Custom, Excise & Service Tax Tribunal
M/S United Phosphorous Ltd vs Commissioner, Central Excise & Service ... on 30 September, 2015
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
Appeal No.E/683-686/2008-DB
[Arising out of OIO No.17/MP/Vapi/2008, dt.28.03.2008, passed by Commissioner of Central Excise & Customs, Vapi]
1. M/s United Phosphorous Ltd,
2. Shri Kanubhai Mohanlal Desai,
3. Shri Hasmukhbhai N. Desai,
4. Shri Arun C. Ashar Appellants
Vs
Commissioner, Central Excise & Service Tax, Vapi Respondent
AND Appeal No.E/892/2008-DB Commissioner, Central Excise & Service Tax, Vapi Appellant Vs M/s United Phosphorous Ltd Respondent Represented by:
For Revenue: Shri Alok Srivastava, Authorised Representative For Assessees: Shri Prakash Shah, Advocate For approval and signature:
Honble Mr. P.K. Das, Member (Judicial) Honble Mr. P.M. Saleem, Member (Technical)
1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen the order?
4. Whether order is to be circulated to the Departmental Yes authorities?
CORAM:
HONBLE MR. P.K. DAS, MEMBER (JUDICIAL) HONBLE MR. P.M. SALEEM, MEMBER (TECHNICAL) Date of Hearing/Decision:30.09.2015 Order No.A/11631-11635/2015, dt.30.09.2015 Per: P. K. Das The relevant facts of the case, in brief, are that M/s United Phosphorous Ltd (in short the Assessee) was engaged in the manufacture of Inorganic, Organic and Miscellaneous Chemicals, classifiable under Chapter 28, 29 and 51 of the Schedule to the Central Excise Tariff Act, 1985. The Assessee was selling the excisable goods through their depots situated at various places of the country. The Assessee was filing the Declaration in Proforma-II declaring therein the price at which the excisable goods were sold from the depots at the time of removal of the goods from the factory. On 22.12.1998, the Central Excise officers HPIU-I, Surat-II, headed by the Superintendent of Central Excise, visited the Assessees factory premises and found that RG23A Part II register and RG-1 registers were not maintained upto date. The Central Excise Officers had seized several records/documents. They had recorded the statements of various persons of the Assessee Company. During the investigation, it was noticed that there was variation in prices at factory gate and subsequent sales from the depots.
2. A Show Cause Notice dt.04.10.2000 was issued proposing demand of Central Excise duty amounting to Rs.70,45,270.71 alongwith interest and to impose penalty on the Assessee, for the period from September 1995 to March 1999. It has also proposed to impose penalty on the Director and employees of the Assessee. It has been alleged that the Assessee had contravened the provisions of Section 4 of the Central Excise Act, 1944 read with Rule 5 of Central Excise (Valuation) Rules, 1975 and other rules of erstwhile Central Excise Rules, 1994, in as much as they have not determined the correct assessable value of their product for discharging the Central Excise duty, as they failed to declare the correct assessable value by claiming the excess deduction of freight and forwarding i.e. transportation charges and also failed to determine and discharge the correct Central Excise duty leviable on their product considering the value/prices collected from their depots. By the impugned order, the Adjudicating authority confirmed the demand of differential Central Excise duty of Rs.51,61,530.00 alongwith interest, after allowing the benefit of cum-duty price, and also imposed penalty of equal amount of duty under Section 11AC of the Act, 1944. It has dropped demand of duty of Rs.9,34,690.00 involved on excess transportation charges. It has further imposed penalty on various persons as under:-
i) Shri Hasmukhbhai Nagjibhai Desai, Rs.2 lakhs
Senior Executive-cum-Authorised Signatory
of the Assessee Company.
ii) Shri Kanubhai Mohanlal Desai, Rs.2 lakhs
General Manager (Admn)
of the Assessee Company
iii) Shri Arun C. Ashar, Rs.5 lakhs
Acting Director of the Assessee Company
3. The Assessee and other noticees filed appeals against the confirmation of demand of duty alongwith interest and imposition of penalties. Revenue also filed appeal against the impugned order for extending the benefit of cum-duty price and dropping of demand of duty on excess transportation charges.
