2009 (12) TMI 416 - AT - Central Excise

Appeal Order Set Aside in Central Excise Case

The impugned order-in-appeal was set aside in a case involving various issues related to the exclusion of different costs and deductions from the ... Transaction value concept - exclusion of transportation cost from the place of removal to the place of delivery - burden of proof on the assessee to show that transportation cost was charged separately and shown in the invoice - deductibility of discounts known prior to removal and actually passed on to the buyer - non-deductibility of damage/concession refunds as discounts - deductibility of bank collection charges as post-manufacturing/post-clearing expenses - requirement that Sales tax/CST must be paid or payable to be excluded from assessable value - no provision for reduction of assessable value on account of receivables (only interest on receivables deductible)Exclusion of transportation cost from the place of removal to the place of delivery - burden of proof on the assessee to show that transportation cost was charged separately and shown in the invoice - Whether transportation cost from place of removal to buyer's premises is excludible from assessable value and the evidentiary standard for such exclusion - HELD THAT: - The Tribunal held that under the pre-1-7-2000 regime old Section 4(2) expressly excluded transportation cost where price is determined for delivery at a place other than the place of removal; under the post-1-7-2000 transaction-value regime, the corollary remains that transportation cost from place of removal to place of delivery is excludible only where the cost is charged to the buyer in addition to the price and shown separately in the invoice in terms of Rule 5. Where the transport cost is not shown in the excise invoice, the burden lies on the assessee to prove that the transaction value includes and permits exclusion of such transportation cost. The Tribunal found that the appellant claimed transport charges were shown in commercial invoices and supported by transporter's bills, but this factual claim had not been verified by the original authority; accordingly the question of exclusion must be examined and determined by the original adjudicating authority on proof of actual expenses incurred for transport from place of removal to place of delivery. [Paras 4]Principle on exclusion and burden of proof stated; remanded to original adjudicating authority for verification and de novo determination of transportation-cost deduction on factual proof.Requirement that Sales tax/CST must be paid or payable to be excluded from assessable value - Whether Sales tax/CST exclusion from assessable value is permissible and whether the quantum allowed by the Deputy Commissioner was correct - HELD THAT: - The Tribunal reiterated that both under the earlier and the post-1-7-2000 provisions exclusion of Sales tax/CST from assessable value is permissible only to the extent such taxes have been paid or are payable. The Commissioner (Appeals) had found that deductions allowed exceeded taxes paid or accrued as per balance sheet, but did not set out factual details. The correctness and quantum of the deduction are questions of fact requiring examination by the original adjudicating authority. [Paras 4]Legal requirement stated that Sales tax/CST must be paid or payable for exclusion; matter remanded to original authority to decide quantum on facts.Deductibility of discounts known prior to removal and actually passed on to the buyer - non-deductibility of damage/concession refunds as discounts - Whether cash/turnover/quantity discounts claimed by the assessee are excludible from assessable value - HELD THAT: - Applying Supreme Court principles, discounts are deductible from assessable value only if they arise under the terms of sale or established trade practice, are known prior to removal and have actually been passed on to the buyer. The Tribunal emphasised that the burden of proof to show existence of a structured policy, prior notice (price list/circular) or that discounts were passed on lies on the assessee. The Department's objections that discounts were not known in advance and not evidenced is a factual dispute; the Commissioner (Appeals) gave no factual particulars to support disallowance. Furthermore, discounts in the nature of damage concessions are not deductible as held by Supreme Court precedent. [Paras 4]Principle on deductibility of discounts stated; remanded to original adjudicating authority for factual determination whether specific discounts met the legal test.Deductibility of bank collection charges as post-manufacturing/post-clearing expenses - Whether bank collection charges on outstation cheques are excludible and whether such charges were allowed twice - HELD THAT: - Relying on Supreme Court authority, the Tribunal held that bank commission or collection charges are post-manufacturing/post-clearing expenses and, where the invoice price is the basis for valuation, are deductible from the assessable value. The Department's contention before the Tribunal was that the deduction had been allowed twice by the original authority; the Tribunal observed that whether the deduction was allowed twice and the correct quantum are questions of fact not examined in the