| Recently one assessee asked a question from the | | | | collector has held that only deduction of actual |
| legal aid section of the Excise Law Times [2004 (170) | | | | amounts of transportation costs and insurance |
| ELT A51] wherein he asked that whether insurance | | | | charges are deductible under section 4 of the Act. |
| charges collected by the assessee in excess of the | | | | However, this view is no more good law and stands |
| actual insurance charges paid by the assessee is | | | | settled against the department by the Supreme Court |
| includible in assessable value under Section 4 of the | | | | judgment reported in 1997 (94) ELT 13, Baroda Electric |
| Central Excise Act? I was surprised with the answer | | | | Meters V/s Collector cited and relied upon by the |
| given and couldn’t reconcile myself with the position | | | | learned consultants. Though the judgment dealt with |
| taken by the Excise Law Times. With humbleness, this | | | | excess realisation of transport cost over actual, the |
| author holds as different view than what was stated in | | | | same principle is applicable to the insurance charges |
| the ELT and this paper is a humble attempt to correct | | | | also, as they have already been held to be non |
| the error, which may have occurred inadvertently. | | | | includible in the Supreme Court judgment Union of India |
| ISSUE: Many a times the manufacturer of goods | | | | V/s Bombay Tyre International 1983 (14) ELT 1896. |
| (Central Excise assessee) provides other services to | | | | The Supreme Court held that duty of Excise is on |
| the buyer and charges an amount for those services | | | | manufacture and not a tax on profit made on |
| provided. The services may be like transportation of | | | | transportation. Therefore we hold that the amount |
| goods to the buyer premises, transit insurance of the | | | | received by the appellant in excess of actual |
| goods, interest charges for the credit given to the | | | | transportation charges incurred by them in not includible |
| buyer, Installation of the goods in the buyer’s | | | | in the assessable value.” The Tribunal is following |
| premises etc. It may happen that cost incurred by the | | | | this position of law consistently and reaffirmed this |
| manufacturer assessee in providing these services is | | | | view in many cases like Gomati Engineering Works V |
| much less than what is charged by the manufacturer | | | | s CCE [1998 (27) RLT 849], in Farm Fresh Foods Pvt. |
| assessee for these services. The question is whether | | | | Ltd. V/s CCE [1998 (113) ELT 441] and in numerous |
| excess charges collected by the manufacturer | | | | other cases. In recent times also the Tribunal declared |
| assessee should be included in assessable value of | | | | the same position of law in Transpect Industries Ltd. V |
| the goods under Section 4 of the Act? Under Section | | | | s Collector of Central Excise [2003 (162) ELT 1095], |
| 4 of the Central Excise Act, 1944, the Central Excise | | | | wherein the tribunal held that excess freight and |
| duty has to be paid on the transaction value of the | | | | insurance charges are not includible in the assessable |
| goods. Transaction value means the price actually paid | | | | value. In Appollo Tyre Ltd. Ltd. V/s CCE [2003 (160) |
| or payable for the goods, at the time and place of | | | | ELT 836], the tribunal reiterated that duties of excise |
| removal. Thus when any amount is paid for | | | | being leviable on manufacture only and such amounts |
| transportation or insurance or interest for credit or for | | | | being profits made on transportation is not includable in |
| any other services, these are payments not for the | | | | the assessable value. In Majestic Auto V/s |
| goods but for the services provided by the | | | | Commissioner of Central Excise [2004 (166) ELT 172], |
| manufacturer and hence these charges are not to be | | | | the tribunal held that freight collected in excess of the |
| included in the assessable value under section 4 of the | | | | actually freight charges incurred is not includible in the |
| Act. Even when the amount paid is in excess to the | | | | assessable value. Thus the law is well settled on this |
| cost incurred by the manufacturer supplier, the excess | | | | point and it is being consistently followed by the |
| amount is profit earned by the manufacturer in course | | | | Hon’ble Tribunal. On the basis of the ratio of these |
| of providing these services. These profits are not in | | | | judgments, it can be argued that expenses incurred by |
| connection with the sale of goods but in connection | | | | the manufacturer and charged from the buyer, |
| with the services provided and hence this profit earned | | | | including any profit earned on there activities are not |
| in not includible in the assessable value of the goods. In | | | | includible in the assessable value. It may be noted that |
| Indian Oxygen Ltd. V/s Collector of Central Excise | | | | the activity must be a post manufacturing and post |
| [1988 (36) ELT 723 (SC)] the Hon’ble Supreme | | | | clearance activity. Further the charges must be |
| Court held that duty of Excise is a tax on | | | | genuine and it mustn’t depress the assessable |
| manufacturer, and not a tax on the profits made by a | | | | value. It may be mentioned that the assessee must |
| dealer on transportation and hence these profits | | | | show these charges separately from the price of the |
| earned are not includible in the assessable value. In | | | | goods. When these charges are shown separately or |
| Baroda Electric Meters Ltd. V/s Collector of Central | | | | billed separately, the onus is on the department to |
| Excise [1997 (94) ELT 13 (SC)], the Supreme Court | | | | establish that these transactions are not genuine or |
| affirmed this judgment and held that excess freight | | | | artificially depressing the prices. On the point of onus of |
| amount collected by the manufacturer is not includible | | | | proof the Tribunal held in CCE V/s Majestic Auto Ltd. |
| in the assessable value of the goods. In Empire Ind. Ltd. | | | | [2002 (146) ELT 327] wherein it held, “ In the |
| V/s collector of Central Excise [1997 (95) ELT 653], | | | | present case, we are concerned with the |
| the Tribunal held that profit earned in a post-clearance | | | | determination of value under Section 4 of the Act as it |
| activity, which has nothing to do with activity of | | | | was pointed out by both the sides. It is settled position |
| manufacture is not includible in the assessable value of | | | | of law that duty of excise is a tax on the |
| the goods. In this particular case the tribunal concluded | | | | manufacturer and not a tax on the profit made by a |
| that excess transportation charges collected over | | | | dealer on transportation. The department has not |
| actual cost incurred is not includible in the assessable | | | | shown any evidence to show that the excess freight |
| value. The tribunal, in this case, also held that interest | | | | was nothing but part of the value of the goods and |
| charges collected for delayed payment by the buyer is | | | | accordingly the differential amount was not includible in |
| not includible in the assessable value. In Sri Kaliswari | | | | the assessable value.” Thus it is clear that the onus |
| Fire Work V/s Collector of Central Excise [1998 (98) | | | | is on the department to establish that excess charges |
| ELT 93], the question of excess insurance charges | | | | are nothing but part of assessable value. However, |
| come before the Tribunal, where in it held that excess | | | | when these charges are not shown separately, the |
| insurance charges collected over actual incurred by | | | | onus in on the assessee to establish that these are |
| the manufacturer is not includible in the assessable | | | | permissible deduction under Section 4 of the Central |
| value. | | | | Excise Act. In view of these, it is suggested that a |
| In S.R. Jhunjhunwala V/s Collector of Central Excise | | | | separate bill should be raised for any other services |
| [1999 (114) ELT 890], the Tribunal clarified the position | | | | provided by the manufacture assessee to the buyer |
| of law and held that, “ It is also found that the | | | | of the goods. |