M/S Mercedes-benz India Pvt. Ltd. Vs. Cce, Pune-i - Court Judgment

Excerpt:
mr. b.s.v. murthy: the appellants are engaged in manufacture of motor vehicles and parts thereof. duty demand of rs.25,21,943/- has been confirmed on the ground that the appellants had collected road delivery charges (rdc) in respect of vehicles cleared by them over and above the actual amount spent by them. we heard both sides, who argued at length and also have gone through the records. both sides indicated that they would like to make written submissions and accordingly they were permitted to file the same within 15 days. both sides made written submissions which have also been taken into consideration. 2. road delivery charges are collected in terms of agreement entered into with the dealers. according to the agreement, the appellant arranges for transportation/ transit insurance on.....

Judgment:

MR. B.S.V. Murthy:

The appellants are engaged in manufacture of motor vehicles and parts thereof. Duty demand of Rs.25,21,943/- has been confirmed on the ground that the appellants had collected road delivery charges (RDC) in respect of vehicles cleared by them over and above the actual amount spent by them. We heard both sides, who argued at length and also have gone through the records. Both sides indicated that they would like to make written submissions and accordingly they were permitted to file the same within 15 days. Both sides made written submissions which have also been taken into consideration.

2. Road delivery charges are collected in terms of agreement entered into with the dealers. According to the agreement, the appellant arranges for transportation/ transit insurance on behalf of the dealer and undertakes to deliver the goods at the premises of the dealer. The agreement also clearly provides that the delivery shall be made ex-factory . The transportation/delivery charges referred to as Road Delivery Charges (RDC) are recovered from the dealer by showing the same in sales invoices separately. On verification, it was found that in some cases, the difference between the RDC recovered and the actual RDC incurred would be positive and in some cases would be negative. The department has taken a stand that wherever such RDC is positive, the same is to be treated as additional charges and duty is to be paid.

3. It was submitted that in respect of the transactions, the requirements of Section 4(1)(a) of Central Excise Act, 1944 have been fulfilled and therefore the RDC recovered separately after removal of the goods from the place of removal cannot be included in the assessable value. The appellants relied upon the decision of the Tribunal in case of M/s Filaments India 2003 (160) ELT 314; M/s Majestic Auto 2003 (57) RLT 19 (Tri) and the decision of the Hon’ble Supreme Court in case of M/s Escorts JCB Ltd.2002 (146) ELT 31 (SC), in support of their contentions that where the conditions of Section 4(1)(a) of Central Excise Act, 1944 are satisfied, freight charges cannot be included and the duty has to be charged on the value at the factory gate. On the other hand, the learned special Counsel on behalf of the Revenue submitted that thee is no dispute at all that the sales took place at the factory gate in this case. He also submitted that the department does not dispute that the elements of freight and transit insurance is not includable in the assessable value of the goods. The case of the department according to the learned Counsel is that as per the definition of transaction value under new Section 4 of Central Excise Act, 1944 each transaction is separate and independent. Excess recovery of freight would result in under-valuation of the goods and it is on this ground that differential duty has been demanded. Since the assessment is to be made on each transaction, the appellants cannot adjust excess recovery of freight in one transaction against the short recovery of freight in another transaction. According to him, these are two real issues in this case.

4. Includibility of excess RDC collected - Appellants contended that once ex-factory price is available, Department cannot look into collection of charges post removal.

