TaxTMI 
TaxTMI 
2022 (5) TMI 865
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.... of Price of Excisable Goods) Rules, 2000. Since M/s Raychem RPG Ltd. have failed to give the selling price of the components manufactured in their factory which are put up along with other bought out items constituting various cable jointing kits, I hold that the same should be arrived at on pro-rata basis of total sale price of the kits as furnished by M/s Raychem RPG Ltd. vis-à-vis the cost of excisable goods manufactured and that of the bought out items constituting cable jointing kits. 2. I confirm in terms of sub-section (2) of Section 11A of the Central Excise Act, 1944, the total duty of Rs. 5,54,55,641/- (Rupees Five Crore Fifty Four Lakh Fifty Five Thousand Six Hundred Forty One only) [ Basic Excise Duty Rs. 5,48,84,430/- + Education Cess Rs. 5,51,815/- + Secondary and Higher Education Cess Rs. 19,396/-), as demanded vide subject Show Cause Notices dated 11.5.2007 and 28.12.2007 under Section 11A(1), as payable by/recoverable from M/s Raychem RPG Ltd., Vasai. 3. I order that the statutory liability of interest on the amount determined as payable at Sr.No.2 above shall also be recovered from M/s Raychem RPG Ltd. under Section 11AB of the Central Ex....
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....ory) along with other bought out items, along with the instructions for use of the said articles in the carton/box is not the activity of manufacture and hence the use of excisable goods for consumption by them or on their behalf in the production or manufacture nor any other article emerge as a result of putting together various items /articles in a carton/box. Therefore the value determined by the Appellant under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, is improper and the value should have been determined under Rule 11 read with Rule 7, ibid. 2.5 Accordingly a show cause notice dated 28.12.2007 was issued to appellant alleging contravention of the provisions of the Central Excise Act, 1944 and Rules framed thereunder in as much as they have failed to : - i. determine the correct assessable value of the excisable goods manufactured and cleared by them from their factory to their customer Care Centre / Depot at Kalher, as required under Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.; ii. correctly as....
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....is applicable when the manufactured product is used in production or manufacture of other articles. The manufactured products have been used in production of cable jointing kits. The meaning of the word 'production' is much wider than the meaning of 'manufacture', as has been held in the decisions as follows: • V.M. Salgaoncar & Bros. (P) Ltd[1998-(99)-ELT-3 (SC)] • N.C. Budharaja and Co. [1993-(204)-ITR-412 (SC)] to substantiate the meaning of production. • The word consumption does not always mean consumption by destruction of product held by the Supreme Court. The Commissioner has given the narrow meaning of the word 'consumption' to mean consumption by loss of original identity. Therefore, the value shall be determined in Rule 8 of the Central Excise Valuation Rules, 2000. • Reliance is placed on the following decisions were in the Valuation has been upheld under Rule 8: • P.C. Pole M/s. P.C. Pole Factory [ 2006-(199)-ELT- 865 (Tri.-Mumbai)] • Indian Hume Pipe Co. Ltd [2015-(321)-ELT-460 (Tri.-Chennai)] • Diffusion Engineering Ltd. [2014-(300)-ELT-145 (Tri.-Mumbai)....
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.... Supreme Court has also applied Rule 11 of the Central Excise Valuation Rules, 2000 in the case of M/s. UTC Fire and Security India Ltd. reported in 2015-(319)-ELT-591 (SC). In this case the company was selling smoke detectors and other parts in two distinct streams as under: • Sales in loose condition; and • Sales as part of turnkey projects where no separate values are recovered for the sale of these goods but the price of the goods forms part of an overall consideration mentioned for such turnkey contracts. • The value of smoke detectors used in turnkey projects was determined on the basis of cost (at the relevant time Rule 6(b) of Central Excise Valuation Rules, 1975 which is parallel to Rule 8 of the Central Excise Valuation Rules, 2000). This rule was applied even when the sale price of the goods in loose condition was available under Section 4 of the Central Excise Act, 1944. (vi) The Supreme Court in para 13 of the Order has observed that Rule 7 of the Valuation Rules, 1975 should be applied in line with the principle for valuation laid down for earlier rules. It approved valuation of goods under Rule 6(b) of the Central Excise Valuati....