4. The learned Advocate on behalf of the Assessee and the other appellants submits that the Assessee removed the excisable goods from their factory gate on payment of duty to the various depots as per the Declaration in Proforma-II filed by them. It is submitted that as per Section 4 of the Act 1944, the Assessee was liable to pay duty at the factory gate on the price prevailing at depot. It is submitted that the subsequent revision of price at depot has no effect. It is further submitted that the varying rate of discount offered by the Assessee depending upon the utilization of free credit period, which is known as prompt payment discount offered to all. It is well settled that cash discount is admissible deduction even the customer had availed or not. He drew the attention of the Bench to the relevant portion of the Adjudication order and also relied upon various case laws. It is submitted that the demand of duty is barred by limitation. There is no irregularity and the penal provision cannot be invoked. The learned Advocate submits that the Adjudicating authority rightly extended the benefit of cum-duty price and dropped the demand of duty on excess transportation charges following the decision of Hon'ble Supreme Court. So, the appeals filed by the Assessee and others are liable to be allowed and the appeal of the Revenue should be dismissed. The Learned Advocate submitted written submission and compilation of case laws.
5. On the other hand, the learned Authorised Representative for the Revenue reiterates the findings of the Adjudicating authority. He submits that it is a clear case of under-valuation of the goods. It is submitted that the Assessee cleared the goods at factory gate at a lower price and charged higher price at their depots. In this context, the learned Authorised Representative drew the attention of the Bench to the Table shown in the impugned order. He further submits that the Assessee is liable to pay duty on the differential amount between the factory gate price and depot price. He further submits that the Assessee had not produced any evidence that they have passed the discount to the customers. So, they are not entitled for abatement on cash discounts as claimed by them. Hence, the appeals filed by the Assessee and the others are liable to be rejected. Regarding the appeal filed by the Revenue, it is submitted that there is no provision to extend the cum-duty benefit. It is further submitted that the Assessee claimed the excess transportation charges over and above the actual cost of transportation charges, which is contrary to the Valuation Rules. As per Section 4 of the Central Excise Act read with the Central Excise Valuation Rules, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price, which would be the actual cost of transportation. So, the Adjudicating authority erroneously dropped the demand of duty on excess transportation charges.
6. Heard both sides and perused the records.
7. The main issue involves in the appeal of the assessee, under-valuation of the goods during the period from Sept. 1995 to March 1999. The Adjudicating Authority bifurcated the demand of duty into two spells i.e., from Sept. 1995 to 27.9.1996 and from 28.9.1996 to March 1999. The reason for bifurcation is that with effect from 28.9.1996 the definition of place of removal under Section 4 of the Central Excise Act 1944 has been changed. For the purpose of the proper appreciation of the case, the relevant portion of Section 4 prior and after 28.9.1996 is reproduced below:
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 sold consideration for the sale:
xxxx xxxx xxxx xxxx xxxx (4) For the purpose of this section, -
(a) assessee means the person who is liable to pay the duty of excise under this Act and includes his agent;
(b) place of removal means
(i) a factory or any other place or premises of production or manufacture of the excisable goods; or
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed. By section 74 of the Finance (No.2) Act, 1996 (33 of 1996), Section 4 of the Act, 1944 was amended, 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 sold consideration for the sale:
xxxx xxxxx xxxx xxxxx (4) For the purpose of this section, -
(a) assessee means the person who is liable to pay the duty of excise under this Act and includes his agent;
(b) place of removal means
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;
(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after the clearance from the factory and, from where such goods are removed.