The appellants have quoted several decisions and have raised the contention that once the sales takes place at the factory gate, RDC recovered separately from the dealer would not be includible in the assessable value of the final product. In fact, this was the position under Old Section 4 of Central Excise Act, 1944. Once normal price at the factory gate was available, that was to be accepted and duty charged on the same. But, if this contention is accepted, assesses can simply clear the goods at the factory gate and collect charges under different heads separately. In such a case, assessable value would not be the transaction value but price charged at the factory gate. This would be doing total violence to the concept of transaction value under New Section 4 of Central Excise Act, 1944. Therefore, this cannot be the correct interpretation of the law. The appellants relied upon the decision of Hon’ble Supreme Court in the case of M/s Accurate Meters Ltd. 2009 (91) RLT 653 (SC), wherein the decision in case of M/s Baroda Electric Meters was followed. We are afraid the decision of the Supreme Court in case of M/s Accurate Meters Ltd. as well as M/s Baroda Electric Meters 1996 (855) ELT 363 would not help the appellant. In both these cases, while placing order, contractor’s price pre-determined with break-up of different elements and accepted by Electricity Boards, have been shown. The contract clearly specified the prices ex-factory, FOR destination, freight and other charges. Therefore, in both cases, it was the choice made by the customer who agreed to pay certain specific amounts towards freight and transit insurance and contract for supply of meters and contract for delivery can be considered to be two separate limbs of the contract. Therefore, if the supplier made some profit, in the transporation, insurance etc., it was part of the contract of those activities and not relatable to the manufacture and supply of electric meters. Both these decisions are not applicable to the present case in view of the fact that in this case, the RDC is fixed by the supplier and as shown by one of the examples cited in the written submission, even when a vehicle carrying two vehicles goes to Bangalore and if the second vehicle is delivered in Cochin, RDC for the dealer in Cochin would not change. The transactions in this case are unlike M/s Baroda Electric Meters and M/s Accurate Meters Ltd. cases, where there was a mutual consent and a separate contract towards cost of the transportation and also a separate price ex-factory was also shown and there was a choice for the purchaser. Here, there is no such choice for the dealer. It was not shown to us that there was any such clause in the agreement giving opportunity to the dealer to arrange transport himself and in such cases, dealer need not pay RDC.

5.1 Another submission made by the appellant is that present case is fully covered by the decision of the Tribunal vide its Order No.A/463-470/08/C-I/EB, dt.26.05.08. It was also submitted that appeal filed by the Revenue against this decision was dismissed by the Apex Court on 31.08.09 and therefore the decision has attained finality and this Tribunal was bound to follow the same. The relevant portion (Paras 4 to 6) are reproduced below.

“4. We find that the case of the department as reflected in the show cause notice was that while clearing the motor vehicles i.e. passenger cars, the assessees were charging freight (Road Delivery Charges) from their customers, that the said charges collected were sometimes in excess or sometimes less than what was actually incurred and the excess recovery was not included in the assessable value of the passenger cars; that the appellants paid differential duty by adjusting the excess recovery with the short recovery in another case and then paid the differential duty as above. The department was of the view that, since each transaction has its separate entity and has to be dealt with separately, excess recovery could not be adjusted against short recovery in another transaction. In all the cases, the assessees worked out differential Central Excise duty and paid the same. Show cause notices were issued proposing recovery of Central Excise duty for incorrect adjustment and computation of differential Central Excise duty on excess/short road delivery charges to customers for the period in dispute (details are contained in the Annexure to this order). The demands were confirmed by the adjudicating authority, who, in some cases, also imposed penalty. Appeal E/95/07 has been filed by the Revenue against dismissal of the department’s appeal seeking imposition of penalties, by the Commissioner (Appeals).

5. On haring both sides, we find that the issue in dispute stand settled in favour of the appellants by the Apex Court s decision in the case of Escorts JCB Ltd. Vs. CCE, Delhi II 2002 (146) ELT 31 (SC) holding that the element of freight and transit insurance is not includible in the assessable value. The Supreme Court further held that ownership of goods has no relevance insofar as transit insurance of goods is concerned. In this view of the matter, the D.R.’s reliance upon Clause VII of the Conditions of Sale to the effect that ownership of the goods is retained by the assessee does not come to the rescue of the Revenue, as this has also been considered and held against the Revenue by the Apex Court. We also note that by the Order dt.17.2.03, the Commissioner of Central Excise, Pune, has accepted the contention of the assessee that their factory gate has to be treated as the place of removal”

6. Following the ratio of the aforesaid judgment of the Supreme Court, we set aside the impugned orders challenged by the assessees and allow their appeals. By the same token, the appeal of the Revenue seeking imposition of penalty is dismissed.”

