2014 (2) TMI 210 - AT - Central Excise

Interpreting 'Transaction Value' under Central Excise Act: Buyer's Payment Considered. Evolution of Valuation Concepts.

The Tribunal analyzed the provisions of the old and new Section 4 of the Central Excise Act and concluded that 'Transaction Value' under the new Section 4 ... Valuation - demand towards cash discounts availed for which prompt payments are not made by the customers within the specified period - scope of definition of ‘Transaction Value’ - Held that:- Valuation under ‘Transaction Value’ under the new Section 4 is different to the Valuation concepts under old Section 4 of the Central Excise Act, 1944, effective up to 01.7.2000 and Section 14 of the Customs Act, 1962. Under the definition of ‘Transaction Value’ of new Section 4 of the Central Excise Act, 1944 even a consideration at a time other than sale will also be required to be added to the assessable value of the goods for the purpose of payment of Central Excise duty at the time of removal. Naturally such consideration, like an escalation of price clause, may not be known at the time of removal. Price payable at a later date could not be said to be the price payable at the time of removal and therefore could not be considered as the transaction value at the time and place of removal. The Bench did not find any significant difference between the deemed price under the old Section 4 and the actual price under the amended Section. In vie of facts and doubts raised by the decision of Lucas TVS Limited vs. CCE, Chennai [2008 (10) TMI 76 - CESTAT CHENNAI] Registry is directed to place the papers before the President for constituting a three Member Bench to come to a conclusion as to whether the issue needs to be referred to five Member Bench or otherwise. - Matter referred to larger bench. Issues:- Whether Central Excise duty is required to be recovered from the appellant for cash discounts availed but prompt payments not made by customers within the specified period.Analysis:1. The appeal was filed against an Order-in-Original confirming demands and penalties imposed by the adjudicating authority. The issue was whether Central Excise duty should be paid on cash discounts not promptly paid by customers. The appellant argued their case was covered by a Mumbai Larger Bench judgment and cited relevant case laws for judicial discipline.2. The Revenue argued that under the present Section 4 of the Central Excise Act, the price charged for each transaction should be considered as assessable value for duty discharge. They contended that the concept of deemed price under the old Section 4 was different from the current provisions. The Revenue suggested that the issue be referred to a Larger Bench for a correct legal interpretation of 'Transaction Value' under the new Section 4.3. The Tribunal analyzed the provisions of the old and new Section 4 of the Central Excise Act. It noted that under the new Section 4, 'Transaction Value' includes any amount payable by the buyer to the assessee by reason of the sale, whether payable at the time of sale or later. The Tribunal observed that the concept of valuation under 'Transaction Value' was distinct from the previous provisions.4. The Tribunal highlighted that even considerations beyond the sale, like cash discounts received after removal, could impact the assessable value for duty payment under the new Section 4. Referring to doubts raised by a Larger Bench in a previous case, the Tribunal directed the Registry to place the matter before the President for constituting a three-Member Bench to decide on referring the issue to a Larger Bench for clarification.5. The judgment emphasized the evolving nature of valuation concepts under the Central Excise Act and the need for a comprehensive interpretation of 'Transaction Value' under the new Section 4. The Tribunal's decision to potentially refer the issue to a Larger Bench reflects the complexity and significance of the legal interpretation required in this case.This detailed analysis provides a comprehensive overview of the legal judgment, addressing the key issues and arguments presented by both parties, as well as the Tribunal's interpretation and decision-making process.