2015 (8) TMI 1014 - SC - Central Excise

Transaction value under amended Section 4 must be based on removal time and include cash discounts

M/s. Purolator India Ltd. Versus Commissioner of Central Excise, Delhi – III

The SC held that under amended Section 4, transaction value must be determined at the time and place of removal of excisable goods, focusing on each ... Valuation of goods - concept of “transaction value” - Section 4 - deduction towards Sales Tax, Cash Discount and Volume Discount on excise duty payable - Held 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 appellant’s factory or depot as the case may be. Judgment in the case of Super Synotex [2014 (3) TMI 42 - SUPREME COURT], was concerned with sales tax incentives that were given under the Rajasthan Sales Tax Incentives Scheme. On the facts of that case, 25% of the sales tax was paid to the Government, and 75% of the said amount of sales tax was retained by the assessee and became the assessee’s profit. - Court did not deal with Section 4(1)(a) as amended in the year 2000 insofar as it speaks of delivery of goods at the time and place of removal. - This judgment does not in any manner deviate from the settled legal position so far as cash discounts are concerned as has been laid down in Union of India v. Bombay Tyre International [1983 (11) TMI 70 - SUPREME COURT] and Government of India v. MRF [1995 (5) TMI 28 - SUPREME COURT] - Decision in the case of Super Synotex distinguished. It is clear that “cash discount” has therefore to be taken into account in arriving at “price” even under Section 4 as amended in 2000. - Matter remanded back - Decided in favour of assessee. Issues Involved:1. Eligibility for deductions on account of volume discount, sales tax, and cash discount.2. Removal of new finished excisable goods instead of old/repaired goods.3. Invocation of the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944.4. Imposition of penalties under Section 11AC and Rule 173Q of the Central Excise Rules, 1944.Detailed Analysis:1. Eligibility for Deductions on Account of Volume Discount, Sales Tax, and Cash Discount:The appellant claimed deductions for sales tax, cash discount, and volume discount while determining the assessable value under Section 4 of the Central Excise and Salt Act, 1944. The Tribunal upheld the Commissioner's decision regarding cash discount, stating that under the new Section 4 (effective from 1.7.2000), the 'transaction value' is the price actually paid or payable for the goods when sold. Since no cash discount was actually given to the customers, the actual price paid by them was considered the assessable value. The Tribunal rejected the appeal concerning the allowance of deduction on account of cash discount but remanded the issues of volume discount and sales tax to the jurisdictional Adjudicating Authority for re-adjudication based on the actual amounts passed on or paid.2. Removal of New Finished Excisable Goods Instead of Old/Repaired Goods:The Tribunal observed that the appellant admitted to clearing new excisable goods in place of defective goods received back from customers. This admission was based on a statement by the appellant's authorized signatory for excise matters. The Tribunal held that the appellant was removing new excisable goods to customers in lieu of defective goods. However, the Tribunal remanded the matter to the jurisdictional Adjudicating Authority to reconsider the evidence and determine the duty demand for defective goods against which no excisable goods were cleared.3. Invocation of the Extended Period of Limitation under Section 11A(1) of the Central Excise Act, 1944:The Commissioner invoked the extended period of limitation provided in the first proviso to Section 11A(1) of the Central Excise Act, 1944, to determine the duty amounts for various periods. The Commissioner confirmed the duty demand of Rs. 44,66,247/- and imposed penalties on the appellant. The Tribunal did not specifically address the issue of the extended period of limitation in its judgment.4. Imposition of Penalties under Section 11AC and Rule 173Q of the Central Excise Rules, 1944:The Commissioner imposed a penalty of Rs. 44,66,247/- on the appellant under Section 11AC and an additional penalty of Rs. 5 lakhs under Rule 173Q of the Central Excise Rules, 1944. The Tribunal left the issue regarding the imposition of penalties open to be decided by the Adjudicating Authority during the remand proceedings.Conclusion:The Supreme Court held that 'cash discount' must be taken into account in arriving at the 'price' even under Section 4 as amended in 2000. The Court affirmed the Tribunal's order of remand on the issues of volume discount, sales tax, and duty liability in respect of returned goods, allowing both parties to argue all points afresh. The Court set aside the Tribunal's order concerning the cash discount issue and disposed of the appeal accordingly.