5.2. Learned special counsel on behalf of the Revenue submitted while the Tribunal had correctly noted the controversy in Para 4, the decision in Para 5 simply followed the ratio of Hon’ble Apex Court decision in the case of M/s Escorts JCB Ltd. holding that element of freight and transit insurance is not includible in the assessable value. He submitted that facts and issues involved in Escorts JCB Ltd. case are entirely different from the present case. He also submitted that Apex Court had dismissed the appeal on the ground of delay and not on merits and therefore it cannot be said that the decision of the Tribunal has been upheld by the Apex Court. We find ourselves in agreement with the conclusions of the learned counsel that in the Escorts JCB case, the Hon’ble Supreme Court was only considering whether in the facts and circumstances of the case, an inference could be drawn that ownership for the property was to be retained by the assessee till it was delivered to the buyer for the reason that the assessee had arranged for transport and transit insurance. It was held that such conclusion is not sustainable. Further, as pointed out by the learned counsel, there is no finding of the Tribunal regarding excess amount collected in the name of RDC. This is further supported by the observations of the Tribunal that CCE Pune in Order dt.17.2.03 had accepted that the factory gate was the place of removal. The issue in the case is not whether place of removal was factory gate or not. The issue is whether the excess RDC is includible or not.

5.3 Judicial discipline requires that one Bench of the Tribunal does not sit in judgment over the judgment/decision of another Bench. When this was pointed out to the learned counsel, he cited the decision of Hon’ble Supreme Court in the case of Collr. Of CE, Calcutta Vs. Alnoori Tobacco Products as reported in 2004 (170) ELT 134 (SC).

11. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid s theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. In London Graving Dock Co. Ltd. v. Horton (1951 AC 737 at p. 761), Lord Mac Dermot observed :

“The matter cannot, of course, be settled merely by treating the ipsissima vertra of Willes, J as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished judge.”

12. In? Home Office v. Dorset Yacht Co. [1970 (2) All ER 294] Lord Reid said, Lord Atkin’s speech is not to be treated as if it was a statute definition. It will require qualification in new circumstances. Megarry, J in (1971) 1 WLR 1062 observed: One must not, of course, construe even a reserved judgment of Russell L.J. as if it were an Act of Parliament. And, in Herrington v. British Railways Board [1972 (2) WLR 537] Lord Morris said :

“There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case.”

13. Circumstantial flexibility, one additional or different? fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.

14. The following words of Lord Denning in the matter of applying precedents have become locus classicus:

“Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.”

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“Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it.”

5.4 In view of the fact that Tribunal had not recorded any finding on the specific issue but relied upon the decision of the Supreme Court in Escorts JCB Ltd case, we find considerable force in the arguments advanced by the learned counsel that this aspect can be considered by the Tribunal and earlier decision need not be followed.

5.5 In the absence of the detailed discussion of the issue involved in the case and about applicability or otherwise of M/s Escorts JCB case, it can not be said that the Tribunal laid down any law nor it can be said that the ratio of that decision is applicable to the present case. At this juncture, we have to observe that in the normal course, when a case is cited and submission is made that the issue is covered, it may so happen (not that it always happens) that Bench accepts the contention and passes the order unless the representative/advocate on the other side points out that the decision does not cover the issue. We have to admit that when the hearing started, our impression was that the issue has been settled in favour of the appellant by the precedent decision of the Tribunal and only when the learned special counsel vehemently submitted that he would be able to convince us that the decision of the Tribunal would not be applicable, we proceeded to hear both the sides and spent considerable time hearing the arguments. While deciding not to follow the decision of the Tribunal, we would like to record clearly that we are doing so with full awareness of our responsibilities towards observance of judicial discipline. Each transaction is to be assessed and each show cause notice/issue has to be decided treating it as a fresh one unless proved otherwise. When a decision is given by the Tribunal based on representations made by both the sides, it would not be binding eternally, when it can be shown that no ratio was laid down or the conclusion was reached based on arguments advanced.

