2002 JTR(SC) 279
2002 AIR(SC) 1245 ; 2002 AIR(SCW) 1039 ; 2002 141 ELT 3 ; 2002 2 JT 469 ; 2002 2 Scale 405 ; 2002 3 SCC 547 ; 2002 2 SCR 99 ; 2002 122 Taxman 105 ; 2002 2 Supreme 260
2002(2) Supreme 260
SUPREME COURT OF INDIA
(From Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi)
B.N. Kirpal, Shivaraj V. Patil and Bisheshwar Prasad Singh, JJ.
Commissioner of Central Excise, Delhi -Appellant
versus
M/s. Maruti Udyog Ltd. -Respondent
Civil Appeal No. 3783 of 2000
With
Civil Appeal No. 660 of 2000
With
C.A. Nos. 3841, 5867-68/2000, 3913, 4082, 4455, 6072, 8455/2001 and 92 of 2002
Decided on 27-2-2002
Counsel for the Parties :
For the Appearing Parties : Mukul Rohtagi, Additional Solicitor General, Mahendra Anand, Senior Advocate, N.K. Bajpai, Jaideep Gupta, Ms. Nisha Bagchi, B. Krishna Prasad, V. Lakshmikumaran, M.P. Devanath, V. Balachandran, A.R. Madhav Rao, S.N. Mehrotra, Attar Singh, V.J. Francis, P.I. Jose, Jenis, S. Nanda Kumar, V. Vijayan, L.K. Pandey, Himanshu Munshi, Rajesh Kumar, M.L. Lahoty, Paban K. Sharma, Himanshu Shekar, Advocates.
IMPORTANT POINT
Tribunal was right in directing that the respondent is entitled to the benefit of Section 4(4)(d)(ii) of the Central Excise & Salt Act.
Act
Referred
:CENTRAL EXCISE ACT : S.4(1), S.4(4)(d)(ii)
CENTRAL EXCISE AND SALT ACT : S.4(4)(d)(ii)
(A) Section 4(1) of the Central Excise Act provides that excise duty is chargeable on excisable goods based on the value deemed to be the ordinary wholesale sale price where the buyer is not a related person and the price is the sole consideration. Section 4(4)(d)(ii) expressly excludes from the value any amount of duty, sales tax, or other taxes payable on such goods, and allows deduction of trade discounts. Read together, these provisions mandate that when a seller passes on the entire price inclusive of excise duty and absorbs the tax without a separate additional charge, the excise duty component embedded in the sale price must be excluded in determining the assessable value. The Central Excises and Salt Act, 1944, therefore operates cum-dutely, and the valuation must be adjusted to strip out the duty element, as recognized in prior rulings such as Assistant Collector of Central Excise vs. Bata India Ltd.
(B) The key legal principles are that the sale price in a cum-duty transaction represents the full consideration, the seller is liable for tax on the goods sold, and the buyer has no obligation to pay any amount beyond the agreed price. Consequently, excise duty payable by the manufacturer must be deducted from the sale price under Section 4(4)(d)(ii) to arrive at the correct excisable value.
Facts of the case:
The respondent manufactured motor vehicles and utilized MODVAT credit on inputs without paying excise duty on them. It later sold waste and scrap of aluminium and iron and steel. The Collector demanded excise duty on the scrap, which the respondent contested. The Tribunal held the sale price to be cum-duty and directed that the excise duty component be excluded to determine the value for duty purposes.
Findings of Court:
The Tribunal correctly applied Section 4(4)(d)(ii) by treating the sale price as the normal wholesale price and excluding the embedded excise duty. The respondent did not seek to recover any additional amount from the purchaser, confirming that the transaction was cum-duty and the tax liability remained with the seller.
Issues:
Whether excise duty is payable on waste and scrap sold by a manufacturer who had not paid duty on inputs and whether the sale price includes excise duty that must be deducted for valuation purposes.
Ratio Decidendi:
When a seller sells goods without passing the excise duty to the buyer and the price is wholly inclusive of the duty, the value for excise purposes must be determined after excluding the duty component as mandated by Section 4(4)(d)(ii).
Result:
The appeal is dismissed, upholding the Tribunals direction that the excise duty on the scrap is not payable after excluding the duty element from the cum-duty price.
(A) Section 4(1) of the Central Excise Act provides that excise duty is chargeable on excisable goods based on the value deemed to be the ordinary wholesale sale price where the buyer is not a related person and the price is the sole consideration. Section 4(4)(d)(ii) expressly excludes from the value any amount of duty, sales tax, or other taxes payable on such goods, and allows deduction of trade discounts. Read together, these provisions mandate that when a seller passes on the entire price inclusive of excise duty and absorbs the tax without a separate additional charge, the excise duty component embedded in the sale price must be excluded in determining the assessable value. The Central Excises and Salt Act, 1944, therefore operates cum-dutely, and the valuation must be adjusted to strip out the duty element, as recognized in prior rulings such as Assistant Collector of Central Excise vs. Bata India Ltd.
(B) The key legal principles are that the sale price in a cum-duty transaction represents the full consideration, the seller is liable for tax on the goods sold, and the buyer has no obligation to pay any amount beyond the agreed price. Consequently, excise duty payable by the manufacturer must be deducted from the sale price under Section 4(4)(d)(ii) to arrive at the correct excisable value.
Facts of the case:
The respondent manufactured motor vehicles and utilized MODVAT credit on inputs without paying excise duty on them. It later sold waste and scrap of aluminium and iron and steel. The Collector demanded excise duty on the scrap, which the respondent contested. The Tribunal held the sale price to be cum-duty and directed that the excise duty component be excluded to determine the value for duty purposes.