8. It may be noted that prior and after amendment as on 28.09.1996, as per Section 4(1)(a), the normal price would be the price at which the excisable goods are ordinarily sold by the assessee to a buyer for delivery at the time and place of removal. In other words, the normal price would ordinarily be determined the price at which goods are sold at the time of delivery and place of removal. The expressions the price at which such goods are ordinarily sold by the assessee, if read with for delivery at the time and place of removal in section 4(1) (a) make it clear that the value of the goods has to be determined only at the time of clearance of goods from the place of removal. By the amendment of place of removal in Section 4 (4) (b) with effect from 28.9.1996, the position has gone a sea change. Prior to amendment as on 28.8.1996, where an assessee sells a part of goods at factory gate (i.e., ex-factory) and the rest of the goods sells through depot, normal price being ascertainable at factory gate and it would be applicable to depot sale. But, after amendment as on 28.08.1996, the place of removal included depots, premises of consignment agents etc. The effect is that the normal price would be, the price of such goods ordinarily sold by the assessee at depots, at the time of delivery of the goods from factory. Where there is no ex-factory sale and the entire stock transferred to depots even prior to 28.08.1996, the assessable value would be determined on the basis of depot sales price, at the time of clearance of goods at factory. In the present case, as there is no ex-factory sale, the appellant is required to pay duty on the basis of the depot price prevalent, at the time of removal of the goods from the factory. So, the amendment of Section 4 as on 18.9.1996 has no effect in the present case. Thus, in the case where the goods are cleared from the depot, and there is no ex-factory price is available, the assessee is liable to pay duty on the price prevalent in the depot at the time of clearance of the goods from factory. It is well settled by the decisions of the Honble Supreme Court and Tribunal that subsequent to clearance of goods fluctuation in prices at depot could not affect liability to the excise duty. The goods are cleared on payment of duty at the price prevalent at depot at the time of clearance from the factory. After clearance of the said goods from factory, may be sold from the depot at a higher or lower price, the assessee is not entitled to claim the refund for lower price and the Dept also cannot demand the duty of higher price at depot. In this context, some of the decisions are discussed below:
a) In the case of MRF Ltd vs Collector of CE, Madras 1997(92)ELT.309 (SC) the assessee claimed refund of excise duty on the differential amount between the price on the date of removal and the reduced price at which the tyres were sold from depot. The assessee contended that their price list was approved on 14.5.1983 but subsequent thereto on account of consumer resistance, the Ministry of Commerce, Govt. of India, directed them, pursuant to the decision taken at the meeting with the tyre manufacturers roll back to pre 14.5.1983 level and it is on account of this roll back of price, they claimed refund of duty of differential amount. The Tribunal rejected the refund claim and came to the conclusion that under Rule 9A and Rule 173C(2)(vi) of the Central Excise Rules 1944, the duty was chargeable on the excisable goods at the rate and on the price prevailing of the date of actual removal as shown by the assessee from the factory and the subsequent reduction in the price even at the behest of Govt. could not create a right in favour of the assessee to refund of Excise duty on the differential amount in the price. Subsequent reduction in the price is totally irrelevant, so far as the liability to pay Excise duty. The Honble Supreme Court held as under:
We have heard the learned counsel for the assessee. Once the assessee has cleared the goods on the classification and price indicated by him at the time of the removal of the goods from the factory gate, the assessee becomes liable to payment of duty on that date and time and subsequent reduction in prices for whatever reason cannot be a matter of concern to the Central Excise Department insofar as the liability to payment of excise duty was concerned. This is the view which was taken by the Tribunal in the case of Indo Hacks Ltd. v. Collector of Central Excise, Hyderabad - (Tribunal) and it seems to us that the Tribunal's view that the duty is chargeable at the rate and price when the commodity is cleared at the factory gate and not on the price reduced at a subsequent date is unexceptionable. Besides as rightly observed by the Tribunal the subsequent fluctuation in the prices of the commodity can have no relevance whatsoever so far as the liability to pay excise duty is concerned. That being so, even if we assume that the roll back in the price of tyres manufactured by the appellant-company was occasioned on account of the directive issued by the Central Government, that by itself, without anything more, would not entitle the appellant to claim a refund on the price differential unless it is shown that there was some agreement in this behalf with the Government and the latter had agreed to refund the excise duty to the extent of the reduced price. That being so, we see no merit in this appeal brought by the assessee and dismiss the same with no order as to costs.
b) In the case of Shri Bhagwati SSK Ltd vs CCE., Pune 2000 (115)ELT(120)(Tri), the assessee was a manufacturer of Sugar. After clearance of goods from the factory, the price of levy sugar was increased by the Govt. Show Cause Notices were issued proposing to demand of duty on the differential amount received by the sugar mills on enhancement of the price. The Tribunal following the decision of the Honble Supreme Court in the case of MRF Ltd (Supra) and Indo Hacks Ltd. v. Collector of Central Excise, Hyderabad - 1986(25)ELT.69 (Tribunal), held that in cases subsequent to the clearance prices increased, the price for assessment would be the price at which the goods were cleared and not the price now determined.
