Customs, Excise and Gold Tribunal - Tamil Nadu
Sri Chakra Tyres Ltd. vs Commissioner Of Central Excise on 2 December, 1996
Equivalent citations: 1998(101)ELT603(TRI-CHENNAI)
ORDER
V.P. Gulati, Vice President
1. This issue in the appeal relates to the duty demandable from the appellants for reason of the goods having been sold at a higher price than what is already approved by the authorities under Rule 173C.
2. The learned Counsel pleaded that he has no objection to the duty being demanded based on the higher price at which the goods were sold by the appellant. His only plea is that differential duty now being demanded should be abated for arriving at the assessable value. In the catena of decisions by the Tribunal whereby it has been held that in the case of certain extra elements to be added for arriving at the assessable value these elements have to be added to the wholesale price and then the assessable value has to be arrived at taking into consideration the total duty payable. In this connection, he has cited the decision of the Tribunal in the case of CCE, Hyderabad v. VST Inds. reported in 1991 (52) E.L.T. 59 (Tribunal). The Tribunal in that case in paras 25 & 26 has held as under :-
"The language of Section 4 and the extract of the Supreme Court's judgment reproduced above show that the interpretation as given by the Supreme Court alone is the correct one. Rule 5 of Valuation Rules and Section 4 of the Act have to be read together. A harmonious construction can lead only to one conclusion - that the extra accrual should be added to the wholesale price and the. assessable value worked back after allowing admissible deductions. Addition of such extra accruals to the assessable value would distort the meaning of the section because there is no way in which abatement of excise duty which is permitted by Section 4 can be given if the extra accrual is directly added to the assessable value. This view is best illustrated by taking instances where the rate of excise duty is 100% and, say, 150%. If the extra accrual is Rs. 100/- and it is added to the assessable value the entire accrual is to be paid as excise duty when the duty is 100%. If the duty is 150%, the assessee has to pay, in a case of extra accrual of Rs. 100/- an amount of Rs. 150/- as excise duty. Excise duty is not a confiscatory tax and therefore, whatever accrual is there to the assessee only a part of it, major or minor according to the rate of duty, would have to be paid as excise duty. This would be achieved only if the extra accrual is added to the price and not if it is added to the assessable value.
In this view, we find the second issue in favour of the respondents and direct that extra accruals should be added to the wholesale price and not to the assessable value. The other argument of the respondents that only cost of manufacture and manufacturing profits should be assessable value are referred to only to be rejected as the Supreme Court in various judgments (Bombay Tyres, Hindutstan Polymers, etc. etc.) found to the contrary."
Once the extra accruals are required to be added to the wholesale price the appellants would be automatically given abatement in respect of the duty relatable to the extra accruals. The Tribunal by this decision can be taken to have allowed the abatement of duty which was not actually collected by the assessees, but was paid by the appellants subsequent to the sale of the goods. He placed reliance on the following decisions :-
(i) Mangalore Chemicals & Fertilizers Ltd. and Ors. reported in 1986 (23) E.L.T. 48 (Karnataka)
(ii) M/s. Ashok Leyland reported in 1987 (29) E.L.T. 530.
In the case of M/s. Mangalore Chemical & Fertilizers Ltd., the Hon'ble High Court has held as under:-
"What emerges from the above discussion is that in determining the assessable value of manufactured goods governed by exemptions granted by Govt. either partial or whole, only.that amount of duty actually paid or payable by such manufacturer should be excluded and the benefit of such exemption cannot be denied on the ground that the extent of such exemptions either in whole or in part had not been passed to the consumer. We need hardly say that assessments, levies, recoveries and refunds as against and from the petitioners from 1-10-1975 had to be regulated on this basis and not in the basis of the trade notice issued by the Collector."
Therefore, whatever is the duty which is payable and is ultimately recovered from the assessees the abatement of that amount at whatever point the duty is paid is required to be allowed. Since further duty has been demanded from them on account of the extra recovery made by the appellants and that amount has to be added to the wholesale price, the duty that would finally become payable and which may not have been recovered from the customers will be required to be paid. Section 4(1)(a) of the CEA read with Section 4(4)(d)(ii) is clear in this regard. What is to be taken note of is the duty which is payable and not what is actually recovered from the customers. It was pointed out to the learned Counsel that this Tribunal in the case of Auto Inds. v. Asstt. Collr. of CE, Madras reported in 1995 (77) E.L.T. 325 has held that inasmuch as no duty was collected from the customers, the question of abatement of the duty which was paid subsequently by them would be allowable. It was also brought to the notice of the learned Counsel that the Hon'ble Supreme Court in the context of exemption notification in the case of Asstt. Collr. of CE. v. Bata India Ltd. reported in 1996 (84) E.L.T. 164 (S.C.) has held for the purpose of arriving at the value of the goods for exemption purposes from the sale price the question of abatement of duty which was not included in the sale price and which was also not collected from the customers would not arise. He has pleaded that the Hon'ble Supreme Court had rendered the decision in the context of exemption notification and the appellants had sold the goods beyond a particular price fixed under the exemption notification and had sought for a notional abatement of the duty which was otherwise payable, for arriving at the value for the purposes of the limit of the sale price fixed for the purpose of exemption notification. He pleaded that the ratio of that decision is distinguishable from the facts of this case. Obviously, there is some divergence of opinion in the interpretation of Section 4(4)(d)(ii) in the context of duty payable and has pleaded that benefit of doubt should be given to the appellants.