5.6 Learned special counsel also relied upon the decision of the Tribunal in case of Tripty Drinks (P) Ltd. 2002 (147) ELT 586 (Tribunal) wherein it was found that the assessee had diverted the cost of aerated water towards the cost of transportation and the assessee was collecting excess amount on account of transportation. The conclusion of the Tribunal that such collection have to be held as additional consideration of sales of the goods. On an appeal filed by the assessee, the Hon’ble Supreme Court dismissed the same. The appellants have pointed out that reliance on Tripty Drinks’ case would not help the Revenue since in that case, there was a detailed investigation and the department has proved that the appellant company had suppressed ex-factory sales price. It was also submitted by the appellant that in Para 7.2 of the said decision, the Tribunal had made clear that there is no dispute about the legal position that even if amount higher than the actual freight was collected by the manufacturer, such differential payment cannot be added to the assessable value. We find that all the decisions cited by the appellants holding that excess freight and insurance expenses collected by the assessee need not be added to the assessable value, are based on the decision of Hon’ble Supreme Court in Baroda Electric Meter case, which we have already differentiated earlier and held that the same is not applicable on facts. It is one thing for the buyer to require the manufacturer to undertake transportation with insurance and willingly accept the charges specified by the manufacturer which was the case in Baroda Electric Meters and it is another thing where manufacture fixed the uniform freight and insurance charges irrespective of the distance involved to maintain uniform price. It would be natural that in some cases, freight collected will be excess and in some cases, it would be short. Total differential duty payable on the excess collection of freight made by the appellant in respect of the orders which were challenged before the Tribunal which culminated into an order dt.29.5.08, was around Rs.2.13 crores. It would mean that appellants would have collected more than Rs.10 crores on freight alone. The quantum of excess freight and the duty liability thereon supports the contention of learned special counsel that RDC, in fact, was another source of tax free income for the appellant. If the intention was not to make a profit out of transportation, assessee would have adjusted RDC from time to time and ensured that amount collected was more or less equal and would have informed the Department that they would be claiming deduction of freight on equalized basis or would have paid duty on transportation charges wherever collection was extra. We can not also say that excess collection was a profit arising from delivery of vehicles alone. It is not the business of the assessee. Assessee’s business admittedly is manufacture of motor vehicles and parts and delivery is part of that business. Therefore, on this ground also, this profit is includible even though subsequent discussions would show why short collection cannot be adjusted against excess. Once transportation is not a separate activity but a part of manufacture, assessee can claim deduction of only actual expenses incurred in road delivery and not excess.

5.7 Therefore, we hold that the decisions cited by the learned advocate for the appellant to support the contention that irrespective of the fact whether the amount collected under the head RDC is more than what is actually spent or not, RDC is not includible, are not applicable to the present case. Therefore, the obvious conclusion is that excess amount collected over the actual amount collected under the head of RDC is includible as an additional consideration.

6.0 Another contention that was made by the appellant was that the Commissioner (Appeals) has travelled beyond the allegations contained in the show cause notice.

6.1 It is their submission that once the Commissioner found that Rule 5 of Valuation Rules is not applicable for charging duty on excess freight collected, Commissioner should not have gone further and invoked Rule 6 of Valuation Rules. This action on the part of the Commissioner (Appeals) is legally incorrect since it is not a case of merely wrong quoting or non-quoting of the Rule. In this connection, the appellants made following submissions:

“12.5 In CCE Vs. Ballarpur Industries Ltd. 2007 (215) ELT 489 (SC), the Hon ble Supreme Court held as under:

It is well settled that the show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest. If there is no invocation of Rule 7 of the Valuation Rules 1975 in the show cause notice, it would not be open to the Commissioner to invoke the said rule.”

(underlining supplied)

12.6 In CCE Vs. Toyo Engineering India Ltd. 2006 (201) ELT 513 (SC), the Hon ble Apex Court held as under:

“16. Learned counsel for the Revenue tried to raise some of the submissions which were not allowed to be raised by the Tribunal before us, as well. We agree with the Tribunal that the revenue could not be allowed to raise these submissions for the first time in the second appeal before the Tribunal. Neither adjudicating authority nor the appellate authority had denied the facility of the project import to the respondent on any of these grounds. These grounds did not find mention in the show cause notice as well. The Department cannot be travel beyond the show cause notice. Even in the grounds of appeals these points have not been taken.

(underlining supplied)

12.7 In Reckitt and Colman of India Ltd. Vs. Collr. of Central Excise 1996 (88) ELT 641 (SC),, the Hon’ble Apex Court held as under:

It was beyond the competence of the Tribunal to make out in favour of the Revenue a case which the Revenue had never canvassed and which the appellants had never been required to meet. It is upon this ground alone that the appeal must succeed.

