1. This appeal is against the order of the Commissioner (Appeals) dismissing the appeal filed before him against the order of the Deputy Commissioner, refusing to extend the facility of provisional assessment to Hindustan Coca-Cola Beverages Pvt. Ltd., the appellant before us.
2. We think it relevant, for a full understanding of the case, to reproduce the assessee's letter to the Deputy Commissioner, as follows:- "We are selling post mix canisters to McDonalds from our factory at Wada at the prices shown in the Invoices. Since excise duty is payable on the assessable value determined Under Section 4 of the Central Excise Act 1944, on the basis of "Transaction Value", being the actual price at which goods are sold to McDonalds from our factory, we maintain that we are correctly paying the duty of excise in respect of such sales.
However, since the department is objecting to payment of duty on the basis of the actual price on which sales are made to McDonalds from our factory, we are applying for permission to clear the aforesaid post mix canisters for sale to McDonalds under Provisional Assessment under Rule 7 of the CE (No. 2) Rules, 2001. We are prepared to furnish the Bond and Security for differential duty. We may also clarify that although the price at which sales are made to the aforesaid bulk buyer McDonalds at lower prices as compared to sales to other buyers, duty is correctly payable on this lower price being the actual selling price, since duty is payable on "Transaction Value" under Section 4 of the Central Excise Act.
Please issue the necessary orders on this application so that we may furnish the requisite bond wit such Security as you may deem fit. We may also mention here that no differential duty is being recovered from McDonalds. As such it would be in the interest of justice to permit us to pay duty on the actual sale price to McDonald in respect of the aforesaid post mix canisters." 3. The Deputy Commissioner has refused to extend the benefit by passing the following order.
"In this connection your request for provisional assessment was examined on merits and as per Rule 7(1) of Central Excise Rules (No. 2) of 2001, the provisional assessment can be considered when the assessee is unable to determine the value of excisable goods or determine the rate of duty applicable there is whereas in your case it is observed that the normal price is available with you. In respect of the goods (Pre/Post Mix canister) supplied to (M/s.
McDonalds.) is much below the normal price which is available with you. You have neither given any reason / basis for arriving at the such assessable value, nor have produced any copy of contract/agreement. Further there is no dispute regarding the rate of duty. Thus there is no reason to resort to provisional assessment, in respect of goods sold to M/s. McDonald when the normal price is available with you.
As regards the cleat-311Ce of scrap for which the assessee has requested permission for provisional assessment under the provisions Rule 7 of the said Rules, it is felt beyond doubt, that clearances of scrap is not governed by the provisions of Rule 7 of the said Rules, as the value of excisable goods is available with you and there is no dispute regarding the rate of duty applicable on the said scrap. Waste and scrap are "final products' within the definition given in the. Cenvat Credit Rules, 2001 as clarified in Board's instructions contained in Para 3.2 Chapter V page No. 7.58 of Part - 7 of CBEC's Excise Manual of supplementary instructions for new Central Excise procedures as on 1.09.2001 which also states that the CENVAT credit C3n be utilised of the pa)'1 llent of duty on Waste and scrap as waste and scrap are final products within the definition given in the Credit Rules.
Under the circumstances there are no cogent reasons in support of the your request for provisional assessment of scrap in terms of Rule 7 of the said Rules, read with the Board's instructions cited Supra - where the assessee is unable to determine the value of excisable goods or determine the rate of duty applicable thereto. In the instant case i.e. in respect of clearances of scrap, both of the above mention criteria are not applicable. Hence it is amply clear that there is no reason to allow provisional assessment in respect of scrap which is sold in the market and which has marketability and fetch value.
In view of the above observation in respect of clearance of Canister to McDonalds as well as for the scrap your request for provisional assessment does not merit consideration and hence the said request for provisional assessment in respect of both the items i.e. Post mix Canisters /scarp is hereby rejected." In his order, the Commissioner (Appeals) has dismissed the appeal on the ground that the price and rate of duty was readily available.
4. At first blush, the matter would appear to be simply one where a request for provisional assessment has been desired. But closer examination will reveal that is not the case. The Deputy Commissioner has refused the provisional assessment of the goods, the refusal has been endorsed by the Commissioner (Appeals), solely on the ground that since the normal price is known to the assessee, the provisional assessment is unnecessary.
5. It is clear to us from this that the Deputy Commissioner does not accept as correct that the prices at which the appellant sells the goods McDonalds, solely on the ground that they were being sold to other buyers at higher prices.
6. We are concerned in this case with the determination of value in terms of Section 4 of the Act as it stands after it was replaced on 1^st July, 2000. Sub-section (1) Section 4 of the Act and the definition contained in the explanation under Sub-section (3) of the transaction value are reproduced below:- "(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 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 of the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
(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." 7. By applying the law as it stands, it is clear to us that the value of the goods for assessment of the goods sold by the appellant to McDonalds should be the price actually paid or payable by McDonalds to the appellant in respect of each removal from the factory. We are concerned with the period after 21.2.2002 when the Deputy Commissioner wrote his letter. To take an example, the appellant sold Fanta in 18 litre post fixed canister to McDonalds at a price of Rs. 1,208/-. This is evident from invoice No. 14043 dated 24.12.2001. The transaction value could not include the elements of tax (central sale tax Rs. 160.29, Cenvat Rs. 118.69, special excise duty Rs. 118.69 and octroi Rs. 68.55. The assessable value therefore would work out to Rs. 741.78.
It is clear from the Deputy Commissioner's order that no other payments are to be made by McDonalds to the appellant. That was indicated in his order. No evidence of such payment was alleged by the departmental representative, after consultations wit officers from the Commissioner's office. Therefore Rs. 741.78, as the example that we have given above, would be the assessable value.
8. Despite his best efforts, the departmental representative was unable to say why this value should not be accepted. It appears to us that the action of the department is the result of its inability to accept the concept of transaction value which has replaced the earlier concept of value. It is no doubt a radical departure from the earlier one and perhaps not entirely acceptable to the department. The law however has been enacted, no doubt in this case, at the instance of the department and it is to be given effect to, however, merely any section of the department finds it unacceptable.
9. There is an ongoing dispute as to the payment of duty by the appellant prior to the date with which we are concerned. We make it clear that this order is not concerned with that dispute or anything that is prior to 21.2.2002. We also make it clear that this order will not operate in any event that the fact situation alters so as to render it inapplicable.
10. In the same order, the Deputy Commissioner has refused to allow provisional assessment of the waste and scrap of glass bottles, plastic carboys, carton boxes, mango tins, empty tins, paper and plastic. The waste of bottles arose because some of the bottles which the appellant used to pack its beverages broke during handling. The ratio of the judgment of the Supreme Court in Dillon Kool Beverages Pvt. Ltd. v. CCE 2002 (144) ELT 8210 that such waste is not liable to duty will apply.
The appellant had various inputs packed in tin, packet etc. this mango pulp for making of beverage in tins. It receives beverage base from which the manufacturer packs it in plastic carboys. Such tins and cartons after they are emptied are not usable and duty has been demanded on the remnants of this container of what we are calling scrap. The ratio of the judgment in Dillon Kool Beverages Pvt. Ltd. v.CCE that the glass is not the result of manufacture would apply to these products. The appellant did not set out the manufacture of any product in the cost of such scrap. The ratio of the decision of the Tribunal in Castrol India Ltd. v. CCE 1998 (99) ELT 234 will also apply. Counsel for the appellant makes it clear that he is not pressing his case as regards payment of duty on scrap of preforms which the appellant uses to make plastic bottles is concerned.