3. The learned DR pleaded that in view of the judgment in the case of Ashok Leyland referred to supra, appellants will not be entitled to the abatement of differential duty which is now being asked to be paid by them.
4. We would like to observe that the Hon'ble Supreme Court rendered the decision in the case of Bata India Ltd. cited supra in the context of benefit of Notifications 49/86 & 89/87 under which footwear which were sold up to a particular price were exempted. The appellants were selling footwear beyond the price stipulated in the notification and claimed the abatement of duty which was payable normally and the price came within the limit as set out in the notification. Footwear was claimed to be exempted for the reason that after abatement of duty element the value of footwear came below the exempted level. It is in that context the Hon'ble Supreme Court has held that the benefit notification would not be available as the shoes were put in the market stream at the price above the value stipulated for exemption purposes. The Hon'ble Supreme Court in that case has held as under :
"12. The construction suggested by Mr. Shanti Bhushan will also defeat the purpose of the exemption notification. Exemption from duty has been given to footwear valued at Rs. 60.00 or less per pair. Excise duty is usually passed on to the consumer by including the duty in the price of the goods. The obvious intention behind the notification was to give relief to the consumers who could not afford to buy higher priced footwear. If the argument on behalf of the manufacturer is upheld, he will be entitled to sell footwear at a price of more than Rs. 60.00 per pair and yet will be able to claim the benefit of the exemption notification and not pay any duty. An anomalous situation will arise. The consumer will pay ex-duty price of more than Rs. 60/-per pair and bear the brunt of a tax burden which is not payable by the manufacturer in law. The manufacturer will enjoy the benefit of the exemption notification by deducting an amount on account of non-payable excise duty from the price and thereby make profit in the guise of payment of tax. At the same time, the revenue will be deprived of the duty which is payable on footwear valued at above Rs. 60.00.
13. If the ex-duty value of the footwear given in the chart was Rs. 60.00 or less, then that should have been the excise value. There could be no reason for fixing the price at above Rs. 60.00 except for the purpose of making a larger profit. A manufacturer at the time of clearance of the goods has to indicate in all the documents relating to assessment, the amount of duty which will form part of the price at which such goods are to be sold. In the instant case, the manufacturer could not have included any amount by way of excise duty as part of the price of the goods, if the ex-duty value of the goods was Rs. 60.00 or less per pair. A manufacturer has to fix the wholesale price of the goods before removal of the goods from factory. The price will include costs, planned profit and taxes, if any. If, as in the chart given by Mr. Shanti Bhushan, the ex-duty price of the footwear manufactured by the Company, after all other permissible adjustments, fell short of Rs. 60.00, there could be no reason for the manufacturer to price the goods at a rate above Rs. 60.00 by including an amount as duty even when no such duty was payable. Sub-section (1) of Section 4 lays down that 'value' shall be deemed to be the normal price which is the wholesale price of the goods. But, if any amount payable as excise duty or sales tax formed part of the normal price that will have to be excluded from the 'value' of the goods under the provision of Sub-clause (ii) of clause (d) of Sub-section (4) of Section 4. If the values of the goods as given in the chart were Rs. 60.00 or less, then these values should have been the normal prices of the goods, that is to say, the prices at which such goods were sold to the wholesale market. But, if even in such cases, the wholesale prices were fixed at Rs. 62.00, Rs. 64.00 or Rs. 66.00, per pair, then these prices were not inclusive of any tax. In such a situation, provisions of Section 4(4)(d)(ii) are not attracted at all. The value of the goods shall be deemed to be the normal price of the goods under Section 4(1) of the Act (Rs. 62.00 or Rs. 64.00 or Rs. 66.00 as the case may be).
