Central Excise Act, 1944: s.4 – Assessable value – Dharmada, a charitable donation – Inclusion of, in the assessable value – Held: When an amount is paid as Dharmada along with the sale price of goods, such payment is not made in consideration of the transfer of goods – Such payment is meant for charity and is received and held in trust by the seller – If such amounts are meant to be credited to charity and do not form part of the income of the assessee, they cannot be included in the transaction value or assessable value of the goods – In the instant case, the Dharmada collected by the appellant was an optional payment made by the buyer – Therefore, it cannot be regarded as part of the transaction value for the sale of goods – Sale of Goods Act, 1930 – Central Excise Valuation (Determination of Price and Excisable Goods), Rules 2000 – r.6.
Allowing the appeal, the Court
HELD: 1.1 There is no dispute that though paid along with the sale price, the payment for Dharmada was made voluntarily by the purchasers and that upon receipt was made over to charity. There were certificates by the chartered accountant that showed that the Dharmada collection was credited to a separate account and donated to a trust during the period of the show cause notices. [Para 9][930-E]
1.2 Sale and purchase have been defined by Section 2 (h) to mean any transfer of the possession of goods for payment or other valuable consideration. A contract of sale under the Sale of Goods Act, 1930 means a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. The transaction in this case was the sale of chewing tobacco. [Para 12][931-C]
2.1 Under the Act, excise duty is chargeable with reference to their value on removal of the goods. In case of sale of goods where price is the sole consideration for the sale, duty is charged on the transaction value. Additional consideration, if any, is also included in the duty payable on such goods vide explanation. “Transaction value” is defined in Section 4(3)(d) of the Act to mean “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……., 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”. [Para 13][931-D; 932-A-B]
2.2 In case of a sale of goods, excise duty is chargeable where price is the sole consideration of a sale on ‘Transaction value’. `Transaction value’ means the price actually paid or payable for the goods and any additional amount the buyer is liable to pay to the assessee or anyone on his behalf in connection with the sale by Section 4(3)(d). Rule 6 of the Central Excise Valuation (Determination of Price and Excisable Goods), Rules 2000 provides that in case of a sale, the value of such goods shall be deemed to be the transaction value and the amount of money value of any considerations following directly or indirectly from the buyer to the assessee. Thus, duty is chargeable on the “price actually paid for the goods”, in other words, the price paid as consideration for transfer of property in the goods. The test for determining whether in a transaction of sale any amount has been paid as price so that it can be treated as transaction value is only whether, the money was paid for the goods as consideration or the money value on any additional consideration paid in connection with the sale of goods. No amount not paid as consideration for the goods can go to make transaction value. [Para 14][932-C-D; 933-A-B]
Garner’s Dictionary of Legal Usage, 3 rd Edition – referred to.
2.3 The term valuable consideration refers to an act, forbearance or promise having an economic value. In the instant case, it is clear that only the money paid for the promise of transferring goods was the valuable consideration contemplated by the Excise Act and the Rules. The transaction value was the sale of goods and the consideration was the price or value paid for the goods. The transaction value must be construed accordingly. This fairly clears up the character of any other amount paid at the time of the transaction of sale of goods. Thus, if an amount is paid at the time of the sale transaction for a purpose other than the price of the goods, it cannot form part of the transaction value; also for the reason that such payment is not for the transaction of sale i.e. for the transfer of possession of goods. Any payment made along side such a transaction cannot be treated as consideration for the goods. [Para 14][933-C-E]
3. DHARMADA is well known in India to be a donation or an offering made for the purpose of charity as distinct from a commercial transaction. The facts in the instant case showed that the receipts on account of Dharmada were voluntary, earmarked for charity and in fact credited as such. Though the payment as Dharmada has been found to be voluntary, it would make no difference to the true character and nature of the receipts even if there were found to be paid compulsorily because the purchaser, purchased the goods out of their own volition. The purchase of the goods is the occasion and not consideration for the Dharmada paid by the customer. [Paras 15, 18][933-F; 935-C-D]
Commissioner of Income Tax (Central) Delhi, New Delhi v. Bijli Cotton Mills (P) Ltd. Hathras, District Aligarh (1979) 1 SCC 496 : [1979] 2 SCR 241 – relied on. Tata Iron & Steel Co. Ltd. v. Collector of Central Excise, Jamshedpur 2002 (146) ELT 3 (SC) – held inapplicable
Collector v. Panchmukhi Engineering Works 2003 (158) ELT 550 (SC) – not good law
Thakur Das Shyam Sunder v. Additional CIT 93 ITR 27; CIT, West Bengal, Calcutta v. Tollygunge Club Ltd., Calcutta (1977) 2 SCC 790 : [1977] 3 SCR 225 – referred to
Professor Wilson’s Glossary and Molesworth’s
Dictionary; Salmond on Jurisprudence Twelfth
Edition p.15 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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