TaxTMI 
TaxTMI 
2007 (6) TMI 208
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....sion, (b) wear and tear charges (earlier known as rental charges), and (c) freight to the different distribution agencies. The allegation is that the company had not declared these elements in invoices pertaining to the clearance of their goods (misc. edible preparations) deliberately to evade payment of Central Excise Duty. 3. The show cause notice has a reference to a statement recorded on 24-1-2002 of Shri Rahul Rastogi, Finance Manager of the Company. 4. The order-in-original passed earlier on 31-8-05 by the learned Asstt. Commissioner held that all the three elements are includible in the assessable value. Thus, the demand of Rs. 3,44,751/- was confirmed under Section 11A of the Act, imposing a like amount of penalty under Rule 25 of the Rules read with Section 11AC, and also confirming interest under Section 11AB of the Act. 5. Aggrieved by this order-in-original, the company went in appeal before the Commissioner (Appeals) who modified the order of the lower authority to the extent that demands confirmed under wear and tear charges stood dropped. He, however, ordered that the expenses on account of freight and commission charges are liable to be included in the tran....
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....ue." Not only in terms of number, but also in content these decisions weigh in favour of the Company. 6.2 Commission charges: The learned Commissioner (Appeals) had observed -if not wondered- that, no agreement was entered into by the company with its so-called "distributors" being referred to as "buyers". In the absence of any written agreement/contract between the parties he found that the transaction cannot be considered as if on principal to principal basis, paid to the so called distributors i.e. commission agents shall be liable to be included in the transaction value for payment of Central Excise Duty. 6.3 It was strongly contended by the learned authorized representative for the Company that the Department has adopted "double standard" while assessing goods: for the purpose of including commission, the Department applied Section 4(1)(a) which is the transaction value concept and for the purpose of including freight, the Department went for a different yard stick as Section 4(1)(b) read with Rule 7 was sought to be applied. 6.4 Opposing this observation, the learned Departmental Representative submitted that, there was no ambiguity as the transaction value had to....
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....from the document, referred to as "pricing master" surfaced during the investigation :- Table-I Sales - Katra Shrine TYPE SHRINE KATRA PACK 18000 ml KO 18000 ml FX 18000 ml TU 18000 ml LI 18000 ml SP Cases per POM-'A' Selling Price/Cases-'B' 16.00 126.15 13.50 128.55 13.75 126.21 13.75 126.21 13.50 128.55 SP per POM-(AB) 2,018.32 1,735.37 1,735.37 1,735.37 1,735.37 Less Retailers Margin Landed Base for Dist. 2,028.32 1,735.37 1,735.37 1,735.37 1,735.37 Less : Shrine Discount Less Dist. Comm. 200.00 200.00 200.00 200.00 200.00 Landed Cost in Dist. 1,310.32 1,535.37 1,535.37 1,535.37 1,535.37 Less: Freight PME 70.00 709.00 70.00 70.00 70.00 Less : Rentals- POM PME 250.00 250.00 250.00 250.00 250.00 Balance Cum Sales Tax 1,498.32 1,215.37 1,215.37 1,215.37 1,215.37 Sales Tax @12.6% &n....
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....; hands of control reach up to a remote point of sale far from the factory gate. It touches a point till the product reaches the hands of their consumers, if is not their parched throats! 7.2 Boning up on this document one cannot but notice that the appellants do not pay any sales tax (due to exemption) and that there are provisions for smoothly adding rentals, freights, distributor's commissions, retailer's margin and what not. In this context an extract of Shri Rahul Rastogi, Finance Manager of the Company's statement dated 24-12-2001 would read as under: "A Commission @ Rs. 200 per canister Rs. 150 per canister respectively is deducted from Kaba agency. The invoices show a sale value which is inclusive of dist. commission. It is his sale value indicated in the invoice which is reflected in the hooks of accounts and the commission is a deduction since the nature of expenses. This commission is given to those agencies to facilitate the sale of POM to retail outlets where we have not allowed the fountain machines for sale of fountain ....
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....ion of duty are desired as per the explanation given vide Ans. No. 13/14. Q. 16. Your Katra Dist. Agent is charging commission from your Company by issuing debit note but you are saying that the Company does not pay any commission. Pl. explain. Ans. As already explained vide AB, Company is reimbursing/paying the dist. Commission due to the fact that the said distributor is selling the product to shrine Board at a much lower value than the suggested price and therefore, not in a position to recover even his commission from such sale and therefore the Company is re-imbursing this commission to Katra distributor only." 7.5 It may be seen here that in the case of Katra Distributor, the company raised the debit note for recovering the sale difference as the sale to Shrine Board was much below the "suggested price". This statement goes to prove that the Company extends its control on the price of their products far beyond the jurisdiction of their factory gate, demolishing their own theory that sales takes place at their factory gate. Though it is referred to as "suggested price", a perusal of the pricing master makes it crystal-clear that a precise pattern has been worked out, ....
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....same. Thus there was no question of lowering Assessable value. Further it yield for filling 8 litre POM is higher than filling one bottle of 300 ml each time." 7.7 The said show cause notice dated 8-10-2002 cannot be simply brushed off as having no bearing on the subject issue. It gives a clear insight as to how the company, over the years have addressed this very issue. It confirms the practice of giving commission to Katra Distributor. What was "commission" before and for which a deduction was openly sought from the Department in the earlier period is now transformed to be termed as the "profit margin of the distributor". In this context it is relevant to recall the provisions of Section 4(1)(a) of the Act, which proclaims that price should be the sole criterion. Here, however we notice that it is not only the price but even the profit margin, which is admittedly a consideration. 7.8 It is also noticed that no payments made by the distributors (who are branded as "buyers" by the company) have ever been made invoice-wise. As demonstrated before us, only ad hoc payments have been made as per the ledger account. No correlation of these payment data particularly between t....