14. Unless it is shown by the manufacturer that the price of the goods, includes an amount of excise duty payable by him, no question of exclusion of the duty element from the price for determination of value under Section 4(4)(d)(ii) will arise. What the manufacturer has really done in the instant case is to increase the profit element in the wholesale price. In the chart given by Mr. Shanti Bhushan, in the second category the wholesale price of goods after discounts etc. has been shown to be Rs. 62.00, Rs. 64.00 and Rs. 66.00 inclusive of duty at 10%. These are self-contradictory figures. If the corresponding ex-duty figures come to Rs. 60.00 or less, than no excise duty was payable on the goods. If the ex-duty price of the footwear manufactured by the Company fell short of Rs. 60.00 per pair, then by virtue of the exemption notification no duty was payable on the goods. In such a situation, a manufacturer could not include in the price of the goods any amount by way of excise duty."
5. The question to be considered is whether in the case of the goods which have been sold at a particular price and where duty is subsequently demanded in respect of the same in terms of Section 4(1) read with Section 4(4)(d)(ii) the amount of duty which became payable later and which has been demanded can be abated from the sale price or not. For this purpose it is necessary to refer to Section 4 of the CEA, 1944. Section 4(1)(a) reads as under :
"Section 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 value, such value, shall, subject to the other provisions of this section, be deemed to be -
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to 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:"
Section 4(4)(d)(ii) reads as under:
'(d) "value", in rejlation 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 wrap 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 oh 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.' In this context, the 3-Member Bench of the Tribunal in the case of Pieco Electronics and Electricals reported in 1994 (71) E.L.T. 1053 has held as under :
'32. Under Section 4(4)(d)(ii) of the Act, the 'value' in relation to any excisable goods "does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods".
33. According to the Black's Legal Dictionary (5th Edition 448), the meaning of the word 'payable' is as under :-
"Payable - capable of being paid; suitable to be paid; admitting or demanding payment; justly due, legally enforceable." A sum of money is said to be payable when a person is under an obligation to pay it. 'payable' may, therefore, signify an obligation to pay at a future time but when used without qualification term normally means that the debt is payable at once as opposed to 'owing'."
34. A sum of money is said to be payable when a person is under an obligation to pay it. The word 'payable' may, therefore, signify an obligation to pay at a future time. [Madras High Court in the case of A.P. Mariappa Mudlaliar v. State of Madras -1962 (13) Sales Tax Cases 746].
35. Although under the provisions of Section 15A(4) of the Bombay Sales Tax Act, 1959, the additional sales tax/turnover tax cannot be recovered from the customers, the Central Excise Law provides that if the taxes are payable with reference to the goods under assessment then they are excludible from the 'value'. It cannot be said that if such taxes are payable and have been paid by the assessee, he cannot claim deductions in respect of such taxes only on the ground that they are not recoverable from the customers.
36. In their clarificatory judgment in the case of Union of India v. Bombay Tyres International, 1984 (17) E.L.T. 329 (S.C.), Hon'ble Supreme Court have held under :-
"Additional sales tax, surcharge on sales tax and turnover tax should be allowed to be deducted from the sale price in order to arrive ' at the assessable value and also octroi where payable/paid by the manufacturer. These taxes if proved to have been paid should be allowed even if they are paid periodically to the relevant taxing authorities in accordance with the relevant provisions of taxing statutes/rules."
37. It is seen that the appellants had claimed deduction on account of irrecoverable taxes on equalised basis by arriving at the average of such taxes.
38. The Collector, Central Excise had observed that the non-recoverable taxes were not included in the factory cost but covered under selling and distribution over head account. He came to a finding that the non-recoverable taxes were not included in the assessable value. He had referred to the order of the Assistant Collector, Central Excise at page 51 of his order that "M/s. Peico are recovering/showing Central Excise duty, additional tax, non-recoverable taxes separately in the invoices". It has been contested by the appellant. They have submitted that such taxes could never be recovered from the customer (ground 'H' of the Grounds of Appeal).
39. The Collector, Central Excise has modified the demand towards non-recoverable sales tax, octroi etc. from Rs. 24,44,208.26 to Rs. 18,79,207/-.
