Deciding Authority : Supreme Court
Date of Judgement : 16/01/2000
Bench : S.P. Bharucha, Doraswamyy Raju, Ruma Pal
Facts : The case contains two appeals
(a) Civil Appeal No.2579 of 2000. In this appeal, the respondent, M/s Vikram Detergent Ltd. is engaged in the packing of detergent powder received by it from M/s Hindustan Lever Ltd. (HLL). After the goods are packed, they are cleared from the factory by HLL and sold through its clearing and forwarding agents from their depots all over the country to wholesale buyers who are known as Redistribution Stockists. The Department calculated the excise duty payable on the detergent powder on the price charged by HLL from the Redistribution Stockists.
(b) Civil Appeal No.3160 of 2000 M/s IPF Vikram India Ltd., the respondent in this appeal produces detergent under agreement with M/s Indexport Ltd. (IEL) and Stepan Chemicals Ltd. (SCL) under the brand name Wheel. The respondent despatches the goods manufactured by it to the destinations specified by IEL/SCL. According to this respondent, IEL and SEL send the goods to clearing and forwarding agents depots from where the goods are sold and delivered to re-distribution stockists. The price lists filed by the respondent with the excise authorities are according to the advice of IEL/SCL and reflect the price charged by them for the goods in the wholesale market. Both the respondents inter alia claimed deduction on account of damage discount and bank charges on outstation cheques from the price charged in arriving at the assessable value of the goods for the purposes of excise duty.
Judgement : The normal price in this case, would have to be determined with reference to the time and place of removal of the goods from the respondents respective factories. Since the price in both cases was fixed with reference to the sale at the depots to the Redistribution Stockists, clearly in terms of sub-Section (2) of Section 4, the respondent would be entitled to deduction of the cost of transportation from the factory to the selling depots.It has been so held in Union of India and Ors V. Bombay Tyre International Ltd. and Others 1984 (1) SCC 467 as well as Assistant Collector of Central Excise and Others V. Madras Rubber Factory Ltd. 1986 (Supp.)SCC 751 as well as Government of India V. Madras Factory Ltd. (1995) 4 SCC 349, 359. These decisions also held that the cost of transportation would include cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery but would not include compensation for defective goods.The position was further clarified in Collector of Central Excise, Meerut V. Surya Roshni Ltd. 2000 (122) ELT 3 (SC) where it was held that: The payment made by the respondent to its customers for breakages and losses cannot tantamount to insurance. Nor can, by any means, such compensation be treated as a part of the cost of transportation; it is a clear case of making up to the customer by means of a credit note the monies that it has lost on account of breakages or losses in transit.
The object of damage discount is to compensate the buyer for the damaged goods and logically,compensation for damaged goods could not feature as a relevant consideration for determining the price of the goods as manufactured at the time of clearance of the goods. The discount is admittedly on account of damages suffered by goods after removal from the factory. A similar deduction claimed as a warranty discount was negatived in the two Madras Rubber Factory judgments referred to earlier. Bhagwati C.Js dictum in the first of such judgments which was quoted with approval in the second was:what is really relevant is the nature of the transaction.The warranty is not a discount on the tyre already sold, but relates to the goods which are being subsequently sold to the same customers.It cannot be strictly called as discount on the tyre being sold.It is in the nature of a benefit given to the customers by way of compensation for the loss suffered by them in the previous sale. A compensation in the nature of warranty allowance on a defective tyre. The finding of the Tribunal on this issue therefore cannot be sustained. On the question of bank charges, however we are of the view that bank charges being in the nature of post clearing expenses are deductible while calculating the assessable value of the goods. In Assistant Collector of Central Excise and Others v. Madras Rubber Factory (supra) and Shriram Fertilizers & Chemicals V. Union of India 1997 (96) ELT 12(SC) and Government of India and Others V. Madras Rubber Factory Ltd. and Others 1995 (4) SCC 349, this Court has held that interest on receivables earned on account of the time lapse between the delivery of the goods and the realisation of the monies is deductible from the assessable value of the goods at the time of removal from the respondents factories.For the same reason,bank charges included in the price on account of clearance of outstation cheques cannot form part of the price of the goods at the time of removal and are as such excludible from the price while calculating the assessable value of the goods.
Held : Appeals Partly Allowed to the extent of disallowing the respondents claim for deduction on account of damage discount and dismissed in so far as the respondents claims for deduction of bank charges are concerned
By Tejasv Anand , IV th Year , AMITY LAW SCHOOL,DELHI.
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