEAL NO. 531 OF 2008
O R D E R
Appellant is a manufacturer of goods falling under Chapter 24 of the Schedule of Central Excise Tariff Act. Appellant recovered some amount as Dharmada(Charity) in the invoices from the customers while selling them goods, which according to it was not to be compulsorily paid by customers and the amount so collected was exclusively for charitable purposes.
The Superintendents issued show cause notices to the appellant on the ground that the Dharmada collected by the appellant could not be claimed as a deduction from the assessable value under Section 4 of the Central Excise Act, 1944 (hereinafter referred to as “the Act”) and raised the demand of duty, penalty, interest etc. Signature Not Verified Digitally signed by Suman Wadhwa Date: 2015.09.09 for the periods April,1997 to April,1998 and April,1997 to March, 14:42:58 IST Reason:
1998. This resulted in passing of the order dated 08.01.1999 by the 2 Adjudicating Authority holding that Dharmada collected by the appellant was used only for charitable purposes and hence the said charges were not trading receipts and, therefore, could not be included in the assessable value. Consequently, he dropped the entire demand raised by the said show cause notices. However, in the meantime, the Superintendents had again issued show cause notices dated 16.7.1998, 04.12.1998, 18.11.1998 and 15.02.1999 to the appellant with the same demand. In respect of these notices as well, on 23/24.08.1999, the Deputy Commissioner of Central Excise, Ahmednagar Division held that Dharmada charges were not trading receipts and, therefore, could not be included in assessable value and as a result dropped the entire demand raised by show cause notices.
After a lapse of one year, another show cause notice dated 03.08.2000 was issued by the Deputy Commissioner of Central Excise and Customs relying upon Section 4 of the Act whereby he called upon the appellant to show cause as to why central excise duty be not recovered from it under Section 11A of the Act read with Rule 9(2) of the Central Excise Rules,1944 and further called upon the appellant to show cause as to why penalty under Section 173Q and interest under Section 11AA of the Act be not levied upon it. Upon hearing the appellant and after having gone through its written reply, the Deputy Commissioner of Central Excise and Customs vide his order dated 26.02.2002, held that Dharmada cannot be considered as trading receipt and, therefore, cannot be held as a part of assessable value.3
The Revenue was not satisfied with this order. The Reviewing Authority under Section 35E(2) of the Act by an order dated 21.02.2003, directed the Assistant Commissioner, Central Excise to file an appeal against the order dated 26.02.2002. Appeal was filed and the Commissioner (Appeals) allowed the appeal of the Department and held that Dharmada collected by the appellant would form a part of transaction value for the sale of goods. Aggrieved, the appellant went in appeal before the Customs, Excise and Service Tax Appellate Tribunal(hereinafter referred to as “the Tribunal”), which vide its impugned order and judgment dated 06.01.2005, partly allowed the appeal, holding that the duty amount needs to be recalculated by treating the prices charged in the invoices as cum-duty-price and by applying correct rate of duty, however, rejecting the appellant's contention that Dharmada should not form a part of transaction value of the goods under the amended Section 4 of the Act.
From the aforesaid, it is clear that the issue as to whether Dharmada (Charity) collected by the appellant from its customers and shown in the invoices is to be included in the price for arriving at transaction value.
We may point out at the outset that the Tribunal has followed the judgment of this Court in Collector Vs. Panchmukhi Engineering Works [2003(158) ELT 550 (SC)], wherein this Court has specifically 4 held that the 'Dharmada' charged by the assessee is includible in the assessable value.
A perusal of the aforesaid decision would indicate that it is a short order running into four paragraphs which follows earlier decision of this Court in the case of Tata Iron & Steel Co.Ltd. vs. Collector of Central Excise,Jamshedpur[2002(146)E.L.T.3 (SC). Therefore, we were taken through the judgment in Tata Iron & Steel Co. Ltd.(Supra). We find that in that case this Court dealt with the issue of “elements” permitted to be added to ex-works price by the Committee set up by the Government of India under the Iron and Steel(Control) Order, 1956 (under the Essential Commodities Act, 1955) whereby the Steel Plants were permitted to add such surcharge to the ex-works price to generate money for Steel Development Fund, to implement schemes entrusted to Committee by the Central Government etc. This addition to the ex-works price was in the nature of surcharge levied by the Steel Plants to generate funds for the said Committees. Therefore, the said surcharge effectively was imposed by the Committee and went to the Committee for use in its various schemes or for the expenditure incurred towards discharge of Committee's functions etc. Two questions were raised before this Court in that case. First, whether the surcharge in that case could be regarded as a “tax” so that it could be deducted as “other taxes” from the normal price under Section 4(4)(d)(ii) and, secondly, whether the 5 surcharge being a compulsory impost, could be considered as part of price on which excise duty was chargeable. The Court on an analysis of the statutory provisions of the Steel Control order came to the conclusion that the surcharge could not be regarded as a tax and was part of the price as under the statutory provisions the Committee was entitled to fix the price and other charges in addition of the price which are also part of the sale price. Both these questions are not involved in the present case. In the present case, the issue involved is whether the Dharmada collected by the appellant, which is clearly an optional payment made by the buyer, can be regarded as part of “transaction value” for the sale of goods. These payments are clearly identifiable for a different purpose i.e. charity, even when they are received. The appellant is merely a conduit for collection of these amounts, which are made over to the charity on receipt. In such circumstances, there is no question of regarding these amounts as part of price for the sale of goods.