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...."2. W.P. No. 8818/97 is filed by XL Telecom Limited, Hyderabad questioning the circular issued by the Central Board of Excise and Customs, declaring that the process of putting together duty paid articles into a container like carton, kit etc. and bringing into existence a new commercially distinct product namely `Cable Jointing Kits' amounts to manufacture under Section 2(f) of the Central Excise Act, 1944 (in short `the Act') and classifying the same under Heading 85.47 of the Central Excise Tariff Act, 1985. The Circular number is 308/24/97-CX, dated 27-3-1997. By virtue of the said circular, the cable jointing kits were made liable for excise duty under Central Excise and Salt Act, 1944. 12. What emerges from the above is excise duty is leviable on goods manufactured. The expression manufacture means bringing into existence a new substance and does not mean merely to produce some change in a substance, however minor in consequence the change may be and as a result of treatment, labour and manipulation there should be transformation in the raw material and as a result of treatment, labour and manipulation a new and different article must emerge having a distinct name, c....
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....uty as the activities undertaken do not amount to manufacture and hence will be excluded from the purview of Section 3 of the Central Excise Act, 1944. It is the submission of the counsel that finished goods cleared from their factory have been consumed for production of the "cable jointing kit". To substantiate the said preposition he has relied upon the decisions in the case of V.M. Salgaoncar & Bros. (P) Ltd [1998 (99) ELT 3 (SC)] and N.C. Budharaja and Co. [1993 (204) ITR 412 (SC)]. 4.4 Taking a pause here we refer to the decision in case of Grasim Industries [2018 (360) E.L.T. 769 (S.C.)] wherein five Judges bench of Hon'ble Supreme Court after taking of the amendments made to the Section 3 and 4 of the Central Excise Act, 1944 has held as follows: "6. On first principles, there can be no dispute. Excise is a levy on manufacture and upon the manufacturer who is entitled under law to pass on the burden to the first purchaser of the manufactured goods. The levy of excise flows from a constitutional authorisation under Entry 84 of List I of the Seventh Schedule to the Constitution of India. The stage of collection of the levy and the measure thereof is, however, a sta....
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....wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold for delivery at the place of manufacture and at the time of its removal therefrom, without any abatement of deduction whatever except trade discount and the amount of duty then payable. 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 value, such value shall, subject to the other provisions of this Section, be deemed to be - (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the Assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale : Provided that - (i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the Assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (a), be deeme....
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....ee 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 the Companies Act, 1956; (1 of 1956 ) (d) "value", in relation to any excisable goods, - (i) where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. Explanation. - In this sub- clause, "packing" means the wrapper, container, bobbin, pirn, spool, reel or warp beam or any other thing in which or on which the excisable goods are wrapped, contained or wound; (ii) does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the....
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.... have been permitted to be deposited without payment of duty, from where such goods are removed; (d) "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, sales tax and other taxes, if any, actually paid or actually payable on such goods. 20. We find no room whatsoever for any disagreement with the above view taken by this court in Bombay Tyre International Ltd. (supra). It is a view consistent with what was held by the Federal....
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....e' under the old Section 4 as held to be permissible in Bombay Tyre International Ltd. (supra) besides giving effect to the changed description of the levy of excise introduced in Section 3 of the Act by the Amendment of 2000. In fact, we are of the view that there is no discernible difference in the statutory concept of 'transaction value' and the judicially evolved meaning of 'normal price'. 4.5 We have referred to this decision of the Hon'ble Supreme Court at this point because this decision refers to the charging section (i.e. Section 3) and valuation section (section 4) of the Central Excise Act, 1944. In para 7 Hon'ble Apex Court has referred and reproduced both the sections both prior and post amendments made in the year 2000. From the perusal of Section 3, it is evident that "a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods which are produced or manufactured in India." If the argument of the Counsel is to be accepted than the duty of excise should have been levied and collected from the appellants on the clearance of the "cable jointing kits" so cleared from the depot of the appellant. Even the Constitutional Entry at Sl No 84 of ....