impugned appellate order and therefore require de novo factual determination by the original adjudicating authority. [Paras 4]Bank collection charges are legally excludible as post-clearing expenses; remanded to original authority to verify quantum and alleged double allowance.No provision for reduction of assessable value on account of receivables (only interest on receivables deductible) - Whether deductions were permissible on account of 'old dues from the buyer' or shortfalls in payment - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that Central Excise law contains no provision permitting reduction of assessable value on account of receivables or 'old dues'-only interest on receivables is deductible. The impugned appellate order did not set out factual details of the deductions allowed by the original authority in this regard; therefore the matter requires detailed factual examination by the original adjudicating authority. [Paras 4]No legal basis to reduce assessable value for receivables; remanded to original authority for detailed factual enquiry where such deductions were allowed.Final Conclusion: The Tribunal set aside the impugned appellate order and remanded the matters to the Jurisdictional Assistant/Deputy Commissioner for de novo adjudication on the questions identified - verification of transport-charge exclusion, factual quantification of Sales tax/CST deduction, proof and applicability of claimed discounts, verification of bank-collection-charge quantum/double allowance, and examination of any deductions on account of receivables - applying the legal principles stated above. Issues Involved:1. Exclusion of transportation costs from the assessable value.2. Exclusion of Sales tax/Central Sales Tax (CST) from the assessable value.3. Exclusion of cash discounts and turnover discounts from the assessable value.4. Exclusion of bank collection charges from the assessable value.5. Deduction on account of old dues from buyers.Issue-wise Detailed Analysis:1. Exclusion of Transportation Costs from the Assessable Value:The first point of dispute concerns whether the exclusion of transportation expenses from the place of removal to the customer's premises is permissible under Section 4 of the Central Excise Act and the Central Excise Valuation Rules. The period of dispute is from March 1997 to March 2002. Prior to 1-7-2000, Section 4(2) explicitly allowed the exclusion of transportation costs from the place of removal to the place of delivery. Despite the absence of a specific provision in the new Section 4 effective from 1-7-2000, the principle remains that transportation costs to the place of delivery should be excluded if charged separately in the invoice. The Tribunal noted that the appellant claimed these costs were shown in commercial invoices and backed by transporter's bills. This claim needs verification, and the matter is remanded to the original adjudicating authority for further examination.2. Exclusion of Sales Tax/CST from the Assessable Value:The second issue is the exclusion of Sales tax/CST. The appellants were availing a scheme for deferment of Sales tax/CST payment. The legal position is that only taxes paid or payable should be excluded from the assessable value. The dispute is over the quantum of deduction allowed by the Deputy Commissioner, which the Commissioner (Appeals) found to be more than the actual liability reflected in the balance sheet. This factual determination needs to be verified by the original adjudicating authority.3. Exclusion of Cash Discounts and Turnover Discounts from the Assessable Value:The third issue involves the exclusion of cash and turnover discounts. According to the Supreme Court judgments in the cases of MRF Ltd. and Bombay Tyres International, such discounts should be excluded if given under the terms of sale or established trade practice, known prior to removal, and actually passed on to the buyers. The Department objected, stating that most discounts were not known in advance and were not passed on. This factual determination also requires verification by the original adjudicating authority.4. Exclusion of Bank Collection Charges from the Assessable Value:The fourth issue is the exclusion of bank collection charges for outstation cheques. The Supreme Court in A. Infrastructure Ltd. held that bank charges are post-manufacturing expenses and should be deductible from the assessable value. The Department alleged that these charges were allowed twice. This factual determination needs verification by the original adjudicating authority.5. Deduction on Account of Old Dues from Buyers:The fifth issue involves the deduction allowed by the original adjudicating authority on account of 'old dues from the buyer.' The Tribunal agreed with the Commissioner (Appeals) that there is no provision in Central Excise law for such deductions, except for interest on receivables. However, since the impugned order lacks details, this matter also requires further examination by the original adjudicating authority.Conclusion:The impugned order-in-appeal is set aside, and the matter is remanded to the Jurisdictional Assistant/Deputy Commissioner for de novo adjudication, keeping in view the observations made in paragraphs 4.1 to 4.5. The appeals are disposed of accordingly.