1988 (7) TMI 58 - SC - Central Excise

Delivery, collection charges and cylinder deposits excluded from assessable value; loading inside factory included; base value on ex-factory price

SC held that delivery and collection charges, cylinder deposits and rentals are not part of the assessable value as they do not pertain to manufacture and ... Value determination under Section 4 - ex-factory price - assessable value - cost of transportation from factory gate - deductibility of delivery and collection charges - inclusion of loading chargesValue determination under Section 4 - ex-factory price - assessable value - cost of transportation from factory gate - deductibility of delivery and collection charges - inclusion of loading charges - Whether delivery and collection charges, cylinder deposits, rentals and transport charges between factory and depot form part of the assessable value where an ex-factory wholesale price is ascertainable - HELD THAT: - The Court applied the valuation scheme in Section 4 and the principle in Union of India v. Bombay Tyre International, holding that where the wholesale price at the factory gate is ascertainable that price is the basis of assessable value and transportation or delivery-related charges to the place of sale are irrelevant to excise valuation. Delivery and collection charges, cylinder deposits and rentals relating to transport and post-manufacture delivery are excluded from the assessable value because they do not form part of the manufacture. Loading expenses incurred within the factory are part of the cost of manufacture and must be included in the assessable value, whereas loading or handling expenses incurred outside the factory gate and costs of transportation from the factory gate to a depot are excludible. The Tribunal's conclusion that, if ex-factory prices are ascertainable, no deduction from ex-depot prices survives, was endorsed; conversely, if ex-factory prices were not ascertainable, deductions may be claimed on the basis of actual evidence. [Paras 5, 6, 8]Where ex-factory price is ascertainable, assessable value is the factory-gate wholesale price; transport, delivery and collection charges and similar post-factory costs are excluded, but loading charges within the factory are includible.Assessable value - ex-factory price - Direction to refix assessable value and remand for computation - HELD THAT: - The Tribunal had remanded the matter to the Assistant Collector to refix the assessable value. The Court directed that, applying the legal principles stated (ex-factory price as basis; exclusion/inclusion rules for various charges), the Assistant Collector shall re-fix the assessable value accordingly. The Tribunal's order was modified to that extent and the case disposed of with a direction for the Assistant Collector to implement the valuation approach laid down by this Court. [Paras 5, 9]The matter is remanded to the Assistant Collector to re-fix the assessable value in accordance with the Court's directions.Final Conclusion: The appeals are allowed in part: the Court holds that where the ex-factory wholesale price is ascertainable it is the assessable value and transport/delivery-related charges are excluded (loading within the factory excepted); the Assistant Collector is directed to re-fix the assessable value accordingly and the Tribunal's order is modified and disposed of. Issues:- Assessment of assessable value under the Central Excises and Salt Act, 1944.- Inclusion of additional charges in the assessable value.- Determination of value under Section 4 of the Act.- Application of principles from previous judgments in determining assessable value.Analysis:The judgment by the Supreme Court of India, delivered by Sabyasachi Mukharji J., pertains to appeals under Section 35L(b) of the Central Excises and Salt Act, 1944. The appellant, a manufacturer of compressed Oxygen and dissolved acetylene, received show-cause notices regarding the approval of price lists for their products. The Tribunal found discrepancies in the prices charged by the appellant at their depots and service centers compared to the approved price list, leading to a dispute with the revenue department regarding the inclusion of additional charges like delivery and collection charges, cylinder deposit, and rentals in the assessable value.The department contended that these additional charges should form part of the assessable value. The Tribunal observed that the assessable value should be based on the price at the factory gate, and any transportation charges incurred should not be added to the wholesale price at the factory gate for excise duty purposes. The Tribunal directed the Assistant Collector to re-fix the assessable value based on the principles outlined in the judgment.The judgment emphasized the importance of determining the assessable value in accordance with Section 4 of the Act. It reiterated that the value of excisable goods should be based on the normal price at which the goods are ordinarily sold in wholesale trade for delivery at the time and place of removal. The judgment referenced previous cases to support the principle that once the ex-factory price is ascertainable, other expenses or charges must be excluded from the assessable value.The counsel for the respondent highlighted specific observations from previous judgments regarding the inclusion of various expenses in the value of excisable goods. However, the Court clarified that in the present case, there was a clear finding of an ascertainable ex-factory price, which should be the basis for determining the assessable value. Accordingly, the Court directed the Assistant Collector to re-fix the assessable value in line with the judgment, modifying the Tribunal's decision. The appeals were disposed of with no order as to costs.