TaxTMI 
TaxTMI 
2014 (5) TMI 384
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....ter referred to as the "assessee") and manufactures agricultural tractors (falling under Tariff item No.34-II), required engines (Tariff item No.29) and certain components (Tariff item No.68) for the same at its factory situated at Kandivali, Mumbai. The assessee has its sales depots at Bombay, Daman, Ludhiana and Lucknow, etc. It had been filing classification list and price list periodically under the procedure of self-removal of excisable goods which is under control and supervision of Inspectors of Excise at the factory level who in turn are under the control of the Superintendent of Excise. Accordingly, the assessee had been paying the excise duty on the goods removed at the factory gate regularly. 3. The competent authority in exercise of power conferred under the Act issued two above referred show-cause notices dated 12th August, 1985 and 4th February, 1986. The first show-cause notice dated 12th August, 1985 covered the period from 1982 to 1985 and alleged therein:- (i) that the assessee sold the duty paid stocks from their sales depots at the higher price; (ii) that the sales depots were related persons and that therefore the price at which the goods were sold fro....
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....sed. It was alleged that the assessee declared the unit of sale of one tractor for sale to individual buyers which includes freight and declare margin, besides excise duty, and that it is making sales of tractors from Bombay and from its depots at Daman, Lucknow and Ludhiana to individual buyers directly through its declared prices and that it did not declare such fixed retail price which could have been assessed by reducing such amounts, on account of freight and part of declare margin as is necessary and reasonable in the opinion of proper officer to arrive at the assessable value. Thus, it was alleged that there has been short payment of duty of excise for the reasons enumerated in the show-cause notice and that such short payment worked out in the annexure to this notice amounts to Rs.20,00,754.50 (Rupees Twenty Lakhs Seven Hundred Fifty Four and Paise Fifty only)- Basic excise duty and Rs.1,00,037.75 (Rupees One Lakh Thirty Seven and Paise Seventy Five only)- Special excise duty totaling Rs.21,00,792.25 (Rupees Twenty One Lakhs Seven Hundred Ninety Two and Paise Twenty Five only) during the period from 1st August, 1985 to 31st October, 1985. The assessee was asked to show-c....
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.... ex factory gate price was ascertainable in this case, even when it was not disputed that there was over charging at the depots in excess over the alleged ex factory price. (c) The High Court failed to take into account the fact that in the case of sale through depots expenses on account of cost of transportation including insurance freight only is allowed deduction. (d) Disputed question of fact being involved, the High Court should have remitted the matter back to the Department asking the parties to lead evidence for deduction towards transportation and "insurance". 11. On the other hand, according to the learned counsel for the respondent- assessee it is too late to remand the matter to the competent authority. According to assessee the difference in price has been on account of freight, after sale service charges, dealer's margin, expenses in respect of marketing, selling etc. Therefore, the Revenue cannot allege that there was short deposit of excise duty by the assessee or that the assessee has failed to comply with Section 4 of the Act. 12. Section 4 of the Act, as it then stood, reads as follows: "Section 4. Valuation of excisable goods for purposes of c....
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....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 the 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; or (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, From where such goods are removed; (c) `related person' means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the assessee, and any sub-distributor of such distributor. Explanation.--In this clause `holding company', `subsidiary company' and `relative' have the same meanings as in....
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.... 1996 (33/1996), Section 4 of the Act was amended and the possibility of there being different prices at different places of removal was added by inserting Section (ia) after Section 4(1)(a)(i). The said Section reads as follows: "(ia) where the price at which such goods are ordinarily sold by the assessee is different for different places of removal, each such price shall, subject to the existence of other circumstances specified in clause (a), be deemed to be the normal prices of such goods in relation to each such place of removal." The depots came to be added in the definition of place of removal by adding sub-clause (iii) after Section 4 (4)(b)(ii). The added sub-clause (iii) reads as follows: "(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory" Then concept of time of removal came to be added by adding sub-clause (ba) after sub-clause (b) in Section 4(4). This sub-clause (ba) reads as follows:- "(ba) "time or removal" in respect of goods removed from the place of removal referred to in sub-clause (iii) of clause (b) shall be deemed to be the time at w....
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....e dealt with later. 28. Finally, where the wholesale price of the excisable article or an article of the like kind and quality is not ascertainable, then pursuant to the old Section 4(b) the value of the excisable article shall be the price at which the excisable article or an article of the like kind and quality is sold or is capable of being sold by the assessee at the time and place of removal or if the excisable article is not sold or is not capable of being sold at such place, then the price at which it is sold or is capable of being sold by the assessee at any other place nearest thereto. 29. In every case the fundamental criterion for computing the value of an excisable article is the price at which the excisable article or an article of the like kind and quality is sold or is capable of being sold by the manufacturer, and it is not the bare manufacturing cost and manufacturing profit which constitutes the basis for determining such value. 30. As we have noted, Parliament amended the Central Excises and Salt Act by Act XXII of 1973. In particular, Parliament introduced a new Section 4 which totally superseded the old section, and embodied a much more comprehensive a....
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....'s length. If there is a special or favoured buyer to whom a specially low price is charged because of extra-commercial considerations, e.g., because he is a relative of the manufacturer, the price charged for those sales would not be the `wholesale cash price' for levying excise under Section 4 (a) of the Act. A sole distributor might or might not be a favoured buyer according as terms of the agreement with him are fair and reasonable and were arrived at on purely commercial basis." 34. Both learned counsel for the assessees and the learned Solicitor General for the Revenue are agreed that in enacting the new Section 4 Parliament did not intend to bring into existence a scheme of valuation different from that embodied in the old Section 4. Reference was made in that connection to the Statement of Objects and Reasons. The difference, however, lies in this that while learned counsel for the assessee attempted to show by reference to the old Section 4 that the legislative intent was to confine the value of an excisable article to the manufacturing cost and manufacturing profit and that therefore the same limitations should be read into the new Section 4, the learned Solici....