1995 (5) TMI 28 - SC - Central Excise

Interpretation of Excisable Value & Deductions under Central Excises and Salt Act

GOVERNMENT OF INDIA Versus MADRAS RUBBER FACTORY LTD.

The Supreme Court analyzed the interpretation of Section 4 of the Central Excises and Salt Act, 1944, emphasizing the basis for determining excisable ... Valuation (Central Excise) - Precedent Issues Involved:1. Interpretation of Section 4 of the Central Excises and Salt Act, 1944.2. Deductibility of various expenses from the assessable value of excisable goods.3. Method of computation of assessable value in a cum-duty price scenario.4. Specific deductions claimed by Madras Rubber Factory.Summary:1. Interpretation of Section 4:The Supreme Court analyzed Section 4 of the Central Excises and Salt Act, 1944, both before and after the Amendment Act XXII of 1973. The Court reiterated that the 'normal price' at which goods are ordinarily sold by the assessee in the course of wholesale trade is the basis for determining the excisable value. The Court emphasized that deductions beyond those specifically mentioned in Section 4 depend on the nature of the claims.2. Deductibility of Various Expenses:- Post-Manufacturing Expenses: The Court held that expenses such as storage charges, outward handling charges, and interest on inventories incurred after the removal of goods from the factory gate cannot be deducted from the assessable value.- Packing Charges: The cost of packing necessary for putting the goods in the condition in which they are generally sold in the wholesale market at the factory gate is to be included in the value of the goods unless the packing is of a durable nature and returnable by the buyer to the assessee.- Interest on Finished Goods: This claim was rejected, as it was considered a post-removal expense.- Interest on Receivables: The Court allowed this deduction, stating it is in lieu of the time taken in making the payment by the up-country wholesale buyer.3. Method of Computation of Assessable Value in a Cum-Duty Price Scenario:The Court agreed with the method of computation as stated in Para 22 of the judgment dated December 20, 1986. The correct method involves first deducting permissible deductions from the cum-duty selling price, then computing the assessable value and excise duty.4. Specific Deductions Claimed by Madras Rubber Factory:- TAC/Warranty Discount: Rejected as it was considered a compensation for manufacturing defects rather than a trade discount.- One Percent Turnover Discount: Allowed, as it was found to be a discount known at the time of removal of goods.- Year Ending Discount and Prompt Payment Discount: Allowed, as these discounts were known and understood at the time of removal of goods.- Special Secondary Packing and Tread Rubber: The claim was rejected based on the factual findings that such packing was necessary for selling the goods in the wholesale trade.Conclusion:The appeals were allowed in part, with specific directions for the computation of assessable value and the admissibility of various deductions. The Court emphasized the importance of adhering to the principles enunciated in the judgment for determining the assessable value of excisable goods.