c) In the case of Lipi Data Systems Ltd vs CCE, Jaipur 2001(130)ELT.91 (Tri.) the assessee was engaged in the manufacture of 'computer line printers'. They have their factory at Udaipur and depot at Mumbai. They were clearing the goods from their factory on payment of duty at the price prevailing at the depot on the date of clearance. The goods were ultimately sold at the depot at the same, higher or lower price. The Adjudicating Authority confirmed the demand of duty on the value at which goods were sold at the depot. The Tribunal held that the value of the goods would be assessed at the price prevalent on the date of removal of goods from the factory. The relevant portion of the said decision is reproduced below:
When goods are removed from the factory to the depot and sales were effected at the depot, how duty is to be calculated is not an issue res Integra. It is covered by Circular dated 14-10-96 issued by CBEC also. Adjudicating authority, in his order, observed "I therefore, cannot persuade myself to agree with the assessee's contention that CBEC Circular date 14-10-1996 is applicable in their case". From this, it appears, he is not happy with the provision contained in the Circular and he wants to take a view contrary to the provisions contained in it. The provision contained in the Circular is in conformity with the law stated by this Tribunal in Castrol India Ltd. v. Commissioner of Central Excise, New Delhi [2000 (118) E.L.T. 35 Tribunal]. Referring to the duty liability of goods removed from the factory and sold from depot, this Tribunal observed "So, in the case of removal of goods from depot the time of removal should be the time at which such goods were cleared from the factory. In other words, time and place of removal provided by Section 4(1)(a), in relation to goods removed from the depot will be the factory gate and depot, respectively. Whenever goods are removed from depot, such goods are to be valued with reference to the time when it was removed from the factory". As per this decision, whenever the goods manufactured by the appellants at their factory at Udaipur were removed for subsequent clearances from Mumbai, they have to be assessed at the price prevalent on that date of removal from the factory. Instead of assessing the goods on this basis, the adjudicating authority and the appellate authority resorted to the method of fixing the value of the goods at the time of its actual sale from the depot. This method was clearly against the CBEC Circular and the decision referred to earlier. Consequently, we have no hesitation in holding that the exercise undertaken by the adjudicating authority was contrary to law. The appellate authority, while confirming that order, has not given any legal sanctity to the proceedings resorted to by the adjudicating authority either. In such a situation, the only course that is open to us is to set aside all the orders passed by the adjudicating authority and the appellate authority. Appeals are allowed and the impugned orders are set aside.
d) After amendment of Section 4 as on 18.9.1996 CBEC vide Circular No.251/85/96-CX, dt.14.10.1996, clarified as under:-
Assessments need not be kept provisional till the actual sale price of the excisable goods cleared from places of removal other than factory gate is known. The assessee may be asked to declare and pay duty at the price prevailing at such other place of removal on the date such goods meant for that place of removal are cleared from the factory gate. To illustrate, if the factory is at Bombay and the storage depot is at Ahmedabad, then for a consignment meant for Ahmedabad Depot, cleared from Bombay factory on, say 1st January, the price at which an earlier consignment of goods of the same destination, is sold from Ahmedabad Depot on 1st January will be the basis for arriving at the assessable value of the goods cleared from Bombay on 1st January. If this consignment cleared on 1st January is sold, say on the 1st March from Ahmedabad Depot at a lower or higher price, such a price will be the basis for valuation of clearances on 1st March and so on. This will apply mutatis mutandis to cases of provisional assessments also where at the time of clearance on 1st January the sale price from the depot on 1st January is not known.
9. It is clear from the above that where no ex-factory price is available and the entire goods sold through depots, the assessable value has to be determined on the price prevalent at the depot at the time of removal of goods from the factory before and after amendment as on 18.9.1996. In the present case, the Adjudicating Authority in respect of demand of duty prior to 18.9.1996 observed that the appellant was required to sell their goods from their depots at the rate declared as Sale Price at Depot are as Rs. per unit. It is also observed that in certain cases, their depots has sold their products at higher rate than Sale Price declared in their declaration, which resulted in undervaluation and thereby short payment of Central Excise duty. They have collected extra amounts from their customers over and above the sale price.