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....ed out on the said goods in the Customer Care Centre. Even the packing of the goods cleared from the factory as well as those bought out items are not removed. Hence, it cannot be said that even without opening packing or wrapper of any excisable goods, the goods were used for consumption for manufacture of other articles. Here the argument of the assessee that they produced some article, by putting extra labour and manipulating with the manufactured excisable goods (in their factory) and bought out items fails. What is required by Rule 8 is - the excisable goods should be used for consumption ..... It is false to say that any goods can be consumed without even opening the packing done in the factory of the manufacture. Now let us discuss what is 'consumption'. Consumption - noun from the verb 'to consume'. Consume means - i) to eat or drink, ii) to use up, iii) to destroy, iv) to devour or overcome completely v) to waste away. Consumption means the act or process of consuming. 41. In the case of State of Tamilnadu V Bharat Dairy reported in 1992 (61) ELT 25 (Madras ) it was observed that 'the legislation concisely used the expression ....
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.... manufacture of other article'. Here the word "manufacture' as per Section 2(f) of the Central Excise Act, 1944 includes any process - i) incidental or ancillary to the completion of a manufactured product; ii) which is specified in relation to any goods in the section or chapter notes of the first schedule) to the Central Excise Tariff Act, 1985; (5 of 1986) as amounting to (manufacture: or) iii) which in relation to the goods specified in the third schedule, involves packing or re packing of such goods in unit container or labeling or re-labeling of containers, including the declaration or alternation of retails sale price on it or adoption of any other treatment on goods to render the products marketable to the consumer. 47. It is an admitted fact that no process is carried out on the excisable goods, manufactured in the factory of the manufacture, by the assessee in their other premises. It has also been brought on record that original packing of the said goods were even not removed at Customer Care Centre. Only some bought out items are placed together with the manufactured items in a combo pack just with the purpose of convenience s....
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....he word "production", is much wider than the "manufacture" would in our view will bring the "cable jointing kits" with the scope of Section 3 of the Central excise Act, 1944, and leviable to the duty of excise. In the case of Buddharaja, Hon'ble Supreme Court has observed as follows: "7......The words "manufacture" and "production" have received extensive judicial attention both under this Act as well as Central Excise Act and the various Sales Tax Laws. The word "production" has a wider connotation than the word "manufacture". While every manufacture can be characterised as production, every production need not amount to manufacture. The meaning of the expression "manufacture" was considered by this Court in Deputy CST v. Pio Food Packers8 among other decisions. In the said decision, the test evolved for determining whether manufacture can be said to have taken place is, whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity. Pathak, J. as he then was, stated the test in the following words: (SCC p. 176, para 5) 8 1980 Supp SCC 174 1980 SCC (T....
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....ay (now Maharashtra) and Others [1961 (1) SCR 709]. Their Lordships observed thus : "Consumption consists in the act of taking such advantage of the commodities and services produced as constitutes the "utilization" thereof. For each commodity, there is ordinarily what is generally considered to be the final act of consumption. For some commodities, there may be even more than one kind of final consumption ........................................... In the absence of any words to limit the connotation of the word "consumption" to the final act of consumption, it will be proper to think that the Constitution-makers used the word to connote any kind of user which is ordinarily spoken of as consumption of the particular commodity." 10. In another decision a two Judge Bench of this Court considered the scope of the words "consumption" vis-a-vis "use". (vide Kathiawar Industries Ltd. v. Jaffrabad Municipality : AIR 1979 SC 1721). There it was held that the precise meaning to be given to those words would depend upon the context in which they are used. It is in a primary sense that the word "consumption" is understood as using the article in such a manner as to destroy ....