Highlighting the aforesaid aspects which were dealt with in Tata Iron & Steel Co.Ltd.(supra), Mr. S.K. Bagaria, learned senior counsel appearing for the appellant submitted that there were material differences between 'Dharmada' and the “elements”/surcharge being considered in Tata Iron & Steel Co. (supra) Ltd., which are as follows:
i) Whereas, Dharmada receipts are charity receipts and the Assessee has got no right to the same as the same are only 6 used for charity, the surcharge imposed by steel plants was ultimately used for implementing schemes formed to benefit the steel plants themselves. Therefore, there was an element of direct/indirect benefit of the said surcharge accruing to the steel plants/assessees.
ii) Whereas, Dharmada receipts are customary receipts and are charged separately and not as part of price, the receipts of surcharge are receipts charged as part of price under a Notification issued under the Iron and Steel(Control) Order, 1956 (under the Essential Commodities Act, 1955).
iii) Whereas payment of Dharmada was optional, the payment of such surcharge was made a part of the invoice and was mandatory.
iv) Whereas by collecting Dharmada, the Assesses were merely acting as conduits or clearing houses for passing the amounts collected as Dharmada, the money so collected as Dharmada was to be used for charitable purposes only, in the case of surcharge levied by the steel plants, even though the surcharge went to the Committee it was ultimately used for the benefit of the plants and the development as a whole of the business of manufacture and sale of steel.7
He further pointed out that insofar as issue of inclusion of 'Dharmada' in the assessable value is concerned, there were direct judgments of this Court which were not taken note of in Tata Iron & Steel Co.Ltd.(supra). He specifically referred to the judgment of this Court in the case of The Commissioner of Income Tax (Central) Delhi, New Delhi vs. Bijli Cotton Mills(P) Ltd. Hathras, District Aligarh [(1979) 1 SCC 496], wherein after detailed discussion, the Court came to the final conclusion as under:
“14. Having regard to the above discussion, we are clearly of the view that a gift to 'Dharmada' or 'Dharmadaya' both in common parlance as well as by the customary meaning attached thereto among the commercial and trading community cannot be regarded as void or invalid on account of vagueness or uncertainty, and it is, therefore, clear that when the customers or brokers paid the impugned amounts to the assessee earmarking them for 'Dharmada' it must be held that these payments were validly earmarked for charitable purposes. In other words, right from inception these amounts were received and held by the assessee under an obligation to spend the same for charitable purposes only, with the result that these receipts cannot be regarded as forming any income of the assessee. “ We have gone through the said judgment minutely and find that the view taken there is in conflict with the view taken by the Court in Tata Iron & Steel Co.Ltd(supra). Therefore, the matters need to be referred to a larger Bench in order to resolve the conflict. Ordered accordingly.8
The Registry is directed to place the appeals before the Hon'ble the Chief Justice of India for appropriate orders.
......................J. (A.K. SIKRI) ........................J. (ROHINTON FALI NARIMAN) NEW DELHI;
JULY 29, 2015.9
ITEM NO.101 COURT NO.12 SECTION III
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 5282/2005
M/S. D.J. MALPANI Appellant(s)
VERSUS
COMMISSIONER OF CENTRAL EXCISE, NASHIK Respondent(s)
WITH
C.A. No. 531/2008
(With Office Report)
Date : 29/07/2015 These appeals were called on for hearing today. CORAM :
HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN For Appellant(s) Mr. Praveen Kumar,Adv.
Mr. K.Radhakrishna,Sr.Adv. Ms. Nisha Bagchi,Adv.
Ms. B.Sunita Rao,Adv.
Mr. K.Subba Rao,adv.
Ms. Pooja Sharma,Adv.
Mr. B. Krishna Prasad,Adv.
For Respondent(s) Mr. S.K.Bagaria,Sr.Adv.
Mr. U.A.Rana,Adv.
Mrs. Mrinal Alkar Majumdar,Adv. Mr. Avirat Kumar,Adv.
Mr. K.Ajit Singh,Adv.for M/s Gagrat & Co.
UPON hearing the counsel the Court made the following O R D E R The matters need to be referred to a larger Bench in order to resolve the conflict. Ordered accordingly.
The Registry is directed to place the appeals before the Hon'ble the Chief Justice of India for appropriate orders.
(SUMAN WADHWA) (ASHWANI THAKUR) (SUMAN JAIN)
AR-cum-PS COURT MASTER COURT MASTER
Signed order is placed on the file.