AI Drafter 
TaxTMI 
TaxTMI 
2015 (8) TMI 1014
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....e to arrive at the assessable value under Section 4 of the Central Excise and Salt Act, 1944. 3. Apart from undertaking manufacturing activities, the appellant at times also receives goods from customers for repair in case of defects noticed by the customers. The customers either reject the entire lot or a particular box etc. if they notice any defect, so that their time is not wasted in checking each and every item and thus, goods are sent back to the appellant. On receipt of such consignments, the appellant checks the same for defects indicated and undertakes necessary repairs. Thereafter, the finished products are returned to customers. The appellant was filing the necessary D-3 declarations for receipt of such returned goods and was maintaining the register required in Form V for the said purposes and was thereafter returning such repaired items under the provisions of Rule 173H without payment of duty thereon. 4. A Show Cause Notice dated 2.4.2002 was issued wherein it was alleged that the appellant is not eligible for the various deductions claimed on account of volume discount, sales tax and cash discount. Besides this it was also alleged that the appellant has removed....
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....has already deposited /paid some amount in relation to the dues determined above, then such payment shall be adjusted against the dues." 6. When it came to cash discount, the Tribunal upheld the finding of the Commissioner on the following basis:- "10. Regarding cash discount, it is not in dispute that the duty has been demanded in respect of cash discount which was not actually passed on to the customers. The learned Advocate has relied upon the decision in Pace Marketing Specialities Ltd, supra, wherein it has been held by the Tribunal that cash discount is a discount allowed for prompt payment for the goods and when this discount is reduced from the invoice price, transaction value at the time of delivery of goods is obtained, otherwise, the invoice price is a future price and as the assessable value is to be determined with regard to time of removal financing and other cost cannot form part of the assessable value. With due regard, we find ourselves unable to agree with this view. The measure for valuation under New Section 4 of the Central Excise Act (with effect from 1.7.2000) is the "transaction value" and not the "deemed value" which was the case under the Old S....
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....s when sold." Contrary to these provisions, under the old Section 4 the value was a deemed one, that is to say, the price at which goods a ordinarily sold in the course of wholesale trade. Now under New Section 4, one has not to look as to what is the price at which goods are ordinarily sold in the course of wholesale trade. The price actually paid or payable is to be taken up as the assessable value. In the present matter, the transaction value has to be taken for the purpose of assessment of duty under Section 4 of the Central Excise Act and as admittedly no cash discount has been given to the customers, the actual price paid by them shall be the assessable value. 12. Accordingly, we reject the appeal as far as it relates to the allowance of deduction on account of cash discount. In respect of volume discount and sales tax and duty liability in respect of returned goods, the matter is remanded to the jurisdictional Adjudicating Authority for re-adjudication in terms of our direction. We leave the issue regarding imposition of penalty open to be decided by the Adjudicating Authority." 7. Shri Lakshmikumaran, learned counsel for the appellant, has argued that Section 4 ....
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....973, read as follows:- "4. Where under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be - (a) The wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production, or if a whole the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists, or (b) Where such price is not ascertainable, the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sold or is not capable of being sold at place at any other place nearest thereto. Explanation-In determining the price of any article under this section, no abatement or deduction shall be allowed except in....
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....rade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail; (b) where the normal price of such goods is not ascertainable 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 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 p....
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.... and the effective duty of excise on such goods under each Act referred 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." 13. Section 4, as it reads after the amendment of 2000, is as follows:- ....
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....le or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling, organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods." 14. It can be seen that the common thread running through Section 4, whether it is prior to 1973, after the amendment in 1973, or after the amendment of 2000, is that excisable goods have to have a determination of "price" only "at the time of removal". This basic feature of Section 4 has never changed even after two amendments. The "place of removal" has been amended from time to time so that it could be expanded from a factory or any other premises of manufacture or production, to warehouses or depots wherein the excisable goods have been permitted to be deposited either with payment of duty, or from which such excisable goods are to be sold after clearance from a factory. In fact, Section 4(2) pre- 2000 made it clear that where the price of excisable goods for delivery at the place of remo....
