Customs, Excise and Gold Tribunal - Delhi
Saru Aikoh Chemicals Ltd. vs Collector Of Central Excise on 26 September, 1994
Equivalent citations: 1995ECR88(TRI.-DELHI), 1994(74)ELT258(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. These appeals from the same appellants involve common issues of valuation. One issue is regarding fixation/application charges in the assessable value of the goods manufactured by the appellants. They manufacture a chemical known as bottom pouring compound which is used in the manufacture of steel ingots and steel castings for the purpose of lining the moulds before pouring molten steel into them. In their sales of this compound to Tata Iron and Steel Co., the appellants collected in their invoice the fixing/application charges for providing the service in the form of labour force who are employed to pour the chemical into the moulds. The jurisdictional Assistant Collector held that the application/fixation charges lend marketability to the product and hence ordered that these charges be added to the assessable value of the goods. The Assistant Collector's order was upheld in appeal leading to the present appeal. The other issue is regarding the trade discount offered by the appellants on the sale of the goods. The Assistant Collector held that the discount was not uniformly offered to all customers and such varying discounts were inadmissible and as such to be included in the assessable value. Disposing of the appeal against the Assistant Collector's order, the Collector (Appeals) observed that provisions under Section 4 of Central Excises & Salt Act, 1944 do admit different rates of discount to different categories of buyers. But, the Collector (Appeals) pointed out that the appellants have failed to substantiate their case in this regard with evidence by way of agreement of sales. There was yet another element of cost forwarding charges which also was added to the assessable value by the Assistant Collector, but the appellants had not seriously challenged this even before Assistant Collector on account of the amount of only Rs. 39/- involved, and appear to have not raised it at all before Collector (Appeals).
2. Shri S.K. Gadhok, ld. Consultant for the appellants, contended that the fixation/application charges were in the nature of post-removal expenses and hence were excludible from the assessable value. He drew support from the Stay Order passed in these appeals by the Tribunal, Stay Order No. 72/1994-A, dated 4-3-1994. The Tribunal has granted stay holding that the appellants have a prima facei case in their favour following the ratio of the precedent decision of Bombay High Court in the case of Voltas v. Union of India - 1991 (56) E.L.T. 329 (Bom.). The ld. Consultant, further, argued that it is equally well-settled that under Section 4 of Central Excises & Salt 1944, trade discount can vary between dealers in different regions or within same region.
3. Shri A.K. Singhal, ld. JDR, while reiterating the reasoning of the lower authorities urged that it has been correctly held that the appellants have failed to establish their claim for the deductions from the assessable value with relevant material evidence.
4. On a careful consideration of the submissions made, it is seen that the appellants have a case regarding exclusion of fixation/application charges from assessable value. These charges are separately invoiced and are on account of the employment of labour services for applying the bottom pouring compound as a lining to the mould. That this service is at a stage beyond the removal of the goods from the factory is also evident. Further, the invoices produced showing the sale of the goods without these charges also is proof that these are not compulsory charges. In such circumstances, the ratio of the Bombay High Court in Voltas case (supra) becomes applicable to the facts of this case as already found by the Tribunal while passing the stay order (supra). The Bombay High Court held that such site service charges recovered from customers for rendering special services are not includible in the assessable value and it was noted that these charges were optional and the customer is not bound to invariably pay them. Therefore, in the present appeals also the fixation/application charges are held to be not includible'in the assessable value. In respect of trade discount the case of the Deptt. is that these discounts are not allowed to all customers uniformly. The appellants have contended with case law that Section 4 of Central Excises & Salt Act, 1944 does not require or envisage such uniformity. Examining the rival contentions, it would appear that Collector (Appeals) in his Order No. 673/93, dated 29-10-1993 has viewed the problem in the correct perspective. He has observed, "The proposition that different rates of discounts are admissible under Section 4 for different category of buyers is not disputed. Although different rate of discount has been allowed by the appellants to different buyers, yet they failed to establish by way of reference of some agreement in terms of sale that the buyers belong to different categories and the type of deduction is known in advance." In other words, the appellants have to establish with acceptable evidence that the different discounts given to different sets of buyers are based on well-defined commercial considerations so as to rule out the possibility that these discounts based on considerations other than proper trade criteria in a transaction at arm's length. The appellants, while stating the position in law in this regard, have not put forth any evidence to show that the varying discounts are demonstrably in accordance with these provisions in law. Therefore, there is no reason to interfere with the Collector (Appeals) order in this regard. It is also not on record that the appellants had proved with satisfactory evidence that forwarding charges are in the nature of transport charges in which case only such costs are deductible from assessable value. In the result, the orders of the Collector (Appeals) are modified only to the extent that fixation/application charges are, for the reasons discussed above, to be excluded from the assessable value. The orders of the lower authorities are, otherwise, upheld.