40. We consider that the amount of additional sales tax, turnover tax, surcharge on sales tax, and octroi, "if proved to have been paid" in respect of the goods assessed to duty, "to the relevant taxing authorities in accordance with the relevant provisions of taxing statutes/Rules", even if non-recoverable : from the customers is eligible for exclusion if included in the value. However, "the factum and the quantum of these taxes actually paid have to be determined on the basis of the facts and evidence on record/produced by the assessee.' It may be seen that turnover tax was not actually recovered by the appellants from their customers as under the Sales Tax Act, the State in which the assessee was located, he was not permitted to recover the same from the customers. It is observed that in terms of Section 4(1)(a), the basis of assessment is the price at which the goods are normally sold by the assessee in the course of the wholesale trade. The sale price of the assessee at any point of time becomes the basis for arriving at the assessable value. Section 4(1)(a) does not say as to what would be the elements which are required to be included for the price to be considered as normal price for assessment purposes and all that it envisages is that it should be the wholesale price which satisfies the criterion as to the time and place of removal when the buyer is not a related person and the price is the sole consideration. There is no plea from the Revenue nor is there any attribution that the price at which the goods had been sold by the appellants is not the sole consideration. The goods have been sold while duty has been demanded at a later point of time on account of the proceedings by the authorities. Once duty on the goods is demanded the claim for abatement has to be considered in our view under Section 4(4)(d)(ii). Section 4(4)(d) envisages that value does not include amount of duty of excise, sales tax and other taxes if any payable on the goods. The Tribunal in the above case has clearly held that the word 'payable' has to be interpreted in the manner that payment is made by the assessee towards those elements and there is nothing to show that tax paid should be recovered by the assessee from the customers. What therefore falls for consideration in this background is whether the appellant will be entitled to abatement of duty which is now asked to be paid even though not recovered from the customers at the relevant time of sale and also whether the ratio of the judgment of the Hon'ble Supreme Court which has been given in the context of exemption Notification and in which case Section 4(1)(a) was not the focus of interpretation would be applicable to the facts of the present case.
6. We find there is a divergence of views held by different Benches in this regard. In the following cases, the Tribunal has held that element of duty which is demanded subsequently is abateable from the sale price :
1. 1993 (49) ECR 126 in the case of Byco International and Ors. v. CCE, New Delhi wherein in para 25 the Tribunal has held as under :
"We also uphold the contention of the learned Counsel that the demand of duty should be calculated on the cum-duty price, i.e. after deducting the duty element from the gross sale price of the goods and not on the basis of the invoice value without duty element, as held by the Hon'ble Supreme Court in the case of Bata Shoe Co. (P) Ltd. reported in 1985 (21) E.L.T. 9."
2. 1990 (50) E.L.T. 410 (3-Member decision in the case of Venus Paper Mills Ltd. v. CCE wherein the Tribunal has held as under:
"Regarding the issue of computation of differential duty, we remand the matter to the Collector for purpose of determining the amount, after deduction of the amount of duty actually paid from the sale price, in accordance with the provisions of Section 4(4)(d)(ii)."
3. 1993 (21) ETR 631 in the case of Vapi Paper Mills Ltd. v. CCE etc. wherein the Tribunal has held as under:
30. The third leg of the argument of the learned Advocate is pertaining to the assessment of the value and rate of duty. The main grievance is that the learned authority despite remand of the matter has not applied its mind and has not calculated the duty in terms of Section 4(4)(d)(ii) of the Act. We have gone through the Orders-in-Original and Order-in-Appeal which are subject matter of appeal in E/2538/90-C. There is force in the submissions made by the learned Advocate. We notice that there is no discussion about the plea taken by them but instead the learned Assistant Collector has held that the duty jointly worked out as per the terms of the Gujarat High Court and it worked Out to Rs. 28,72,391.18 and the first appellant had in pursuance of Gujarat High Court order dated 26-9-1984 deposited Rs. 15 lacs and further the Court had directed by its order dated to give a Bank Guarantee if at all required to be furnished after the departmental official confirmed the calculation of differential duty. The learned Assistant Collector has held the order that in pursuance of the direction of the High Court it was recalculated and worked out to Rs. 28,72,391.18 is not clear as to whether.the duty was calculated in terms of Section 4(4)(d)(ii) of the Act or not. As has been seen from the Venus Paper Mills Ltd. case, the Tribunal has accepted this plea of calculation in accordance with the provisions of Section 4(4)(d)(ii) of the Act and, had remanded the matter for computation of the differential duty in accordance with the said provisions.
31. In view of this we have also to direct the lower authorities to the Assistant Collector for carrying out the said exercise in the light of the plea taken by the learned Advocate and the citations noted. In any case, the appellants have clearly admitted that they are liable to pay Rs. 12,96,221.50. Therefore, the differential duty is required to be worked out by granting the benefit of clearances of paper upto and inclusive of 225 Gsm. in the light of the observations made by us.'
7. In our view, in view of the divergence of views between the different Benches, the matter requires to be resolved by reference to the Larger Bench. We direct the registry to forward the papers to the registry at Delhi for placing the papers before the Hon'ble President for orders for constituting a Larger Bench.