1984 (12) TMI 303 - AT - Central Excise

Tribunal modifies assessable value, excludes transportation charges. Appellants granted relief.

The Tribunal partially accepted the appeal, excluding transportation charges and the cost of the regulator from the assessable value. However, the appeal ... Packing as part of assessable value where goods are delivered packed - secondary packing doctrine - deduction of freight and transit insurance from assessable value - trade discounts deductible if known at or prior to removal - contingent/incentive bonus not a trade discount - component forming indispensable part of excisable article excluded from assessable value - interpretation of value for excise under Section 4(4)(d)(i) as to packingPacking as part of assessable value where goods are delivered packed - secondary packing doctrine - interpretation of value for excise under Section 4(4)(d)(i) as to packing - Whether charges for packing could be deducted from the wholesale cash price in computing assessable value. - HELD THAT: - Applying the Supreme Court's test in Union of India v. Bombay Tyres International Ltd., the Tribunal held that only secondary packing necessary to put the article in the condition in which it is generally sold at the factory gate can be excluded; ordinary packing used for transport and delivery at removal is included in the value. There was no evidence that the appellants used secondary packing; the wooden packing was ordinary packing for transport. Under the statutory provision dealing with value, cost of such packing where goods are delivered packed forms part of the value. The Bombay High Court decision relied upon by the appellants was distinguishable on the facts. [Paras 9]Packing charges are not deductible and must be included in the assessable value.Deduction of freight and transit insurance from assessable value - Whether transport charges including transit insurance are deductible from the assessable value. - HELD THAT: - Relying on the Supreme Court decision cited, and on concession by the Departmental Representative, the Tribunal held that freight and transit insurance charges are to be excluded from the assessable value. [Paras 10]Transport charges including transit insurance are deductible from the assessable value.Trade discounts deductible if known at or prior to removal - contingent/incentive bonus not a trade discount - Whether the incentive bonus (quantity discount of the second type) payable after year end on meeting targets can be deducted as a trade discount from the wholesale cash price. - HELD THAT: - The Tribunal applied the principle that only discounts established under agreement or by practice and known at or prior to removal can be deducted. The appellants' incentive bonus was contingent, determined after the year on the basis of dealers' performance and did not reduce the pre determined sale price at the time of removal. Precedents under Sales Tax were held analogous. Consequently, the scheme amounted to a reward or gift, not a trade discount deductible at removal. [Paras 16]The incentive bonus is not deductible as a trade discount and cannot be excluded from the assessable value.Component forming indispensable part of excisable article excluded from assessable value - Whether the cost of speed control regulators included in the price of electric ceiling fans is deductible from the assessable value. - HELD THAT: - Following the Andhra Pradesh High Court decision (and the Delhi High Court's view noted), the Tribunal held that regulators form an indispensable part of the fan. On that basis the cost of the regulator is not part of the assessable value of the fan and should be excluded. [Paras 17, 19]Cost of the speed control regulator is excluded from the assessable value.Final Conclusion: The appeal is partly allowed: deductions for freight and transit insurance and for the cost of regulators are permitted, while the claim to exclude ordinary packing charges and the contingent incentive bonus are rejected; the impugned order is modified accordingly and consequential reliefs granted. Issues Involved:1. Packing Charges2. Cost of Transportation3. Incentive Bonus Discount4. Cost of Regulator5. Other Post-Manufacturing Expenses and Selling ProfitsIssue-wise Detailed Analysis:1. Packing Charges:The appellants argued that packing charges should not be included in the assessable value as the packing was only for transportation and storage, not essential to the manufacturing process. They cited the decision in M/s. Godrej and Boyce Manufacturing Co. Pvt. Ltd. v. Union of India to support their claim. However, the respondents contended that the packing was ordinary and necessary for trade, thus includable in the value.The Tribunal referred to the Supreme Court's ruling in Union of India v. Bombay Tyres International Ltd., which stated that the cost of packing necessary for marketability at the factory gate is includable in the assessable value. Since the appellants did not provide evidence of secondary packing, the Tribunal concluded that the packing charges should be included in the assessable value.2. Cost of Transportation:The appellants cited the Supreme Court decision in Union of India v. Bombay Tyres International Ltd., which allowed the exclusion of freight and transit insurance charges from the assessable value. The respondents conceded this point.The Tribunal agreed with the appellants and held that transportation charges, including transit insurance, should be excluded from the assessable value of the goods.3. Incentive Bonus Discount:The appellants argued that the incentive bonus discount, based on previous year's performance, should be considered a trade discount. They referenced the Supreme Court's clarification in Union of India v. Bombay Tyres International Ltd., which allowed trade discounts to be deducted if established by agreement or practice.The respondents countered that the incentive bonus was not granted at the time of removal and was contingent on future performance, thus not a trade discount.The Tribunal noted that trade discounts should be known at the time of removal. Since the incentive bonus was determined after the year-end based on performance, it was deemed a contingent concession rather than a trade discount. Consequently, the Tribunal ruled that the incentive bonus discount could not be deducted from the assessable value.4. Cost of Regulator:The appellants sought exclusion of the regulator cost from the assessable value, citing decisions by the Andhra Pradesh and Delhi High Courts, which held that the regulator is an indispensable part of the fan.The Tribunal agreed with these precedents and held that the cost of the regulator should be excluded from the assessable value of the fans.5. Other Post-Manufacturing Expenses and Selling Profits:The appellants did not press for these deductions, acknowledging the Supreme Court's decision in Union of India v. Bombay Tyres International Ltd., which disallowed such deductions.Conclusion:The Tribunal partially accepted the appeal, modifying the impugned order to exclude transportation charges and the cost of the regulator from the assessable value. The appeal was rejected concerning packing charges and the incentive bonus discount. Consequently, the appellants were granted relief in accordance with these modifications.