(underlining supplied)

6.2 First of all, we would like to examine the decisions relied upon by the learned advocate for the appellant. In Ballarpur Industries Ltd. case as reported in 2007 (215) ELT 489 (SC), the issue was valuation of the goods cleared to a sister unit as a stock transfer for the purpose of levy of 8% excise duty as per Rule 57CC of Central Excise Rules, 1944. The department had proposed assessment under Rule 6 of Valuation Rules and the lower authorities had already held that Rule 6(b)(ii) of Valuation Rules would apply. At this stage, the Hon ble Supreme Court observed that it would not be open to the Commissioner to invoke Rule 7. In that case, the crux of the issue was the procedure/method to be adopted to determine the value of the impugned goods and Rule 6 and Rule 7 of the Valuation Rules provides totally different methods. In Toyo Engineering India Ltd. case as reported in 2006 (201) ELT 513 (SC), the Apex Court did not allow the department to deny the facility of project import on totally new ground which did not find mention in the show cause notice, neither the adjudicating authority nor the appellate authority had denied the facility of project import on that ground. In that case, the adjudicating authority, appellate authority and Tribunal had not considered the ground canvassed by Revenue before Supreme Court. In the case of Reckit and Colman India Ltd. case reported in 1996 (88) ELT 641 (SC), the Apex Court had held that the Tribunal can not make out a case which was not canvassed by the Revenue at any time and which the appellant had never been required to meet.

6.3 At this juncture, we would like to once again refer to the decision of the Hon’ble Supreme Court in case of Alnoori Tobacco Products as reported in 2004 (170) ELT 134 (SC), wherein the Hon’ble Court had held that the Court could not place reliance on a decision without discussing as to how factual circumstances fit in with the factual circumstances of the decision on which reliance is placed. None of the 3 cases, as already discussed can be compared on facts to the present case. In the present case, the contention of the department is that by collecting excess amount as part of RDC, the appellants had received additional consideration and therefore value cannot be determined under the main clause of Section 4 and the same has to be determined as per the valuation rules. The appellants were required to meet this allegation only. As can be seen from the discussion, the appellants have contended that even if excess amount is received while collecting the RDC, the same cannot be included in the assessable value and in fact, the RDC itself is not includible. The defence of the appellant does not in any way is affected by the fact that in the show cause notice, Rule 5 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 was quoted. Unlike the cases cited by the appellant, in this case, whether it is Rule 5 or Rule 6 which is applied, result would be a decision on the dispute relating to the addition of excess amount collected under the head of RDC only. Therefore, as rightly contended by the learned special counsel, the defence of the appellant does not get affected in any manner and in any case, the Commissioner (Appeals) has applied the correct Rule. We also find that there are several decisions of the Supreme Court holding that merely because of wrong Rule or wrong Section is quoted, the proceedings do not get vitiated. In case of Fortune Impex 2004 (167) ELT A134 (SC), the Hon’ble Court had considered the case where the provision of Section 18(1) of Foreign Exchange Regulation Act, 1973 was mentioned, but relevant provisions of Customs Act applicable had not been mentioned. The Hon’ble Court held that since the provisions of FERA, 1973 have been mentioned and all allegations and charges against the appellant were mentioned in clear terms in the show cause notice, the proceedings do not get vitiated. In this case also, it is not the argument of the appellant that facts have not been clearly mentioned and real ground has not been brought out. Mumbai Bench of the Tribunal had also considered a similar situation in the case of Endress and Hauser Flowtech (I) Pvt. Ltd. 2009 (237) ELT 598 (Tri-Mumbai). The Tribunal relied upon the decision of Hon’ble Supreme Court in the case of J.K. Steel Ltd. Vs. UoI 1978 (2) ELT (J 355)(SC). The Supreme Court in J.K. Steel case, had observed that ‘If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well settled proposition of law.’ The Tribunal took note of the fact that in that case, impugned order was not being made valid on the basis of a ground which was not in existence on the date when the declaration was made. The conclusion that emerges by examining the different cases cited by the learned advocate on behalf of the appellant and other decisions cited by us is that each case has to be examined independently and what is required to be seen is whether the appellants have got an opportunity to meet the allegations against them and the grounds are clearly explained and the consequences of inability to explain is clearly understood. In this case, the consequences of inability of the appellant to show that excess charges collected under RDC need not be added to the assessable value would be addition of such excess collection to the value and consequent levy of duty. Therefore, just because Commissioner applied a different Rule albeit a correct one, appellant’s interest is not prejudiced.

