2011 (4) TMI 905 - AT - Central Excise

CESTAT assessable value ruling upheld, machine usage charges disputed, remanded for fresh decision

The Supreme Court upheld CESTAT's decision that the assessable value of BIB syrup should consider discounts allowed by the appellant's subsidiary, PCIM, ... Assessable value - independent wholesale price - related party transactions - trade discount admissibility - price declaration - remand for fresh adjudication - consideration of evidentiary documentsTrade discount admissibility - price declaration - assessable value - consideration of evidentiary documents - Whether the adjudicating authority considered the appellants' claim of having passed on trade discounts (though not reflected in the price declarations) and therefore whether the matter required fresh adjudication. - HELD THAT: - The Tribunal found that the Commissioner did not consider crucial documents and submissions which were central to the controversy over assessable value - notably the Chartered Accountant's statements asserting that trade discounts were actually passed on, the appellants' price declarations and marketing pattern declarations, and relevant invoices. The Commissioner relied on some sample invoices to conclude that discounts were not passed on, but those invoices either showed discounts or related to periods after 2001; there is no recorded assessment of the Chartered Accountant's verified statement. There is also no discussion by the Commissioner of the legal position concerning the admissibility of discounts which were not incorporated in the price declaration filed under the rules. Because these evidentiary materials and legal contentions going to the root of the valuation question were not examined in depth, the Tribunal held that the matter could not be finally decided on the record before the Commissioner and required fresh consideration after affording the appellants an opportunity to lead and press their documentary evidence and legal submissions. [Paras 4, 5]The matter is remitted to the original adjudicating authority for a fresh decision after considering the appellants' documents and contentions and after giving them an opportunity to be heard.Final Conclusion: Impugned order set aside and the matter remitted to the original adjudicating authority for fresh adjudication on merits after hearing the appellants and considering the Chartered Accountant's statements, price declarations, invoices and related submissions concerning trade discounts and assessable value. Issues:Assessable value determination for BIB syrup manufactured by the appellant.Analysis:The case involved a dispute over the assessable value of bag in box (BIB) syrup manufactured by the appellant, who was engaged in the manufacture of aerated water. The appellant purchased soft drink concentrate from Pepsi Foods Ltd. and sugar from outside, which were mixed to create the final syrup used in the production of aerated water. The BIB syrup was sold to Pepsi Cola India Marketing (PCIM) and two independent distributors. The department contended that the distributors were not truly independent and were created to show a false wholesale price, as 98% of the product was sold through PCIM, the appellant's subsidiary. The assessable value was determined based on the prices declared by the appellant and deductions for excise duty and sales tax. The Assistant Commissioner and Commissioner (Appeals) held that the assessable value should be based on the price at which PCIM sold the BIB syrup to their buyers, including machine usage charges.The appellant appealed to CESTAT, which held that the proviso to Section 4(1)(a) and Rule 9 of the Valuation Rules, 2000 were not applicable. CESTAT ruled that even if PCIM's price was used, the discount allowed by PCIM should be deducted to determine the assessable value. Additionally, CESTAT found that machine usage charges were for a separate activity and should not be included in the assessable value. The Supreme Court upheld CESTAT's decision. However, the department later demanded duty on machine usage charges, which was initially dropped but confirmed for BIB syrup sold to PCIM during a specific period.During the hearing, it was found that certain documents and submissions were not considered by the Commissioner, leading to a lack of detailed analysis. The appellant had provided evidence, including Chartered Accountant's statements, to demonstrate that trade discounts were passed on to buyers, although not claimed in price declarations. The matter was remanded to the Commissioner for a fresh decision, emphasizing the need to consider all relevant documents and submissions to cover all contentions put forth by the appellant.Therefore, the impugned order was set aside, and the case was remanded for a fresh decision on merits by the original adjudicating authority.