M/S Gits Foods Products Pvt. Ltd vs Cce, Pune-I

IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. II

APPEAL NO. E/354/05

(Arising out of Order-in-Appeal No. P III/200/04 dated 04.11.2004 and passed by the Commissioner of Central Excise (Appeals), Pune-III.)

For approval and signature: Honble Mr. P.K. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) ===================================================

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy : Seen of the order?

4. Whether order is to be circulated to the Departmental : Yes authorities? ===================================================

M/s Gits Foods Products Pvt. Ltd. : Appellant Versus

CCE, Pune-I

: Respondent

Appearance Shri Bharat Raichandani, Advocate with Shri Mihir Mehta, Advocate : For Appellant

Shri Ashutosh Nath, Asst. Commissioner (A.R.)

: For Respondent

CORAM: Honble Mr. P.K. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) Date of Hearing : 12.03.2015 Date of Decision: 27.04.2015

ORDER No. .

Per: Ramesh Nair:

The appeal is directed against Order-in-Appeal No. P III/200/04 dated 04.11.2004 passed by the Commissioner of Central Excise (Appeals), Pune-III, wherein the learned Commissioner (Appeals) upheld the Order-in-Original No. 51/CEX/2003 dated 29.08.2003 and rejected the appeal filed by the appellant.

2. The fact of the case is that the appellant is selling the goods the wholesale dealers for which they filed a price declaration to the department, however in the price declaration they have not declared the deduction of 9.5% margin given to their consignment agent/distributors out of which, however 2% margin was for replacement of goods damaged in transit before arriving at Depot. The appellant were issuing debit notes to their distributors/consignment agents for the said 2% margin of replacement. The said deduction was a mutual agreement entered by the appellant with their consignment agent for protection against any damage and spoiled goods received by the consignment agents. The Revenue contented that since 2% margin was not claimed by the appellant in price declaration and since the debit note was raised towards the said margin the deduction is not admissible and the same is liable for excise duty being includible in the assessable value. Accordingly a show-cause notice dated 06.06.2003 came to be issued to the appellant which was culminated to adjudication order dated 29.08.2003 wherein demand of excise duty amounting to Rs. 2,41,337/- along with interest and equal amount of penalty of Rs. 2,41,337/- were confirmed. Being aggrieved by the said order the appellant filed appeal before the Commissioner (Appeals) who rejected the same by upholding the Order-in-Original. Therefore the appellant is before us.

3. Shri Bharat Raichandani, learned Counsel for the appellant alongwith Shri Mihir Mehta, Advocate submits that as per their sales policy this margin was provided uniform to each and every distributor. This margin has not affected the assessable value as the same is part of the margin of the distributor on account of their sale of goods in details. He submits that the margin was not deducted from the sale price charged to the distributor therefore there is no question of inclusion of said margin in the assessable value. He submits, in the price Circular for the different region/states, it was clearly shown that what is the retail price and calculation to arrive at the wholesale price wherein the amount of Sales Tax, margin, excise duty were shown, after deduction of the said from the retail price, the wholesale price was arrived and the same price is charged to their distributor/consignment agents. Therefore the wholesale price is assessable value which is correct value on which excise duty is charged. It is his submission that they have issued a debit note in very few cases but at the same time they have issued credit notes also for huge amount and the amount of debit note was not collected by appellant.

He submits that credit note amount cannot be treated as flow back of money. He submits that as regard the contention of the Revenue that there is no uniform margin and it is varying for different region, the learned Counsel submits that in every region/states the retail price of the product is uniform however the assessable value gets varied for different region because in different states the Sales Tax, Octroi charges are different, accordingly as per the actual calculation of the different rate of Octroi the assessable value vary from one state to another states. However the margin given to the wholesale buyer 7.5%+2% = 9.5% is fixed therefore it cannot be said that the sale price is different from one state to another states. As regards the pricing policy including the margin, he submits that the appellant from time to time have been declaring to their wholesale buyer and accordingly the assessable value were being declared to the Revenue under erstwhile Rule 173(c) of the Central Excise Rules, 1944. Therefore there is neither any suppression nor any mis-declaration of price on the part of the appellant.

He placed reliance on the various judgements which are cited below:-

(i) Metal Box India Ltd. Vs. Collector of Central Excise, Madras  1995 (75) ELT 449 (SC)

(ii) Union of India & Others Vs. Bombay Tyre International Ltd.  1983 (14) ELT 1986 (SC)

(iii) Gujarat State Fertilisers Co. Ltd. Vs. Union of India & Others -1980 (6) ELT 397 (Guj.)

(iv) Union of India & Others Vs. S.S.M. Bros. Pvt. Ltd. and Another  1986 (24) ELT 269 (Mad.)