10. The appellant in their reply to the show cause notice categorically stated that they have filed Price Declaration in Proforma-II declaring therein the price at which the excisable goods were sold from the depot at the time of removal of goods from the factory gate. It is further submitted that after removal of the goods from the factory, the appellant sold the goods from the depot at the price prevailing at the depot, which could either be higher or lower depending upon the market condition. It is noted that the appellant declared the depot sale price as prevalent at the time of clearance of the goods from the factory and paid duty thereon.
11. We find that the appellant rightly paid duty on depot sale price as prevalent at the time of clearance of goods from the factory gate, which is in conformity with provision of Section 4(1)(a) of the Act , 1944 and case laws as referred above. The finding of the Adjudicating Authority that the appellant is required to pay duty on such goods sold from the depot at a higher price over and above price as declared in their declaration, is contrary to provision of Section 4(1)(a) of the Act, 1944 and the case laws. It is not in dispute that the appellant cleared the goods from their factory, at the price prevalent at the depot and therefore, the demand of duty cannot be raised for increase of the price after clearance of the goods from the depot. Thus, the demand of duty cannot be sustained.
12. With regard to demand of duty for the period from 28.9.1996 to March 1999, the Adjudicating Authority observed that the price prevalent at depot at the time of removal of goods from the factory is relevant for the payment of Central Excise duty. It has been observed that the assessee has not paid duty on the price prevalent at the depot at the time of clearance from the factory. In this context, the Adjudicating Authority observed on the basis table as mentioned in the impugned order, that there was difference in price between the columns Rate Charged from Customer from Depot and Declared Price of Goods in the factory at which duty paid at the time clearance /Sale Price (S.P.). It is observed that S.P. is inclusive of duty. The appellant in their reply to show cause notice categorically stated that the duty element is required to be excluded in the invoice value of the depot. The appellant also submitted some of the copies of invoices to show that the price it depot is cum-duty price. It is noticed that as per Section 4 (3) (d) of the Act, 1944, value in relation to any excisable goods does not include excise duty, sales tax etc., Hence, the findings of the Adjudicating Authority that the factory price is inclusive of duty cannot be sustained.
13. The next issue is that the denial of benefit of cash discounts from assessable value.The Adjudicating authority observed that the nature of discount appears to be conditional and not uniformly given to all customers. The Assessee had also failed to produce any evidence to establish that they have passed on the said discount to the customers. Therefore, they are not entitled for abatement of cash discount. It is submitted by the learned Advocate that varying rate of discount offered by the Assessee depending upon the utilisation of free credit period. The Hon'ble Supreme Court in the case of Metal Box India Ltd Vs Collr. of C.E. Madras 1995 (75) ELT 449 (SC), held that even cash discount is not uniformly given or is given at the different rates, to different purchasers, which would be admissible deduction. The relevant portion of the said decision is reproduced below:-
13. Learned counsel for the Department vehemently? contended that such a discount to be admissible has firstly to be uniformly made available to all customers like concessional sales of goods on festivals like Diwali or Christmas etc. It may be that such general concessions are given on such occasions to all customers but it cannot be said that if a special trade discount is given to such an esteemed customer who is a buyer of 90 per cent of goods, it would amount to trade practice which would not be a normal trade practice but would be in any way an impermissible trade practice. In fact such type of concessions are usually given by manufacturers whose goods are lifted by whole-buyers whose availability avoids lot of marketing and advertising costs for the manufacturer and also ensures a guaranteed quantity of sales year after year. In order to keep such a wholesale monopolistic buyer attached to it, if under such circumstances by way of business expediency, the manufacturer offers him a special trade discount, it cannot be said that it is not in accordance with normal practice of wholesale trade. It is not in dispute that Ponds (I) Limited has not refunded such discount on any account. Therefore, it satisfies the requirement of clause (ii) of Section 4(4)(d) of the Act. Learned counsel for the appellant in this connection invited our attention to the decision of the Gujarat High Court in Gujarat State Fertilizers Co. Limited v. Union of India & Ors. - 1980 (6) Excise Law Times 397. The Division Bench of the Gujarat High Court consisting of P.D. Desai and G.T. Nanavati, JJ., interpreting the scope of Section 4 of the Act laid down that Section 4 of the Central Excise Act does not in terms enact the trade discount in order