6.4 Therefore, just because the Commissioner (Appeals) has confirmed the demand under Rule 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, the appellant cannot be said to have been prejudiced.

7. At this juncture, it is also necessary to clarify that as per law, the intention behind the excess collection is not relevant.

7.1 After the amendment to Section 4 of Central Excise Act, 1944 in the year 2000, some major changes have been made in the concept of value. The first major change as pointed out by the learned special Counsel is that the levy of Central Excise duty is on transaction value. Earlier, the concept was normal price which need not necessarily be equal to the transaction value. As per the new provisions, assessment is to be done on each transaction value and in respect of each and every transaction, the requirement of satisfaction of the conditions prescribed in the main Section is to be made. Another major change that has come about is that earlier if it was found that normal price under Section 4(1)(a) could not be determined, what was required to be determined under Section 4(1)(b) was nearest equivalent of the normal price. Whereas, in the new Section, the value has to be determined in such a manner as may be prescribed. For better appreciation, the relevant provisions of the old Section 4 and new Section 4 are reproduced below:

Old Section 4:

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, 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 deemed to be the normal price of such goods in relation to each such class of buyers;

(ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price of the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof;

(iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail;

(b) where the normal price of such goods is not ascertainable for the reason, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed.”

New Section 4:

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.

(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.

Explanation: For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.

7.2 In this case, the goods are sold at the factory gate which is not in dispute. Assessee and the buyer are not related. The only question is whether the price is the sole consideration for the sale which is another requirement to be fulfilled to accept the price charged as a transaction value. This is to be read with the definition of transaction value given in the Section 4 which is reproduced below:

“(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.”

7.3 In this case, once it is noticed that the assessee is collecting RDC over and above the value at the time of clearance itself by showing in the invoice what is required to be examined is whether this amount can be excluded from the value. For this purpose, definition of transaction value will have to be considered. According to the definition, a transaction value includes any amount that the buyer is liable to pay in addition to the amount charged as price.

7.4 When we look at the explanation in new Section 4, that the money value of additional consideration flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods is required to be included. Once we look at the explanation, it becomes quite clear that when the assessee in this case collects excess amount under the head RDC, it becomes a flow-back of money under the head of RDC to the appellant. Whether the intention of the appellant is to collect excess money under heading RDC or not, is not relevant. Any additional consideration which is not deductable and which is not admissible as per the provisions of Section 4 read with the explanation and the definition of transaction value given there-under, the same is liable to be included. In fact, when we look at the definition of value under Section 4, explanation there-under and the definition of transaction value in which provisions of Section 4, immediate reaction would be that the whole amount collected as RDC would be includible. The excludability comes from the definition of place of removal and the need for determination of price for delivery at the time and place of removal.

7.5 Another aspect that is required to be dealt with and considered is the fact that in reality, strictly going by Section 4, the transaction value is to be determined first and thereafter admissible deduction have to be made. This becomes quite clear when we look at the definition of transaction value and also the explanation both of which provide for deduction of amount of duty of excise, sales tax and other taxes actually paid or payable. Therefore, in the present case also, what is required to be done is to take the total price charged to the dealer and thereafter calculate total of all admissible deductions. Once that is done, the payment under head of transportation will have to be the amount which is actually incurred or payable as per the explanation and the definition of transaction value. Thus, when we examine provisions of new Section 4, it becomes very clear that what can be deducted is only the actual transaction value. Once actual transaction value is not available, in view of the fact that the amount reflected in the invoice towards RDC is not the actual one, necessarily, the assessing officer has to determine the value under Valuation Rules.

7.6 Again there is a major difference between old Section 4 and new Section 4 as regards determination of value under the Valuation Rules. In the old Valuation Rules, the officer was to arrive at nearest equivalent of the normal price of such goods. In the new Section 4, there is no such requirement. Once it is held that transaction value under Section 4 cannot be determined, on the basis of value declared in the invoice, and in terms of explanation and transaction value, there are elements which are to be verified to determine the actual amount that can be deducted, resort to Valuation Rules becomes necessary. However, under the Valuation Rules, it is not necessary that the value determined should be equal to the transaction value or it should be nearest equivalent of transaction value. Therefore, once value under Section 4(1)(a) of Central Excise Act, 1944 is not available in respect of a transaction value has to be determined as prescribed and price at the factory gate even if available becomes irrelevant.