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....MRF limited have granted the discount only at the end of the year and not at the time of actual sales". The learned Additional Solicitor General disputed the correctness of the basis on which the Assistant Collector has allowed this deduction. He commended for our acceptance the reasoning in Para 13(ii) of the judgment dated December 20,1986 (Assistant Collector of Central Excise v. Madras Rubber Factory.) The reasoning in the said order runs thus: "The allowance of the discount is not known at or prior to the removal of the goods. The calculations are made at the end of the year and the Bonus at the said rate is granted only to a particular class of Dealers. This is computed after taking stock of the accounts between MRF and its dealers. It is not in the nature of a discount but is in the nature of a Bonus or an incentive much after the invoice is raised and the removal of the goods is complete. In the circumstances, we are of the opinion that MRF is not entitled to deduction under this head." We are, however, of the respectful opinion that the said reasoning cannot be accepted in view of the clear finding recorded by the Assistant Collector that this system of d....
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....tever is agreed to as the price for the goods forms the basis of value, whether such price has been paid, has been paid in part, or has not been paid at all. The basis of "transaction value" is therefore the agreed contractual price. Further, the expression "when sold" is not meant to indicate the time at which such goods are sold, but is meant to indicate that goods are the subject matter of an agreement of sale. Once this becomes clear, what the learned counsel for the assessee has argued must necessarily be accepted inasmuch as cash discount is something which is "known" at or prior to the clearance of the goods, being contained in the agreement of sale between the assessee and its buyers, and must therefore be deducted from the sale price in order to arrive at the value of excisable goods "at the time of removal". 19. We were referred to the Central Board of Excise and Customs Bulletin for the period January-March, 1975 in which the Board laid down:- "Cash Discounts That is, discounts for prompt payment of price of goods on delivery, are admissible in arriving at the assessable value if they are available to all buyers. This aspect has been dealt with in de....
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..... and Ors. (supra). The said judgment was concerned with sales tax incentives that were given under the Rajasthan Sales Tax Incentives Scheme. On the facts of that case, 25% of the sales tax was paid to the Government, and 75% of the said amount of sales tax was retained by the assessee and became the assessee's profit. Under the earlier Board's circulars that were issued by the Central Board of Excise and Customs, the amount of 75% of sales tax that was never paid to the Government but retained by the assessee was also liable to be deducted from "price" under the old Section 4, that is, Section 4 before its amendment in the year 2000. This Court held that the amended Section 4 would require that such amount of 75% is not deductible as sales tax because, according to this Court, only sales tax that is "actually paid" could be deducted post Section 4 as amended in 2000. This Court said:- "It is evincible from the language employed in the aforesaid circular that set off is to be taken into account for calculating the amount of sales tax permissible for arriving at the "transaction value" under Section 4 of the Act because the set off does not change the rate of sales tax pay....
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....t the time and place of removal. This Court was only concerned with whether sales tax is to be deducted from "transaction value" as newly defined. We have already seen that "transaction value" specifically states that it will not include sales tax "actually paid or actually payable on such goods". On the facts of that case, this Court was not concerned with the expression "actually payable" as it did not arise in that case. This Court was only concerned with sales tax not "actually paid" to the Rajasthan Government, and therefore held that since 75% of sales tax was retained by the assessee, the said amount could not be deducted as only amounts payable to the State Government as sales tax can be deducted. This was so held on an interpretation of the last part of the definition of "transaction value". The facts of the present case are concerned with the first part of the definition of "transaction value" which has to be read with Section 4(1)(a) as has been stated above. 25. This judgment does not in any manner deviate from the settled legal position so far as cash discounts are concerned as has been laid down in Union of India v. Bombay Tyre International (supra) and Government ....