Central Excise - Levy Vs Valuation
SECTION 3 of the Central Excise Act inter alia provides that there shall be levied and collected in such manner as may be prescribed, a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985.
Section 4 of the Act provides for valuation of excisable goods for the purposes of charging of duty of excise.The concept of Transaction value was introduced in the year 2000.
Is there a conflict between Section 3 and Section 4? Can/should the cost of transport be included in the assessable value when Section 3 stipulates a duty on goods manufactured?
In the celebrated Bombay Tyre International - case, the Supreme Court held, "Section 3 of the Central Excises and Salt Act provides for the levy of the duty of excise. It creates the charge, and defines the nature of the charge. That it is a levy on excisable goods, produced or manufactured in India, is mentioned in terms in the Section itself. Section 4 of the Act provides the measure by reference to which the charge is to be levied. The duty of excise is chargeable with reference to the value of the excisable goods, and the value is defined in express terms by that Section. It has long been recognized that the measure employed for assessing a tax must not be confused with the nature of the tax."
In Acer Ltd - case which considered the amended version of 2000, the Supreme Court held, "So far as the valuation of goods in terms of "transaction value" thereof, as defined in Section 4(3)(d) of the Act is concerned, suffice it to say that the said provision would be subject to the charging provisions contained in Section 3 of the Act."
A Division Bench of the Supreme Court in Grasim Industries - did not agree with the Acer judgement for the reasons that:
1. Section 3 is a charging Section providing for levy of excise duty on excisable goods, whereas Section 4 provides for the measure for valuation of excisable goods with reference to which the charge of excise duty is to be levied,
2. both operate in their independent fields even though there may be a link between the two and
3. in the case of Bombay Tyre (a three-Judge Bench), the contention of the assessees that "the measure was to be found by reading Section 3 with Section 4, thus drawing the ingredients of Section 3 into the exercise" was specifically rejected.
So, the matter was referred to a Larger Bench with the following questions:
1. Whether Section 4 of the Central Excise Act, 1944 (as substituted with effect from 01.07.2000) and the definition of "Transaction Value" in Clause (d) of sub-Section (3) of Section 4 are subject to Section 3 of the Act?
2. Whether Sections 3 and 4 of the Central Excise Act, despite being interlinked, operate in different fields and what is their real scope and ambit?
3. Whether the concept of "Transaction Value" makes any material departure from the deemed normal price concept of the erstwhile Section 4(1)(a) of the Act?
The Larger Bench gave its decision yesterday.
The Larger Bench felt that another Coordinate Bench should not venture into the issues raised and even attempt to express any opinion on the merits of either of the views expressed in Union of India & Ors. Vs. Bombay Tyre International Ltd. & Ors . and Commissioner of Central Excise Vs. Acer Ltd. Rather, the questions referred should receive consideration of a Larger Bench.
So, now the question goes before a still Larger Bench, possibly a five Member Bench. For more than half a century, we are struggling to find the value of excisable goods. Wait for a few more years for the decision of the Larger Bench of the Supreme Court.
For more details of the case, please see Breaking News