(v) Ind-Sphinx Precision Pvt. Ltd. Vs. Collector of Central Excise, Chandigarh  1994 (74) ELT 683 (Tribunal)

From the above judgment the learned Counsel argued that even if discount is not uniform, on this ground deductions of such discount cannot be denied. In the present case there is no dispute the 2% margin on account of replacement was uniformly given to their wholesale buyer in all over India, therefore cannot be said that the 2% margin given is not uniform. He further submits that as per Section 4 of the Central Excise Act, 1944 the concept of normal sale price is wholesale price and not the retail price. In the present case the wholesale price at the time of sale of goods or whole sale buyer and thereafter whether it is 7.5% + 2% margin. It is the margin of the wholesale buyers towards selling of their goods to the retailers. Therefore, if the contention of the Revenue that the assessable value should include 2% margin then the value shall not be wholesale value, it will be retail sale price which is not correct as per the provision of Section 4 of Central Excise Act, 1944. It is his submission that as against 2% margin of few debit notes for amount of Rs. 2,41,337/- were issued but no amount was received on that account from the wholesale buyer, therefore the contention of the Revenue that due to issuance of debit notes the amount of 2% margin should be added in assessable value is not correct.

4. On the other hand learned Shri Ashutosh Nath, Asst. Commissioner (A.R.) appearing for the Revenue reiterates the findings of the impugned order. He submits that as per erstwhile Section 4 of the Central Excise Rules, 1944, the Excise duty is chargeable on the normal sale price. In the present case due to the reason elaborated by the lower authority, 2% margin is not allowable and the same is part and partial of wholesale price which is the correct assessable value. He submits that since debit notes were raised in respect of 2% margin, then the particular element became conditional and the conditional discount are not permissible for deduction. He further submits that in the price declaration filed by the appellant they have not declared the 2% margin, therefore for this reason 2% margin is not permissible. Learned A.R. placed reliance on the various judgments as cited below:-

(i) Neelkamal Plastics Ltd. Vs. CCE  2004 (164) ELT 197 (Tri.-Del.)

(ii) CCE Vs. Vikram Detergent Ltd.  2001 (127) ELT 641 (S.C.)

(iii) Modipon Fibre Company Vs. CCE  2007 (218) ELT 8 (S.C.)

(iv) Krishna Industrial Chemicals Ltd. Vs. CCE  2002 (146) ELT 565 (Tri.-Chennai)

(v) Shree Gobinddeo Glass Works Ltd. Vs. CCE  2001 (134) ELT 182 (Tri.-Kolkata)

5. We have carefully considered the submissions of both sides and gone through the various judgments. We find that the appellant in the marketing policy explicitly declared to their wholesale buyer in all over India regarding the margin of 2% towards damage and replacement. It is also found that this 2% margin was allowed to each and every wholesale buyer. Therefore contention of the Revenue that this margin is not uniform is apparently not correct. As regard the variation of the price from one state to another state, we find that the retail sale price remain same in all over India, however the wholesale price/assessable value varied from one state to another state only for the reason that in different state Sales Tax and Octroi rates are different. Therefore the rate of margin indeed the same and uniform, the variation is only on account of Sales Tax/Octroi. As regard the debit notes, we find that this practice is not followed in each and every case as against the total sales. Only few debit notes were issued for an amount of Rs. 2,41,337/- therefore in our view merely because the debit note of Rs. 1,46,706/- was issued, entire sale cannot be weighed in the same manner.

We do not agree with the learned Counsel that the debit note was issued symbolic and no amount was recovered against such debit notes. We are of the view that once a debit note is issued, it is not merely a symbolic but amount of the debit notes become legally recoverable from the person who is wholesaler. Therefore in our view in as much as Rs. 2,41,337/- for which debit notes raised, it will attract excise duty. As regard the entire sale, there is no case of the Revenue that the 2% margin which is nothing but sales margin were flow on back to the appellant. Therefore, the same cannot be included in the assessable value. We also convinced that in any circumstances the normal sale price cannot be stretched to retail sale price and in place of wholesale price retail price cannot be adopted for levy of excise duty. In the present case the 2% margin which is margin of wholesale buyer towards sale of their goods to the retailer cannot from the part of whole sale price and accordingly the same cannot be included in the assessable value. Even in terms of Rule 6(a) of erstwhile Central Excise Valuation Rules, 1975 if the goods are sold in retail and wholesale price is not known reasonable margin has to be deducted to arrive at the wholesale price for charging of excise duty.

In the present case the wholesale price is clearly known i.e. the price after deduction of Sales Tax, Octroi, 7.5% margin, 2% margin and excise duty from the retail sale price, therefore the wholesale price clearly known. Hence, excise duty is chargeable on the wholesale price and not on retail price. In view of our above discussion, we are of the considered view that the demand confirmed in the original order and upheld in the impugned order is not sustainable except the amount of duty attributable on the amount of debit notes i.e. Rs. 2,41,337/-. Therefore the original adjudicating authority shall recover the duty on Rs. 2,41,337/- along with interest and penalty commensurate to such duty however the remaining demand is dropped. The appeal is disposed of in above terms.

(Pronounced in Court on 27.04.2015)

(P.K. Jain) Member (Technical) Ramesh Nair Member (Judicial)

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