Custom, Excise & Service Tax Tribunal
M/S Dcm Engineering Products vs C.C.E., Jalandhar on 3 February, 2011
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-I Date of hearing/hearing:3.2.1011 Central Excise Appeal No.2148 of 2005 Arising out of the order in appeal No.84/CE/Appl/Jal/2005 dated 28.2.2005 passed by the Commissioner of Central Excise (Appeals), Jalandhar, Chandigarh. For Approval and Signature: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Technical Member 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s DCM Engineering Products ... Appellant vs. C.C.E., Jalandhar ... Respondent
Appearance:
Shri S.C. Kamra,Advocate for the appellants Shri N. Anand, Authorized Departmental Representative (DR) for the Revenue Coram: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Technical Member Oral Order No.________________ Per Shri Justice R.M.S. Khandeparkar:
Heard the Advocate for the appellants and the DR for the respondent. This appeal arises from the order dated 28.2.2005 passed by the Commissioner (Appeals), Chandigarh. By the impugned order, the appeal filed by the Department against the order of the adjudicating authority has been allowed and the order of the adjudicating authority has been set aside. Consequently, the duty amount to the tune of Rs.2,57,770/- stands confirmed against the appellant along with interest payable thereon along with penalty of Rs.50,000/-. Hence the present appeal.
2. The appellants are engaged in the manufacture of cast iron classifiable under Chapter 73 of the Schedule to the Central Excise Tariff Act, 1985. In the course of audit by the audit authority, it was observed that the appellants had incurred certain expenses towards publicity and advertisement but the same were not included in the assessable value for the purpose of payment of central excise duty. On being asked about the details as regards such expenditure, the same were supplied by the appellants to the Department under their letters dated 17.9.03 and 6.1.04. Consequently, it was revealed that for the period from December 2002 to December, 2003, the appellants had incurred expenditure amounting to Rs.16,11,063/- on publicity and Rs.1,89,831/- on advertisements. Accordingly, a show cause notice dated 7.1.2004 was issued to the appellants proposing recovery of the duty to the tune of Rs.2,88,143/-. The appellants contested the claim by filing their reply dated 12.1.2004. The adjudicating authority while accepting the contention sought to be raised by the appellants dropped the proceedings. Being aggrieved, the Department carried the matter in appeal before the Commissioner (Appeals) and thus the impugned order came to be passed.
3. Learned Advocate for the appellants while assailing the impugned order submitted that the Commissioner (Appeals) totally misconstrued the concept of transaction value under the Excise Act. Drawing our attention to the definition of the term transaction value under Section 4(3)(d) of the said Act, the learned Advocate submitted that the definition has clearly two parts, however, both parts specifically refer to amount which is either payable by the buyer to the manufacturer or the amount which the buyer has to incur on account of manufacture or at the instance of the manufacturer in relation to the sale of the product. Referring to the expression to make provision for in the said definition, the learned Advocate submitted that the same essentially refers to the expenditure which the buyer is obliged to incur in terms of the oral or written agreement with the manufacturer in relation to the sale of the product. He further submitted that even Board has clarified this aspect in the Circular No.643/34/2002-CX dated 1.7.2002 wherein the question No.6 which was referred for necessary consideration of the Board was clearly answered to the effect that the transaction value includes the cost which the buyer incurs or makes provision for or on behalf of the assessee for advertising or publicity charges. According to the learned Advocate, therefore, the transaction value does not include each and every expenditure incurred by the manufacturer but it only refers either to amount recovered from the buyer or the amount which buyer is compelled to spend in relation to the sale of product manufactured, either on account of advertisement or publicity thereof. Further, drawing our attention to the instructions issued by the Joint Secretary, Government of India on the File No.354/81/2000-TRU, dated 30.6.2000 on the subject of transaction value and more particularly, to para 6 and 7 of the said instruction, it was submitted that the transaction value is always understood to be relating to the amount recoverable from the buyer or the amount which the buyer spends in relation to the advertisement or publicity of the product.
4. On the other hand, the Departmental Representative placing reliance in the decision of the Larger Bench in the matter of Maruti Suzuki India Ltd. vs. C.C.E., Delhi III reported in 2010 (257) ELT 226, and specifically drawing attention to paras 16, 17, 18 of the said decision, submitted that the term transaction value would include all the elements which are integrally connected with the sale of excisable goods and therefore, whatever expenses which the manufacturer incurs in relation to the advertisement or publicity will have to be included in the assessable value of the product. Further, drawing our attention to the definition of the term transaction value he submitted that the expression to make provision for is preceded by another expression any amount charged for or which clearly disclose that the transaction value does not merely mean the price actually paid or payable for the goods but also include any other expenditure in relation to the advertisement for the product.
5. Taking into account the rival contentions, the only point which needs to be considered is whether the expenditure incurred in relation to the publicity of the product cleared by the manufacturer would form part of the assessable value bearing in mind the meaning and scope of the term transaction value under the said Act.
6. The term transaction value as defined in Section 4(3(d) of the said Act reads thus Transaction value means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.
7. The point relating to the scope of the said term transaction value was the subject matter for consideration before the Larger Bench in Maruti Suzuki India Ltd. case. In paras 16 to 21 of the said decision, it was observed thus 16.?The definition clause of the expression transaction value begins with the clear meaning thereof as understood under Sale of Goods Act, 1930 and farther proceeds to elucidate its extensive nature, simultaneously circumscribing the excludable items therefrom. Obviously, as far as inclusive part of the definition is concerned, it is totally extensive and very wide, while the exclusion portion is completely exhaustive.