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....nsertion of Central Excise Valuation Rules, 2000. As such, the citation is distinguishable from the present case and not relevant. Thus, I find that costing method in terms of Rule 8 of the Valuation Rules, 2000 adopted by the assessee for valuation of goods which are stock transferred to their Kalher Godown is totally wrong and has been adopted intentionally to evade Central Excise duty." 4.8 In the case of Indian Hume Pipe Co. Ltd, the goods were not sold but were consumed by them at the project site of the project being executed by them on the turnkey basis. Since there was no sale of the goods cleared from the factory but were consumed at the project site this decision is distinguishable from the facts of present case. 4.9 In case of Diffusion Engineering Ltd. tribunal has observed as follows: "5.1 Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 reads as follows : "(8) Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten per cent of the cost of production or manufa....
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....rison purposes of Rule 4 of the Central Excise (Valuation) Rules, 1975, material in such different packings cannot be comparable or 'SUCH GOODS'. Therefore, valuation has to be arrived at under Rule 6(b) (ii). Since the removals 'Service Centre' are for use and consumption on the assessees behalf, pursuant to the Service Contracts. Even in this case, for the same reasons the principles of Rule 6(b)(ii) would have to be applied. This would be so even under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 Rule 8 which take places of earlier Rule 6(b)(ii) of 1975 rules. This new rule does not relate to comparable goods but mandates that value should be one hundred fifteen per cent of the cost of manufacture and provides for "consumption" by or on behalf of the assessee. The term "consumption" need not be given a narrow meaning to limit it to mean that entity should "reach the stage of non-existence". A stage of 'sort of utilisation' of the Pesticides/Insecticides would well amount to "Consumption" by the Service Centre, even if the entity remains the same (See V.M. Salgaonkar and Bros P. Ltd., 1998 (99) E.L.T. 3 (S.C.), therefore, consumption by the....
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....) of the Central Excise Act, 1944 states that if the value cannot be determined under Section 4(1)(a), it shall be determined in such manner as may be prescribed by rules. Under these powers, Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 have been made effective from 1.7.2000. Among these Rules, only Rule 7 and Rules of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 deals with a situation where there is no sale at factory gate. As discussed earlier, applicability of Rule 8 has already been discarded as the said rule will be applicable only when the goods are consumed for manufacture of other goods by the assessee or by his agent on his behalf. As such, the recourse has to be taken to Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. As is evident and as admitted by the assessee, the goods cleared from the factory are sold in the original packing condition at their Building No. 2/Customer Care Centre along with other bought out items. This Building No. 2/Customer Care Centre is nothing but the depot of the assessee from where the goods are sold to unrelated buyers b....
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....t Building No. 2 or Customer Care Centre at Kalher. There the goods were sold to buyers who were not related at an agreed price which was the sole consideration for sale. The goods removed from the factory are sold in their original form and packing after putting in a carton along with some bought out items from the other place. Because of the said situation, the valuation of the said goods has to be made as provided under Rule 11 of the Valuation Rules, 2000 read with rule 7 ibid which is the most appropriate rule in the prevailing situation and this stand is also supported by the Hon'ble Tribunal's decision in the case of Castrol India Ltd. cited supra. Further, the assessee have failed to declare to the department as to the value of goods (manufactured individual component) cleared from factory taken for arriving at the price of cable jointing kit which also included the bought out items. Therefore, I also observe that it is quite reasonable to arrive at the assessable value of the said excisable goods by apportioning the total sale value proportionately in the ratio of cost of excisable goods manufactured by the assessee to the price of bought out items, which together ....