to qualify for deduction thereunder should be on a uniform basis to all wholesale purchasers at the factory gate. Any such view would require the addition of word `uniform before the `trade discount occurring in Section 4 which is not evidently permissible. Nor it would be advisable to read the requirement of uniformity even by implication. Even if trade discount is not uniformly given or is given at different rates to different purchasers, it cannot by itself disqualify if from being excluded for arriving at the assessable value so long as the lack of uniformity is not founded on any extra-commercial considerations. To ignore the deduction of trade discount would amount to adding a non-existent fraction to the manufacturing profit which will artificially inflate the net assessable value for the levy of excise duty which is not legally permissible having regard to the basic concept of excise levy. We concur with the aforesaid view on the scope and ambit of trade discount envisaged for Section 4. In view of the aforesaid discussion, it must be held that the Tribunal was in error in taking the view that as trade discount was uniformly not given to all its customers by the assessee, it was not a permissible deduction and it had to be reloaded in the price of the excisable goods. We, therefore, accept the last contention. In the result these appeals are partly allowed, the order of the Tribunal will stand confirmed insofar as period of limitation applicable herein and reloading of the purchase price by the notional value of interest on advances made by wholesale buyer Ponds (I) Limited to the assessee is concerned and to that extent Assistant Collectors order will stand untouched. However, to the extent of the disallowance of the trade discount offered to the wholesale buyers Ponds (I) Limited by the assessee, the decision of the Tribunal is set aside and accordingly the original order passed by the Assistant Collector to that effect will also stand set aside. In the facts and circumstances of the case, there will be no order as to costs.
14. It may be referred to the recent decision of the Honble Supreme Court in the case of Purolator India Ltd vs. CCE, New Delhi III 2015(323)ELT.227(SC). In that case, the Commissioner of Central Excise dropped the duty demand on the issue of cash discount for the period prior to July 2000 and confirmed the demand from July 2000 after introduction of transaction value, which was upheld by the Tribunal. It is not in dispute that the duty has been demanded in respect of cash discount, which was not actually passed on to the customer. The Honble Supreme Court set aside demand of duty on cash discount issue. The Honble Supreme Court in the case of Purolator India Ltd (supra) held as under :
18.?It can be seen that Section 4 as amended introduces the concept of transaction value so that on each removal of excisable goods, the transaction value of such goods becomes determinable. Whereas previously, the value of such excisable goods was the price at which such goods were ordinarily sold in the course of wholesale trade, post amendment each transaction is looked at by itself. However, transaction value as defined in sub-clause (3)(d) of Section 4 has to be read along with the expression for delivery at the time and place of removal. It is clear, therefore, that what is paramount is that the value of the excisable goods even on the basis of transaction value has only to be at the time of removal, that is, the time of clearance of the goods from the appellants factory or depot as the case may be. The expression actually paid or payable for the goods, when sold only means that whatever is agreed to as the price for the goods forms the basis of value, whether such price has been paid, has been paid in part, or has not been paid at all. The basis of transaction value is therefore the agreed contractual price. Further, the expression when sold is not meant to indicate the time at which such goods are sold, but is meant to indicate that goods are the subject matter of an agreement of sale. Once this becomes clear, what the learned counsel for the assessee has argued must necessarily be accepted inasmuch as cash discount is something which is known at or prior to the clearance of the goods, being contained in the agreement of sale between the assessee and its buyers, and must therefore be deducted from the sale price in order to arrive at the value of excisable goods at the time of removal. The Honble Supreme Court allowed cash discount even after introduction of Transaction Value for the reason the cash discount for prompt payment as agreed by the buyer at the time of clearance of goods is a contractual price and it would be deducted from the sale price. It may be noted that the present case is prior to July 2000 and therefore, the appellant is eligible for deduction of cash discount from the assessable value. The Ld. Advocate also relied upon the following decisions:
i) Bhartia Cutler Hammer Ltd Vs Collector 1988 (24) ELT 373 (Tribunal) approved by HSC 2000 (119) ELT A 175 (SC)
ii) Pedder and Pedder Tiles Ltd Vs Commissioner 2000 (120) ELT 751 (Tribunal)
iii) Jenson & Nicholson (India) Ltd Vs UoI 1984 (17) ELT 4 (Bom.)
iv) Alembic Ltd Vs CCE Vadodara 2005 (185) ELT 103 (Tri-Mum)
v) Purolator India Ltd Vs CCE Delhi-III 2015 (323) ELT 227 (S.C.)
