Judgment:
1. The appellants are manufacturers of water filter-cum-purifiers of various types and their parts. The appellants sell their excisable goods to M/s. Eureka Forbes Ltd., who by virtue of being their holding company, is considered as their "related person". The appellants clear the excisable goods on payment of duty from their factory to their depot from where the "related person" lifts the goods and takes it to their godown. M/s. Eureka Forbes then sell the water filters to the consumers directly on a retail price fixed by them. The appellants determine their assessable value for the purpose of payment of excise duty on the basis of the retail price adopted by Eureka Forbes and claim deduction from such a retail value to arrive at the assessable value. The deductions claimed include freight and insurance incurred from the factory of the appellants to the depot of the appellants. They do not incur any expenses towards freight from their depot since M/s.
Eureka Forbes takes delivery at the godown of the appellants. Eleven Show cause notices were issued proposing to disallow the deduction claimed by the appellants towards freight and demand differential duty thereon on the ground that the said deduction represented freight from the depot of the appellant to the depot of M/s. Eureka Forbes Ltd. The demand was confirmed with the differential duty and imposition of penalty. After going the processes of de novo adjudication and again an appellate order, the matter came before the SZB, Bangalore. After hearing both sides and considering the submissions, the Tribunal held as follows:- (a) The Department is applying the amended definition of the "place of removal" and thereby include the element of freight and insurance incurred while transporting the goods from the factory of the Appellants to their depot.
(b) In a case like this, where the related person was selling the goods in retail, then, the value is to be determined in terms of Section 4 (1) (b) of the Act read with Rule 6 (c) (1) of the Central Excise Valuation Rules, 1975 i.e. under the provisions of Rule 6 (a) of the Central Excise Valuation Rule 1975. This value is to be determined on the basis of the retail price of the goods as reduced by the proper officer to arrive at the price at which the assessee would have sold the goods in the course of wholesale trade to a person other than a related person.
(c) Vide circular No. 251 / 85 / 96-CX dt. 14.10.1996, the Board in response to a doubt as to whether transport cost from the factory to the other place of removal such as depot would form part of the assessable value when no amendment has been carried out to Section 4 (2) of the Central Excise Act, 1944, has clarified as follows:- "After amendment of Section 4, depots etc., have been declared as "place of removal" and as such sale price prevailing at such depots etc., which will include transport charges etc., will be known at the "place of removal" i.e. the storage depots etc., and as such Section 4 (2) will not be applicable in such cases. Section 4 (2) is applicable only in cases when sale price is not known at the place of removal." It is therefore, evident that the sale price at the place of removal viz. the depot of the appellants is not known and consequently in view of the circular issued by the Board itself, the provisions of Section 4 (2) which provides for deduction under Rule 6(a) would apply. This circular issued by the Board is binding on the authorities as held by the Apex Court in the case of Paper Products Ltd. vs. CCE reported in 1999 (112) ELT 765 (SC). The Tribunal vide Final Order No. 225-227 / 2002 dt. 5.3.2002 in the case of appellants had decided the issue in their favour.Fedders Llyod Corporation Ltd. vs. CCE, Delhi-I, reported in 2002 (51) RLT 396, the assessee was to be denied the quantum of deduction permittedbefore the amendment to the definition of the term "place of removal".
In Section 4, the quantum proposed to be denied by Show Cause Notice was "transport charge from the factory gate to the sale depot" which was considered as not permissible. However, the Tribunal held in Para 6 of this decision as follows:- "6. We have find no merit in the stand taken by the Revenue. Section 4 (1) (a) refers to a situation when there is a sale price available, namely, a wholesale price. In case where such wholesale price is available, the amendment to Rule 4 relating to place of removal will have consequences. But in cases when there is no wholesale price available, it has to be determined with reference to retail price, then the procedure to be followed is Rule 6(a). A reading of the show cause notice or the impugned order would not show that a change in the percentage of reduction is required on the basis of trade practice in the commodity during the relevant period.
As mentioned earlier consideration of trade practice is an essential requirement while applying Rule 6 for arriving at the assessable value. Therefore, we are of the view that there was no reason to modify the rate of deduction granted to the appellant under order passed by the Commissioner (Appeals) dt.9.2.78." The ratio of the decision of this case, that there was no reason to modify the rate of deduction granted to the appellant, would be squarely applicable herein in absence of any other case law to the contrary being shown to us. Following the same, we would also hold that under Rule 6(a), a deduction of transport up to the depot will have to be allowed.
Considering the view we have taken, the order is set aside and the appeal is allowed.