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....arance of goods from the factory for those goods which are sold by the manufacturer at depot, consignment agents or any other place etc. at a sale price of the place of removal i.e. depot, consignment agents etc. Where the goods are sold at the factory gate, there would be no problem." 27. This amendment has taken away the basis of the judgments which dictated that where the factory gate price was available that price would apply to all clearances, including those made from the depots. The effect of the amendment would be that at the factory gate itself the same goods would be valued differently, depending upon their final place of removal. The findings of the Collector reproduced in Para 22 above would seem to suggest that the goods which are destined to be sold from the depots would be leviable to the duty at price charged at such depots when assessed at the factory gate. Where the goods so moved from the factory gate are the same which were sold at the depot gate, this judgment cannot be faulted. But in the present case what was removed from the factory gate was oil in bulk in tankers and what was sold at the depots was oil packed in tins. 28. Section 4(1)(a) e....
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.... become comparable goods." The issue involved in the said case was interpretation of the phrase "such goods", and tribunal found that the manner in which the goods were sold from the depot were not covered by the said phrase, they disagreed to adoption of the sale value from the depot as the value for clearance of comparable goods from the factory. It is not even the case before us. In the case present case the issue is for determination of the value of the same goods without losing or modifying the identity, but sold along with the bought out items at the depot. Admittedly the value of the "bought items" could not be the part of the vale at which the goods were cleared from the factory. In case of Neycer India Ltd [2015 (320) ELT 28 (SC)] Hon'ble Supreme Court has observed as follows: "The Department/Revenue wanted to add the value of Handle assembly, Ball valve assembly, overflow assembly, Syphon assembly, Outlet flange assembly and Flush pipe assembly, while arriving at the valuation of the flushing cisterns manufactured by the respondent. It is an admitted position that the aforesaid fittings are not manufactured by the assessee. It is also an admitted position that....
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....taken into consideration, subject, of course, to the condition that the buyer is not a related person and the price is the sole consideration for the sale. In this case, as mentioned above, even the Assistant Commissioner in his final order, accepted that the case was covered by Section 4(1)(b) of the Act meaning thereby, he accepted the position that normal price of the goods in question was not ascertainable. It is only in such a situation that Section 4(1)(b) of the Act gets attracted. This provision further mentions that in such an eventuality, where the normal price of the goods is not ascertainable for the reasons given in the said provision, the criteria to ascertain the price mentioned is the "nearest ascertainable equivalent thereof". This is to be determined in such manner as may be prescribed. Manner is prescribed in the Valuation Rules, 1975. Therefore, we have to consider as to which Rules of the Central Excise (Valuation) Rules, 1975 is applicable. Since there is a dispute between the applicability of Rule 4 and Rule 6, we will like to reproduce these two Rules along with Rule 3 and Rule 7 as well in order to present the complete picture. "RULE 3.....
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....e Act, the value of the goods so sold shall be determined - (i) in a case where the assessee sells the goods to a related person who sells such goods in retail, in the manner specified in clause (a) of this rule; (ii) in a case where a related person does not sell the goods but uses or consumes such goods in the production or manufacture of other articles, in the manner specified in clause (b) of this rule; (iii) in a case where a related person sells the goods in the course of wholesale trade to buyers, other than dealers and related persons, and the class to which such buyers belong is known at the time of removal, on the basis of the price at which the goods are ordinarily sold by the related person to such class of buyers. RULE 7. If the value of excisable goods cannot be determined under the foregoing rules, the proper officer shall determine the value of such goods according to the best of his judgment, and for this purpose he may have regard, among other things, to any one or more of the methods provided for in the foregoing rules." 13. Rule 4 would be applicable only in those cases where value of "such goods" which are sold by th....
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.... the manufacturing process. While the levy in our country has the status of a constitutional concept, the point of collection is located where the statute declares it will be. We shall return to this later when it is necessary to consider a submission in regard to the effect of transactions to or through "related persons". 13. We move on now to a different dimension, to the conceptual consideration of the measure of the tax. Section 3 of the Central Excises and Salt Act provides for the levy of the duty of excise. It creates the charge, and defines the nature of the charge. That it is a levy on excisable goods, produced or manufactured in India, is mentioned in terms in the section itself. Section 4 of the Act provides the measure by reference to which the charge is to be levied. The duty of excise is chargeable with reference to the value of the excisable goods, and the value is defined in express terms by that section. It has long been recognised that the measure employed for assessing a tax must not be confused with the nature of the tax. In Ralla Ram v. The Province of East Punjab - (1948) F.C.R. 207, the Federal Court held that a tax on buildings under Section 3 of th....