Findings of Court:
The Tribunal correctly applied Section 4(4)(d)(ii) by treating the sale price as the normal wholesale price and excluding the embedded excise duty. The respondent did not seek to recover any additional amount from the purchaser, confirming that the transaction was cum-duty and the tax liability remained with the seller.
Issues:
Whether excise duty is payable on waste and scrap sold by a manufacturer who had not paid duty on inputs and whether the sale price includes excise duty that must be deducted for valuation purposes.
Ratio Decidendi:
When a seller sells goods without passing the excise duty to the buyer and the price is wholly inclusive of the duty, the value for excise purposes must be determined after excluding the duty component as mandated by Section 4(4)(d)(ii).
Result:
The appeal is dismissed, upholding the Tribunals direction that the excise duty on the scrap is not payable after excluding the duty element from the cum-duty price.
ORDER
The respondent is manufacturing motor vehicles and it had availed of MODVAT credit of the duty paid on inputs under Rule 57A of the Central Excise Rules. As it had not paid any excise duty on the raw material, it became liable to pay excise duty on the waste and scrap of aluminium and iron and steel which scrap had been sold by the respondent.
2. The Collector raised a demand of excise duty on the waste and scrap which was sold. The demand was challenged by the respondent who contended that excise duty was not payable. Having been unsuccessful before the Collector, an appeal was filed before the Customs, Excise and Gold (Control) Appellate Tribunal. The Tribunal by the impugned order came to the conclusion that excise duty was payable on the scrap sold by the respondent. It further came to the conclusion that the price on which the waste and scrap had been sold should be considered to be cum-duty price and the assessable value should be determined after deducting the element of excise duty. It is this part of the decision of the Tribunal which is sought to be challenged by the Revenue in this appeal.
3. The respondent had sold the scrap and according to it the purchaser was not liable to pay any amount in addition thereto and it is for this reason the Tribunal regarded this transaction as being one of cum-duty price.
4. Section 4 of the Central Excises and Salt Act, 1944 provides for valuation of excisable goods for purposes of charging of duty of excise. Under Section 4(1), the duty of excise is chargeable on any excisable goods with reference to the value which is deemed to be the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade where the buyer is not a related person and the price is the sole consideration for the sale. Section 4(4)(d)(ii) states that value in relation to any excisable goods does not include the amount of 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, etc., is also to be allowed as a deduction.
5. A reading of the aforesaid Section clearly indicates that the wholesale price which is charged is deemed to be the value for the purpose of levy of excise duty, but the element of excise duty, sales tax or other taxes which is included in the wholesale price is to be excluded in arriving at the excisable value. This Section has been so construed by this Court in Asstt. Collector of Central Excise and Others vs. Bata India Ltd., 1996(4) SCC 563, and it is thus clear that when cum-duty price is charged, then it arriving at the excisable value of the goods the element of duty which is payable has to be excluded. The Tribunal has, therefore, rightly proceeded on the basis that the amount realised by the respondent from the sale of scrap has to be regarded as a normal wholesale price and in determining the value on which excise duty is payable the element of excise duty which must be regarded as having been incorporated in the sale price, must be excluded. There is nothing to show that once the demand was raised by the Department, the respondent sought to recover the same from the purchaser of scrap. The facts indicate that after the sale transaction was completed, the purchaser was under no obligation to pay any extra amount to the seller, namely, the respondent. In such a transaction, it is the seller who takes on the obligation of paying all taxes on the goods sold and in such a case the said taxes on the goods are to be deducted under Section 4(4)(d)(ii) and this is precisely what has been directed by the Tribunal. There is also nothing to show that the sale price was not cum- duty.
6. It will be useful here to refer to the observations of this Court in Hindustan Sugar Mills vs. State of Rajasthan & Others, 1978 (4) SCC 271, at page 280, as follows :
"Take for example, excise duty payable by a dealer who is a manufacturer. When he sells goods manufactured by him, he always passes on the excise duty to the purchaser. Ordinarily it is not shown as a separate item in the bill, but it is included in the price charged by him. The sale price in such a case could be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of the goods. True, the excise duty component of the price would not be an addition to the coffers of the dealer, as it would go to reimburse him in respect of the excise duty already paid by him on the manufacture of the goods. But even so, it would be part of the sale price because it forms a component of the consideration payable by the purchaser to the dealer. It is only as part of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchaser. There is no other manner of liability, statutory or otherwise, under which the purchaser would be liable to pay the amount of excise duty to the dealer. And, on this reasoning, it would make no difference whether the amount of excise duty is included in the price charged by the dealer or is shown as a separate item in the bill. In either case, it would be part of the sale price ......."
7. The example given in the aforesaid decision is clearly applicable in the present case. The sale price realised by the respondent has to be regarded as the entire price inclusive of excise duty because it is the respondent, who has, by necessary implication, taken on the liability to pay all taxes on the goods sold and has not sought to realise any sum in addition to the price obtained by it from the purchaser. The purchaser was under no obligation to pay any amount in excess of what had already been paid as the price of the scrap.
8. Under the circumstances, the Tribunal was right in directing that the respondent is entitled to the benefit of Section 4(4)(d)(ii) of the Central Excises & Salt Act.
9. For the aforesaid reasons, this appeal is dismissed. No costs.
C.A. Nos. 660, 3841, 5867-5868/2000, 4082, 4455, 6072, 8455/2001 and 92/2002
For the reasons stated in our order passed today in Civil Appeal No. 3783 of 2000 entitled Commissioner of Central Excise, Delhi v. M/s. Maruti Udyog Ltd., these appeals are dismissed.
Civil Appeal No. 3913/2001
After hearing the learned counsel for the parties, we see no reason to interfere with the decision of the Tribunal. Hence, the civil appeal is dismissed.
(N.K.R.) Appeal dismissed. Order accordingly.
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