17.?The definition clause defines the transaction value to be the price paid or payable for the goods when sold. It further proceeds to enumerate the factors elements which are to be included in addition to the price to determine the assessable value as the law contemplates by Section 4 of the Act. It then explains that the inclusion of identified items does not mean that they are restricted or limited to those which are specifically identified. In this inclusion part of definition, the legislature has used the word any amount at two places, thereby clearly disclosing the extensive nature of the definition. Thereafter, the definition clause specifically identifies the items which stand excluded from the transaction value, which is absolutely restrictive in nature.
18.?On the whole, the definition of the expression transaction value is neither restrictive in nature nor exhaustive but illustrative and inclusive. The definition clause uses terms like means, includes, including, but not limited to, and but does not include. The word includes has been suffixed by the phrase in addition to. Apparently, it is a definition of extensive nature and at the same time it is restrictive and exhaustive in relation to the items to be excluded therefrom. It discloses to be of vary wide and extensive in nature and it is evident from the use of the expressions like includes in addition to and including but not limited to. At the same time, it precisely pinpoints the items which are excluded therefrom, with the prefix as but does not include. Exclusions being defined no presumption for further exclusions is permissible since measure of levy is revenue yield base. There appears no ambiguity to say that the amendment made w.e.f. 1-7-2002 has to cover all factors/elements integrally connected with sale of excisable goods to contribute for determination of assessable value thereof.
19.?If one peruses the definition clause of the expression transaction value, it refers to any amount that buyer is liable to pay. Only restriction that has been imposed is that such payment should be by reason of or in connection with the sale on such goods. Thus reason of sale and inter connection thereto are essential elements to contribute for assessable value. The definition further clarifies that any such amount is not limited to, any amount charged for .... The expression any has been used twice and on both the occasions, it refers to the amount payable by the buyer. The second time use of the word any is preceded by the expression but not limited to. The said expression clarifies the definition to be totally extensive in nature and not exhaustive as far as the items referred in the definition clause after the expression but not limited to.
20.?Further perusal of definition of the term transaction Value does not disclose that the elements to be included in the assessable value would depend upon direct flow back of the consideration to the assessee. Such a conception shall defeat the spirit of amendment to the law. Even indirect benefit in that regard, wholly or partly, resulting from the payment made by the buyer to the dealer in connection with or by reason of the sale transaction will have to be included in the assessable value. Being so, any amount collected by the dealer towards pre-delivery inspection or after sale services from the, buyer of the goods under the understanding between the manufacturer and the dealer or forming part of the activity of sale promotion of the goods would be a payment on behalf of the assessee to the dealer by the buyer, and hence, it would form part of the assessable value of such goods. Undoubtedly, such collection of charges by the dealer could also be to the advantage of the dealer to discharge post sales obligations/liability arose under contract of sale. However, that may involve a question of profit to the dealer and may be a subject matter of assessment for the purpose of direct taxes. However, in relation to the manufacturer, it would be an indirect consideration received by the assessee in relation to the clearance of the product manufactured by him.
21.?The term sale used in die definition clause should not be misunderstood as having used, otherwise than to identify the stage at which the product is cleared to the customer i.e. the buyer thereof and the price element which is to be considered for the purpose of deciding the issue relating to the assessable value of the manufactured goods. It essentially denotes the total consideration payable by the buyer for the product which is to be considered while calculating the assessable value of the goods for the purpose of determining the duty liability under the said Act. It is totally different from the liability relating to sale tax. This is apparent from the scheme of the Act as well as the intent and spirit of the Section 4 itself. Considering the definition of the transaction value as is found in Section 4(3(d) of the said Act and observations made by the Larger Bench, it is abundantly clear that the expression to make provision for which is in relation to the advertising or publicity, marketing and selling organization expenses, is not necessarily related to the amount which is recoverable from the buyer but also include all the expenditure in relation to the said subjects. The contention of the appellants, however, is that such expenditure is necessarily to be by the buyers in order to make the said amount to be part of the transaction value. It is submitted by the Department that once it is clarified that the definition of the term transaction value is not restrictive in nature but is exhaustive and only in relation to exclusion, it is restrictive.
8. It is difficult to accept the contention sought to be canvassed on behalf of the appellants. The expression to make provision for is nowhere related the amount which is required to be spent only by the buyer. Rather the expression is preceded by the expressions in the form of including and but not limited to and these expressions having appeared in the definition after the expression about obligation of the buyers to pay the price or any other amount in relation to the sale of the product, it would obviously mean that the expression to make provision for will not relate exclusively to the expenses by the buyer only but would include the expenses by the seller too.
9. The Circular dated 1.7.02 in para 6 thereof on which heavy reliance is placed by the appellants cannot be of any help to the appellants in this regard. The Board was dealing with a question as to whether the expenses in relation to advertisement and publicity borne by the dealers/buyers were to be excluded from the assessable value. It was clarified that as per definition, the transaction value has to include the cost which the buyer incurs, or, makes provision for or on behalf of the assessee for advertising or publicity charges. The question was restricted to the expenditure by the dealers and buyers and was answered accordingly.
10. As regards the instructions dated 30.6.2000 in paras 6 and 7 to which attention was drawn are also in relation to the amount receivable from the buyer. The point which is canvassed in the matter in hand was not the subject matter of the said instructions. It is also to be noted that that though the appellants had taken a specific defence that the expenses were incurred towards distribution of complementary items and such distribution was not forming part of any sale promotion scheme, the appellants did not produce any evidence in that regard and there is a clear finding to that effect in the impugned order. We have not been pointed out any material which could disclose that the said finding to be contrary to the materials on record.
11. For the reasons stated above, therefore, we do not find any case having made out for interference in the impugned order and hence the appeal fails and is thereby dismissed.
(Justice R.M.S. Khandeparkar)
President
(Rakesh Kumar) Technical Member
scd/
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