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....d the measure of a tax." It is, therefore, clear that the levy of a tax is defined by its nature, while the measure of the tax may be assessed by its own standard. It is true that the standard adopted as the measure of the levy may indicate the nature of the tax but it does not necessarily determine it. The relationship was aptly expressed by the Privy Council : In Re. A Reference under the Government of Ireland Act, 1920 and Section 3 of the Finance Act (Northern Ireland), 1934 - L.R. 1936 A.C. 352, when it said :- "........It is the essential characteristic of the particular tax charged that is to be regarded, and the nature of the machinery- often complicated-by which the tax is to be assessed is not of assistance, except in so far as it may throw light on the general character of the tax." The case was referred to by a Constitution Bench of this Court in R.R. Engineering Co. v. Zila Parishad Bareilly & Anr. - (1980) 3 S.C.R. 1, where the relationship was succinctly described thus :- "It may be, and is often so, that the tax on circumstances and property is levied on the basis of income which the assessee receives from his profession, trade, calling or....
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....of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market did not exist for such article at such place, then delivery was envisaged at the nearest place where such market existed. Section 4(b) declared that where such price was not ascertainable, the value would be deemed to be the price at which an article of the like kind and quality was sold or was 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, and if such article was not sold or was not capable of being sold at such place, at any other place nearest thereto. Then there was an Explanation which declared that no abatement or deduction would be allowed except in respect of trade discount and the duty payable at the time of the removal of the article from the factory. The wholesale price was envisaged as a cash price in order to make it a uniform standard, because it was then a price freed from the burden of an increas....
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....s, and not under Section 4(b) on the basis of the price of retail sales effected directly to the consumers. The case was brought in appeal to this Court. The Court observed that for the purposes of Section 4(a), it was not necessary for a wholesale market to exist in the physical sense of the term where articles of a like kind or quality are or could be sold. A wholesale market, it was observed, could also mean "the potentiality of the articles being sold on a wholesale basis". What was necessary was that the articles could be sold wholesale to traders. It was observed further that the application of Section 4(a) of the Act did not depend upon any hypothesis to the effect that at the time and place of sale any further articles of the like kind and quality should have been sold. If there was an actual price for the goods themselves at the time and place of sale and if that was a `wholesale cash price', the clause was not inapplicable for want of sale of other goods of a like kind and quality. Later follow the words, which have brought on the present controversy : "Excise is a tax on the production and manufacture of goods (see Union of India v. Delhi Cloth and General Mills....
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.... into account the discount given to the distributors. Before this Court, the excise authorities pressed the same contention, urging that Section 4(a) did not provide that in every case the wholesale price charged by the manufacturer should be taken into consideration and not the wholesale price charted by the wholesale buyers who sold the product also in wholesale to the next buyers. One of us (Bhagwati J.) spoke for the Court in that case, and delivered a closely enunciated and lucid exposition of the true legal position. It was explained : "The value of the goods for the purpose of excise must take into account only the manufacturing cost and the manufacturing profit and it must not be loaded with post-manufacturing cost or profit arising from post-manufacturing operation. The price charged by the manufacturer for sale of the goods in wholesale would, therefore, represent the real value of the goods for the purpose of assessment of excise duty. If the price charged by the wholesale dealer who purchases the goods from the manufacturer and sells them in wholesale to another dealer were taken as the value of the goods, it would include not only the manufacturing cost and th....
