TaxTMI 
TaxTMI 
2010 (4) TMI 724
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....he period of dispute in these appeals in from September 1996 to February 1999. During this period, the Appellant stock transferred a part of their goods to depots from where the same were being sold in retail. In respect of stock transferred goods, the duty was being paid on the assessable value at the factory gate determined by deducting from, the depot sale price, the central excise duty and trade taxes, distribution charges, cost of durable packing, outward freight including freight from factory gate to depots and retailing expenses. 1.2.1 Some of the goods manufactured were sold to M/s. Drinkwell India Pvt. Ltd. (hereinafter referred to as DIPL) and M/s. Hello Marketing Pvt. Ltd. (hereinafter referred to as HMPL) who sold the goods in retail at much higher price than their purchase price from the Appellant, but the Appellant paid duty on their sale price to DIPL and HMPL, while according to Departments both DIPL and HMPL are related with the Appellant within the meaning of this term as defined in Section 4(4)(c) of Central Excise Act, 1944 (hereinafter referred to as the Excise Act) and duty should have been paid on the price at which the goods were sold by DIPL and HMP....
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.... 40 cycle of refilling and notional cost of packing, claimed as deduction from the depot sale price is includible in the assessable value. 1.4.1 The appellant have filed appeals No. E/4461, 4462 & 4463/04-EX against the Commissioner (Appeals)'s order treating Appellant and HMPL, DIPL and appointed dealers as related persons, and ordering determination of assessable value on the basis of sale price of HMPL, DIPL and appointed dealers, who were selling in retail. 2. Heard both the sides. 2.1 Shri A.R. Madhav Rao, Advocate, the learned Counsel for the Appellant made the following submissions. (1) The dispute in this case is about assessable value of the branded bottled water packed in 330 ml., 1 litre, 20/24 litre and 12 litre bottles. Sales by the Appellant from depot are made in retail and similarly the sales by DIPL and HMPL and by the authorised dealers are in retail. During the period of dispute, the law provided for assessment of excise duty on the wholesale price and since the depot price or the sale price of DIPL/HMPL/authorised dealer is retail price, for arising at the wholesale price, the margin between the wholesale price and retail price has to be ab....
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....delivery agents were being appointed by them. Just because of this, the Appellant's sale price to Dealers cannot be rejected and the transaction between the Appellant and those wholesale dealers do not cease to be at arm's length. 2.2 Shri R.K. Verma, the learned DR, made the following submissions. (1) The "delivery charge", whose deduction has been allowed by the Commissioner (Appeals), are nothing but Depot maintain charges including transport charges of the goods from the factory gate to Depots. When during the period of dispute, in case of sale of the goods from depot, the depot, was to be treated as the "place of removal" and in this case, there is no dispute that the goods were sold from Depot, in respect of goods sold from depot, the deduction of transport expenses from factory gate to depot could not be allowed. (2) Deduction on account of packing in respect of 12 litre and 20/24 litre bottles is not admissible and has been wrongly allowed by CCE (Appeals) as the bottles have certain life spam and have to be discarded after about 40 cycles of use. (3) During the period from 13-4-98, the sales were through appointed dealers. But since the Appellant....
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....PL, DIPL and Dealers cannot be adopted without making adjustments for the margin between the wholesale price and retail price. Thus the main points of dispute to be decided are as under - (1) Whether the duty on the goods stock transferred to depot, is to be charged on the depot sales price and if so whether from the depot price, deduction of distribution charges; inward freight expenses incurred in transportation of empty bottles, transportation of the goods from the factory to the depots, and cost of packing in respect of 12 litre, 20 litre and 24 litre bottles is to be allowed. (2) Whether the Appellant's Sales to HMPL, DIPL and appointed dealers are at arm's length and if so what should be the assessable value of the goods sold to HMPL, DIPL and appointed dealers? (3) Are the sales from Depots and by HMPL, DIPL and appointed dealers only in retail, as claimed by the Appellant and if so whether such retail prices are be adopted as the assessable value. 4. During the period of dispute, the Section 4 of the Central Excise Act, 1944 read as under. Section 4. Valuation of excisable goods for purpose of charging of duty of excise - (1) Where under t....
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....certainable for the reason, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed. (2) Where, in relation to any excisable goods the price thereof for delivery at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price. (3) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of Section 3. (4) For the purposes of this section, - (a) "assessee" means for person who is liable to pay the duty of excise under this Act and includes his agent; (b) "place of removal" means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be d....
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....rred to in clause (a) or clause (b) shall be, - (i) in a case where a notification or order providing for any exemption (not being an exemption for giving credit with respect to, [or reduction of duty of excise under such Act on such goods equal to, any duty of excise under such Act, or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), already paid] on the raw material or component parts used in the production or manufacture of such goods) from the duty of excise under such Act is for the time being in force, the duty of excise computed with reference to the rate specified in such Act, In respect of such goods as reduced so as to give full and complete effect to such exemption; and (ii) in any other case, the duty of excise computed with reference to the rate specified in such Act in respect of such goods.] (e) "wholesale trade" means sales to dealers, industrial consumers. Government, local authorities and other buyers, who or which purchase their requirements otherwise than in retail,] 5. From a plain reading of sub-section (1) of Section 4 it is clear that the assessable v....
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....f Appellant's sales to HMPL, DIPL and appointed dealers, also, he has accepted that HMPL, DIPL and appointed dealers are selling only in retail and the price charged by them from their customers is retail sale price, but he still did not deduct from the retail sale price, the margin between the wholesale and retail price. The impugned order is, therefore, not correct on this count as - (i) it accepts without any discussion that the sales depot and by HMPL, DIPL and Appointed dealers are, only in retail and (ii) having accepted the sates from depot and by HMPL, DIPL and appointed dealers as in retail, the margin between the wholesale price and retail price has not been deducted to convert the retail sale price into wholesale price. Therefore, for correct determination of the assessable value the matter has to be remanded for de novo decision. 6. There is no dispute that HMPL, DIPL and appointed dealers of Appellant are not a holding company, a subsidiary company, a relative and a distributor and a sub-distributor of such distributor. Therefore as per the provisions of Section 4(4)(c), the Appellant and HMPL/DIPL/appointed dealers can be "related person" within the....
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....ottles were of durable and returnable nature and the same were being actually returned, their cost would not be includible in the assessable value. 9. As regards the freight expenses for transportation of the goods from factory to Depot the same would have to be included in the assessable value of the goods, sold from the depot, as in such a case, it is the depot which has to be treated as the place of removal. 10. As regards the deduction of "delivery charge/distribute charges" for determining the assessable value, CCE (Appeals)'s order, while permitting their deduction does not discuss the nature of these charges. Then deduction would be permissible only if the same are purely the transport expenses for transport of the goods from the place of removal to the customer's premises. But if these expenses are in the nature of "marketing and selling organisation expenses" in view of Hon'ble Supreme Court's judgments in cases of Union of India and Others v. Bombay Tyre International reported in 1983 (14) E.L.T. 1896 (S.C.) and Government of India v. Madras Rubber Factory Ltd. reported in 1995 (77) E.L.T. 433 (S.C.) their deduction will not be permissible. Since the impug....