Value has to be determined in the manner as prescribed in the rules. This becomes very clear when we consider the definition of normal transaction value given in the Valuation Rules, 2000 and addition of notional profit of 10% under Rule 8 of Valuation Rules. Therefore, once an assessee’s case is not covered by the decision of Hon’ble Supreme Court in the case of Baroda Electric Meters, it becomes necessary to add excess collected to the assessable value. Rule 6 of the Valuation Rules, 2000 adopted by the Revenue is most appropriate.

8. The next question that is required to be determined is that whether the appellants are required to pay excise duty on the excess amount collected under RDC on the basis of total amount realized in excess over a period by settling off short collections with excess or whether they are required to pay excise duty on the excess amount received without such adjustment.

8.1 Learned special counsel submitted that since each transaction is assessed and transaction value determined for the purpose of levy of excise duty, there cannot be any adjustment of excess paid and short collection. We find considerable force in these arguments. As already seen from the definition of Section 4, the transaction value has to be arrived at in respect of each transaction. In the old section 4, the value was deemed to be the normal price. In the new Section 4, the value has to be determined on each removal of the goods. The definition of normal price under Section 4(1)(a) and the definition of value under new Section 4(1)(a) are almost same except for the omission of ‘in the course of wholesale trade’. In the present situation, what is required to be determined under Section 4 is the transaction value in respect of each and every removal.

8.2 Adjustment of excess collection and short collection would have been appropriate before the provisions relating to the unjust enrichment were incorporated in Central Excise law. Now, the situation is where there is excess collection of RDC, there is a liability of excise duty to be paid. Where there is short collection of RDC, naturally the duty would have been paid in excess. Therefore, in respect of each and every transaction, where there is a short collection of RDC, going strictly by the definition of transaction value as discussed above, the result will be excess payment of excise duty. This amount of excise duty paid in excess cannot be refunded to the appellant unless the appellant is able to show that he has not collected the amount being claimed as refund. If duty amount has been collected by the appellant, the refund can be claimed only by the buyer. On the other hand, when it comes to recovery under any of the provisions of Central Excise law, the recovery is always from the assessee irrespective of the fact whether he has collected the excise duty or not even though excise duty being a indirect tax by its very nature, is to be collected from the customer and paid to the Government. Therefore, the legal provisions relating to the recovery of short levy/non-levy of excise duty would be based on whether the assessee is liable and that is the end. Whereas when it comes to refund, besides determining eligibility of assessee for the refund, the law requires the assessee to show that he has not collected excess amount of excise duty being claimed as refund. Since the value has to be determined on each transaction, assessment has to be on each transaction, where the amount collected under the head RDC is less than the actual amount, assessee has no option but to ask buyer to claim refund or refund the amount himself and claim it from the department. On the other hand, in case of excess collection irrespective of the fact whether he collects excess amount to be paid to the Government from the dealer or not, he would be required to discharge the liability. Further, the fact that returns are filed on monthly basis and for recovery of short levy, date of filing return is considered as relevant date, are all procedural requirements and do not really help the appellant.

9. Our conclusions as enumerated above are briefly summarized as under:

a) We hold that we need not follow the decision of the Tribunal in Order No.A/463-470/08/C-I/EB, dt.26.05.08 in view of the fact that while the controversy was noted, the decision was that the elements of freight and transit insurance are not includible in the assessable value since place of removal was factory gate. This decision did not address the grievance of the Revenue and did not consider all the facts and did not lay down a clear ratio. Therefore, with due respect to the decision, we beg to differ and have considered the issue afresh.

b) Excess amount collected from the dealer over and above the actual amount incurred towards RDC by the assessee is liable to be added to the assessable value and charged to duty. However, the additional amount collected is to be treated as cum-duty-price and demand would have to be re-worked.

c) In view of the fact that each transaction has to be assessed separately and in view of the provisions relating to unjust enrichment, the excess payment received under the head of RDC cannot be adjusted towards short payment.

10. We reject the appeal except for direction to the lower authority to recalculate the demand and interest thereon treating the additional amount received as cum-duty price.