AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 8
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....ely sold to Govt. authorities putting a mark on packages "For Govt. Supply Only", "Not for Sale" against rate contract, but excise duty was paid on the transaction value with their distributors, who in turn, supply the said medicines to hospitals at the rate approved by the Govt. authorities. Also, it revealed during the course of investigation that even though there was increase in the price of the medicines subsequent to levy of excise duty and thereafter increase of rate of duty during the relevant period, the appellant though collected duty in excess that was paid to the Govt. but failed to deposit the same, hence the excess amount of duty is recoverable from them under Section 11D of the Central Excise Act, 1944. Consequently, a show-cause notice was issued to them on 31.3.2005 for recovery of the differential duty and also excise duty under the relevant provisions of Central Excise Act with interest and penalty. On adjudication, a certain portion of demand was dropped and balance was confirmed with interest and penalty. Aggrieved by the said order, they filed an appeal before the learned Commissioner (Appeals), who in turn, rejected their appeal. Hence, the present appeals. ....
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....f any flow back of money from the distributor to the appellant. He has further submitted that clause 7.10 of the rate contract has been mis-interpreted as in the said clause, it stipulates that the appellant cannot sale to "any Govt. institution or public sector consumer or local authorities in the Maharashtra State below the rate accepted" to mean that no distributor could have been appointed by the appellant. However, reading clause 2.8 of the said rate contract along with veracity clause, it could be stated that the only contract restriction that sale could not be made to a Govt. institution or public sector consumer or local authority in Maharashtra State at the rate below the rate contract price, but no restriction was placed to sale the medicines to distributors by the manufacturers. 5. Assailing the impugned order and confirming demand under Section 11D of Central Excise Act, 1944, the learned Advocate has submitted that the appellant had recovered excise duty from the distributor only to the extent of amount mentioned in the excise invoice. There is no evidence that the appellant had recovered excise duty over and above the amount mentioned in the excise invoices. The dist....
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....gation against the appellant revealed that they were supplying the medicines on rate contract to Govt. Institutions and Govt. Hospitals etc. through rate contract approved by the Govt. authorities by calling tender from manufacturer of the medicines. As per approved rates under the contract, the quantities mentioned in the tender were procured from the manufacturer against the approved rate by mentioning the rate contract number and specifying the period for which the supply was required. Every rate contract had its validity period for supply. The supply has been made by the manufacturers against the rate contract to different authorities, hospital, district institution and the payment had been released according to the approved rate contract. The investigation by DGCEI revealed that Central Excise duty had been evaded by the appellants by creating artificial intermediaries in the distribution system and undervalued the excisable goods in the invoices and records. The appellant initially raised Central Excise invoices in the name of distributors at a lower value than the rate contract, the distributors in turn, raised the invoices quoting the rate contract in the name of respective....
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....rescribed under Section 4(3)(d) of Central Excise Act, 1944, he has submitted that amount paid or payable to any person by the assessee or to a person on behalf of the assessee, the amount so paid or payable will be the transaction value. He has vehemently argued that what is relevant in the said provision is that the amount paid or payable for the goods and in the present case, the payable amount is fixed as per the rate contract. The statements of various persons recorded by the Department confirm the fact that the distributors are on paper only and their role is to complete the transaction on paper, for which they are paid certain remuneration, which initially the appellant claimed as commission and sought deductions from the assessable value as discounts. 10. The learned AR further submitted that there was increase in the price of the medicines by revision of the rate contract pursuant to levy of excise duty and increase in the rate of excise duty thereafter. The appellant had availed exemption in accordance with SSI exemption Notification/ head wise by discharging concessional rate of duty which is lower than the rate that they had recovered from their buyers. Thus, the duty ....
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....4 of the Central Excise Act dealing with valuation of goods, which reads as under: - SECTION 4. Valuation of excisable goods for purposes of charging of duty of excise:- (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; "Transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale 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, sa....
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.... BDIL and Government agencies, would attract duty at the value at which the goods were sold by the appellant to M/s. Anupam or given in the peculiar facts and circumstances of the case, the duty is required to be paid at the contracted value. Admittedly, the rate contract is between M/s. BDIL and the State of Maharashtra for supply of the medicines manufactured by them at a contracted price. Such medicines also have the stamp to the effect that the same have been specifically manufactured for supply to Government departments and it is not open to sell the said goods in the market. The question which arises is as to whether M/s. Anupam, though named as distributor, can actually be called as distributor or are having the status of an intermediary agency for the manufacturer for supply of goods to the Government agencies. In a common parlance, a distributor is a person, who is free to sell the procured goods in the market at a price to any person. In the present case the goods purchased by M/s. Anupam from the manufacturer cannot be sold to any person other than the Government agencies. Such goods are a part of the contract entered into between the manufacturer and the Government ag....
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.... the price charged by the appellant to the distributor cannot be considered as true transaction value within the scope of the definition of transaction value, therefore, the price at which the goods were ultimately sold/supplied to the govt. agencies against rate contract be the correct transaction value and duty is required to be paid on the same. 16. The appellant has also contended that the demand is barred by limitation, inasmuch as department was well aware of the fact that the appellant had been supplying the medicines through distributors as show cause notice was issued to them for denial of deduction on sales commissions from the price paid to the distributors. Rebutting the said argument, the Revenue has contended that in the initial days, the appellants while supplying the medicaments through distributors to various govt. agencies in their price list claimed deductions on account of commissions paid to the distributors claiming that it is nothing but in the nature of discount, hence deductible from the price in arriving at the assessable value. Even though the adjudicating authority allowed the said discount but later on an appeal filed by the Revenue, the Commissioner (....
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....g of the said provision reveals that a person who is liable to pay duty and has collected any excess amount than the amount assessed as duty from the buyer representing as duty of excise, then such excess amount so collected be deposited with government. In the present case we do not find any such circumstances present. Moreover this issue has also been dealt with by this Tribunal in Bright Drugs Industries Ltd. case. This Tribunal observed as follows: - 13. Admittedly, there was a revision on account of increase in excise duty during the Budget of 1999 and 2000. Accordingly rates were revised upwards and the appellant during the relevant period paid the higher rate of duty. It is subsequently they realised the said amount on account of the revised rate contract and in such a scenario it can be safely concluded that the provision of Section 11D are not applicable inasmuch as they get invoked only when an assessee receives the amount representing as duty of excise from its customer and does not deposit the same with the Revenue. As such, we find no merit in the appeal filed by the Revenue. Same are accordingly rejected. 19. Following the aforesaid judgement we are of the view tha....