2003 (4) TMI 109 - SC - Central Excise

Uniform all-India excise pricing with equalised freight: whether depot transport costs can be added to assessable value-disallowed

The dominant issue was whether, under s. 4 of the Central Excise Act, 1944, where a manufacturer charges a uniform all-India price inclusive of equalised ... Scope and ambit of Section 4 of the Central Excise Act, 1944 - definition of the term 'Place of removal' - Whether in cases where a manufacturer includes equalised freight in the price of the goods and sells the goods all over the country at a uniform price, the Department is entitled to compute value by including the cost of transportation from the factory to the depot? Held that:- Section 4 has to be read as a whole. If the place of removal was the factory, then the price would be normal price at the factory. If place of removal was some other place like a depot or the premises of a consignment agent and the price was different then that different price would be the price. It is because newly added Section 4(ia) was now providing for different prices at different places of removal that the definition of the term 'place of Removal' had to be enlarged. Thus the amendment was not negativing the judgments of this Court. If that had been the intention it would have been specifically provided that even where price was the same/uniform all over the country, the cost of transportation was to be added. Thus, in cases where the price remains uniform or constant all over the country, it does not follow that value for purpose of excise changes merely because the definition of the term 'place of removal' is extended. The normal price remains the price at the time of delivery and at the place of removal. In cases of 'equalised freight it remains the same as per the judgments of this Court set out in Union of India & Ors. Etc. Etc. v. Bombay Tyre International Limited Etc. [1983 (10) TMI 51 - SUPREME COURT OF INDIA, NEW DELHI] . It is because newly added Section 4(ia) was now providing for different prices at different places of removal that the definition of the term 'place of Removal' had to be enlarged. Thus the amendment was not negativing the judgments of this Court. If that had been the intention it would have been specifically provided that even where price was the same/uniform all over the country, the cost of transportation was to be added. Issues: Whether, after the amendment to Section 4 of the Central Excise Act, 1944, where a manufacturer sells goods at a uniform price nationwide by including equalised freight, the Department is entitled to compute excise value by adding the cost of transportation from factory to depot.Analysis: Section 4(1)(a) defines normal price as the price at which goods are ordinarily sold for delivery at the time and place of removal; the amended Section 4(ia) contemplates differing prices for different places of removal where applicable. The enlargement of the statutory definition of 'place of removal' to include depots was introduced to give effect to differing prices at different places of removal and not to alter the valuation where a single uniform price (equalised freight included) is charged nationwide. Section 4(2) excludes the cost of transportation when price for delivery at place of removal is not known and value is determined with reference to price for delivery at another place. Reading Section 4 as a whole shows the normal price remains the price at time and place of removal; consequently, where the price is uniform across places of removal by virtue of equalised freight, the value for excise does not change merely because the statutory definition of place of removal was extended.Conclusion: The Department is not entitled to add transportation cost from factory to depot to the excise value where the manufacturer charges a uniform price across the country by including equalised freight; the appeals are allowed in favour of the assessee.