15. The Revenue filed appeal against the impugned order, as the demand of duty was dropped on excess transportation charges. The learned Authorised Representative for the Revenue has relied upon the decision of the Tribunal in the case of Auto Control Pvt. Ltd Vs CCE 1993 (63) ELT 166 (Tri). It has been held that the freight charges are allowable subject to production of evidence regarding its expenses, and subject to verification. He also relied upon CBEC Manual Part III (Valuation) Para 3.2. It has been clarified that for the period prior to 01.03.2003, exclusion of cost of transportation is allowed only for the actual cost of transportation and only if the Assessee has shown the same separately in the invoice. In the present case, there is no dispute that the Appellant shown the cost of transportation separately in the invoice. Section 4 (2) of the Central Excise Act, 1944 provides where in relation to any excisable goods the price thereof for delivery at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price. So, it is clear that the cost of transportation from the place of removal to the place of delivery would be excluded from the price. The contention of the Revenue is that the Appellant has claimed the excess transportation charges. The Commissioner of Central Excise dropped the demand, following the decision of Hon'ble Supreme Court in the case of Baroda Electric Meters Ltd Vs CCE 1997 (94) ELT 13 (S.C), held that the profits made by the manufacture on transportation, cannot be a part of the assessable value. The Adjudicating Authority rightly dropped the demand of duty on excess transportation charges. The relevant portion of the decision of Hon'ble Supreme Court in the case of Baroda Electric Meters Ltd (Supra) is reproduced below:-
The Tribunal accepted the position that equalized freight was charged by the appellant from everyone, but proceeded to say that even though freight cannot be a part of the assessable value that wherever freight actually paid was less than the amount collected by way of freight and transportation charges the difference was appropriated by the appellant and, therefore, the same would be a part of the assessable value. In our opinion, the Tribunal proceeded on an incorrect premise. It was clearly held in Indian Oxygen Ltd. v. Collector of Central Excise - 1988 (36) E.L.T. 723 (S.C.) = 1988 (Supp.) SCC 658, that the duty of excise is a tax on the manufacturer and not a tax on the profits made by a dealer on transportation. In view of that decision, the view taken by the Tribunal cannot be sustained.
16. We find that the Hon'ble Supreme Court and the Tribunal passed various decisions following the decision of Hon'ble Supreme Court in the case of Baroda Electric Meters Ltd (supra) as under:
i) Farm Fresh Foods (P) Ltd Vs Collector 1999 (113) ELT 441 (Tribunal)
ii) Nalco Chemicals India Ltd Vs CCE Calcutta-II 1998 (104) ELT 730 (Tribunal)
iii) Prabhat Zarda Factory Ltd Vs Commissioner 2002 (146) ELT 497 (S.C.)
iv) Escorts JCB Ltd Vs Commissioner 2002 (146) ELT 31 (S.C.)
v) Bathinda Industrial Gases Vs CCE & ST Chadigarh-II 2014 (308) ELT 111 (Tri-Del.)
17. So, we do not find any merit in the appeal filed by the Revenue. The learned Advocate on behalf of the Appellant also contested the demand of duty on limitation. As the appeal is decided on merit, there is no need to go into the limitation. It is observed that the demand of duty cannot be sustained and therefore, the imposition of penalty on the assessee and others are not warranted.
18. In view of the above discussion, we set aside the impugned order. Accordingly, the appeals filed by the Assessee and others are allowed. The appeal filed by the Revenue is rejected.
(Operative portion of the order pronounced in Court) (P.M. Saleem) (P.K. Das) Member (Technical) Member (Judicial) cbb ??
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