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.... manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arm's length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise. That would be the wholesale cash price for which the goods are sold at the factory gate within the meaning of Section 4(a). The price received by the wholesale dealer who purchases the goods from the manufacturer and in his turn sells the same in wholesale to other dealers would be irrelevant to the determination of the value and the goods would not be chargeable to excise on that basis." 23. This case also does not support the case of the assessees. When it refers to post-manufacturing expenses and post- manufacturing profit arising from post-manufacturing operations, it clearly intends to refer not to the expenses and profits pertaining to the sale transactions effected by the manufacturer but to those pertaining to the subsequent sale transactions effected by the wholesale buyers in favour of other dealers. 25. Accordingly, we hold that pursuant to the old Section ....
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.... prescribed shall be the value of the excisable goods for the purpose of charging the excise duty. 31. It will be noticed that the basic scheme for determination of the price in the new Section 4 is characterised by the same dichotomy as that observable in the old Section 4. It was not the intention of Parliament, when enacting the new Section 4 to create a scheme materially different from that embodied in the superseded Section 4. The object and purpose remained the same, and so did the central principle at the heart of the scheme. The new scheme was merely more comprehensive and the language employed more precise and definite. As in the old Section 4, the terms in which the value was defined remained the price charged by the assessee in the course of wholesale trade for delivery at the time and place of removal. Under the new Section 4 the phrase "place of removal" was defined by Section 4(b) not merely as "the factory or any other place or premises of production or manufacture of the excisable goods" from where such goods are removed but was extended to "a warehouse or any place or premises wherein the excisable goods have been permitted to be deposited without payment ....
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....The old Section 4 provided by the Explanation thereto that in determining the price of any article under that section no abatement or deduction would be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid. The new Section 4 provides by sub-section (2) that where the price of excisable goods for delivery at the place of removal is not known and the value 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 has to be excluded from such price. The new Section 4 also contains sub-section (4)(d)(ii) which declares that the expression "value" in relation to any excisable goods, does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contrac....
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....he new Section 4(1)(a) is not ascertainable, the price is determined under the old Section 4(b) or the new Section 4(1)(b). Now, the price of an article is related to its value (using this term in a general sense), and into that value how poured several component, including those which have enriched its value and given to the article is marketability in the trade. Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on account of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacturer after clearance), charges for other services after delivery to the buyer, namely after-sales service and marketing and selling organisation expenses including advertisement expenses cannot be deducted. It will be noted that advertisement expenses, marketing and selling organisation expenses and after-sales service promote the marketability of the article and enter into its value in the trad....
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....gh Court is set aside. The order of the Collector dated 7-7- 1983 in F. No. RO-943/83 is restored." 4.19 In case of Siddharta Tubes [2000 (115) ELT 32 (SC)] Hon'ble Supreme Court has held as follows: "2. The appellants manufacture mild steel pipes and tubes. About 30% of the production is cleared at that stage, and the product is then known as black pipe. The balance production is taken to separate shed in the appellants' factory premises and galvanised. The dispute is in relation to the galvanised black pipe. According to the appellants, what they clear is black pipe, the process of galvanisation is not a process of manufacture and no addition can be made to the assessable value of the black pipe on account of the galvanisation that subsequently occurred. The Tribunal rejected the contention. It said that the appellants themselves had, in their classification list, declared M.S. black pipes and galvanised pipes as their products. In such a situation, the mere fact that galvanisation was done subsequent to paying duty on the M.S. black pipes could not, by itself, be a ground for not including the cost of galvanisation in the assessable value of the black pipes subjected....
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....sale price of the pipes. Therefore, the cost had to be included in the assessable value of m.s. galvanized pipes. We do not find any error in the reasoning of the adjudicating authority. 8. In the case of Union of India & Others v. Bombay Tyre International Ltd. reported in AIR 1984 SC 420, this Court observed as follows : "...... the price of an article is related to its value, and into that value one has to pour several components, including those which enrich the value of the product and which give to an article its marketability in the trade. Therefore, the expenses incurred on account of the several factors, which have contributed to the value of the product up to the date of sale, are liable to included in the assessable value." 9. Recently, this Court in the case of Procter & Gamble Hygiene & Health Care (supra), has observed as follows : "9. This case relates to valuation. At the outset, we would like to clarify certain concepts under the Excise Law. The levy of excise duty is on the "manufacture" of goods. The excisable event is the manufacture. The levy is on the manufacture. The measure or the yardstick for computing the levy is the "n....
