SHREE RAJASTHAN SYNTEX LIMITED Vs. CCE

JUDGEMENT

(1.) THE appeal of M/s. Shree Rajasthan Syntex Limited, Udaipur is directed against duty demand of over Rs. 3.6 lakhs. The ground for confirming the demand is that the appellants had collected certain amounts towards insurance charges while selling their goods, but had not spent these amounts fully on insurance, rendering the excess collections towards insurance charges liable to excise as additional consideration. The appellant's explanation is that amounts were correctly collected towards insurance and differential amounts arose because the appellants insured the goods with insurance Cos. Only for half their value and risk for the rest of the goods was borne by appellants themselves. It has been explained that the amount retained by them constituted the insurance premium attributable to the risk borne by them i.e. 50% of the value of the goods. It is their contention that providing insurance is a separate activity from manufacture and that an amount representing the insurance risk can not form part of the value of the goods. They have relied on the decision of the Apex Court in the case Mis. Baroda Electric Meters Limited v. CCE, 1997 (94) ELT 13 SC in support of their contention. The appellants' contention was not accepted by the lower authorities and the Commissioner (Appeals) confirmed the order holding that the aforesaid decision has no relevance to the present dispute and that the present case is correctly covered against the appellant under the order of this Tribunal in the case of CCE, Meerut -II, v. Prabkat Zarda Factory Limited, 2000 (70) ECC 794 (T -LB) : 2000 (119) ELT 191 (T -LB).

(2.) THE present dispute relates to the period, March 1994 to September 1996. The learned Counsel for the appellant has submitted that the decision of the Tribunal in the case of Prabhat Zarda Factory Limited cannot have any application to the present dispute, since that order was passed in relation to a dispute about assessable value for a later period in view of amendment dated 28.9.96 in regard to the place of removal in Section 4 of the Central Excise Act. The learned Counsel points out that since the present dispute is prior to the amendment of Sept. 96 neither the amended provisions nor a decision regarding its scope has any application. The learned Counsel has further pointed out that the dictum of the Supreme Court in the Baroda Electric Meters judgment applies to the present dispute. According to him, the Apex Court has held in the Baroda Electric Meters case that excess amounts collected towards freight cannot be added to the assessable value of the goods since transport has no connection with ex -factory sale price of manufactured goods. The contention of the Ld. Counsel is that ratio of that decision equally applies to amounts collected towards insurance. The Counsel also points out that 50% of the amount collected towards insurance was retained by the appellant only because appellant bore the responsibility for 50% of the risk.

(3.) WE have perused the records and heard the learned DR also. The Commissioner's (Appeals) reliance on the decision of this Tribunal in the case of Prabhat Zarda Factory Limited is clearly erroneous. That decision was with regard to interpretation of a legal provision introduced subsequent to the period of the present dispute. Since the amended provision can have no application to the present dispute, the decision explaining that amendment cannot have any application to the present dispute. Further, that decision of the Tribunal has since been over -ruled by the Apex Court. We find that the appellant's case is correctly covered by the dictum of the Apex Court in the case of Baroda Electric Meters case. Insurance, transport etc. are activities entirely separate from manufacture. Payments representing such activities cannot, therefore, constitute the price of the goods. For that reason, they cannot also form part of the assessable value of the goods for the purpose of excise duty.