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....he process of galvanization was incidental to the manufacture of the m.s. galvanized pipes and, therefore, the cost of that process was rightly included in the assessable value. We do not find any error in the concurrent findings recorded by the Commissioner and by the Tribunal." 4.21 Undisputedly the appellants have offered the goods for sale for the first time in normal course of trade at depot only, which are their fully owned service centers. The actual place of removal as per the definition of place of removal, as section 4, as have been interpreted by the Hon'ble Apex Court umpteen number of times has to be the depot only. Even if the arguments of the appellant are accepted, then also in view of the decisions of Hon'ble Apex Court specifically in case of Sidharta Tube, the value will be determined only on the basis of sale price from depot. We have find that the form in which the goods have been sold at depot are in package comprising of the goods cleared from the factory of appellant and other bought items packed together in a carton. Hence the sale price of the goods comprise of the sale price of the goods manufactured by the appellant and the sale price of the goods tra....
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....hey were going to make cable jointing kits by putting together the bought out items and manufactured duty paid components. They did not inform that they were not going to carry any process or even will not remove the packing of the duty paid goods, but would be selling the duty paid goods as such along with some bought out items by keeping the duty paid goods in tact in their original packing condition in which they were cleared from the factory. The communication by the range superintendent and letter dated 4.4.2002 was regarding request for de-registering Building No. 2 and approval of fresh ground plans, having no bearing over valuation of goods. 57. From the above discussions, I conclude that M/s Raychem RPG Ltd. with intent to evade Central Excise duty, considered themselves or posed as if they were rightly covered within the scope of rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, when they were aware that they were not using the excisable goods manufactured and cleared by them for consumption in production or manufacture of other articles, but the goods were sold by them from their other premises without any process do....
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.... to arrive at the transaction value of the goods on the basis of costing method in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 is nothing, but to undervalue the goods with the sole intention of evading Central Excise duty and thereby, defraud exchequer of its legitimate dues. For this act and omission on the part of the assessee, I also hold that M/s Raychem RPG Ltd. are liable to penalty under Section 11AC of the Central Excise Act, 1944. The assessee are also liable to pay appropriate interest in terms of Section 11AB of the Central Excise Act, 1944 on the demand amount held to be payable by/recoverable from them. 59. As regards penalty clause invoked in the Show Cause Notice dated 28.12.2007, I find that I find that the assessee have deliberately followed the modus operandi of clearing the manufactured components from their factory under the guise of captive consumption at Customer Care Centre with the sole intention to undervalue and evade the payment of correct Central Excise duty. The goods cleared in such a manner under the guise of captive consumption is in contravention of the Central Excise Act, 1944 and....
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....efited by the said non-payment of duty by the company; iv) he had no knowledge that the goods were liable to confiscation; v) he believed and continued to believe that the appropriate duty liability was discharged on the goods and therefore, the same cannot be confiscated and vi) the Show Cause Notice only seeks to recover the alleged short payment of duty from the company and there is no proposal to confiscate the goods. 61. It can be seen from the statement of Shri Kapil Gohil that though he said that he was handling day to day matter pertaining to banking, treasury, legal and secretarial, but in his statement as well as in the reply to the Show Cause Notice, he has not only defended the act of short payment by the company, but has vouched for correctness of the method adopted by the company by giving his detailed statement as well as reply to the Show Cause Notice. Hence, his innocence cannot be accepted. Further, as regards his argument about confiscation of goods, it is certain that the goods in respect of which duty was evaded, were liable to confiscation. Only because the goods are not available for confiscation, there is no proposal for confiscation in the Show Cau....