ORDER
V.K. Ashtana, Member (T)
1. These eleven appeals are against Orders-in-Appeal passed by the learned Commissioner as follows :-
(a) E/V/440/97 – This appeal is against the Order-in-Appeal No. 344/96(C), dated 30-8-1996.
(b) E/V/655 to 664/97 – These ten appeals are against the Order-in-Appeal No. 400/96(0), dated 22-10-1996.
As the issues are common, therefore, they were heard together.
2. Heard Shri Habibullah Badsha, learned Senior Advocate and Shri C. Manishankar, learned Advocate for the appellants and Shri N.R. Chandran, Additional Solicitor General of India and Shri V.P. Senkottuvel, Additional Central Govt. Standing Counsel for revenue. Hearings commenced on 10-11-1998 and remained part heard, therefore, continued and ended on 30-11-1998.
3. The appellants had also filed two Miscellaneous applications. First one dated 16-12-1997 seeks permission for filing additional documents regarding the tax paid, freight charges paid and invoices. The second one dated 18-1-1998 is for introducing new ground in their appeal namely that the Order-in-Original and Order-in-Appeal go beyond the scope of the show-cause notice, as the issue of related persons had not been agitated in the show-cause notice but has been introduced later by the adjudicating/appellate authority. The amount involved in Appeal No. 440/97 is duty of Rs. 6,44,629/- which has been fully pre-deposited. In the other ten appeals, the amount of duty involved is Rs. 5,70,28,531/-, out of which as per stay order of this Tribunal, an amount of Rs. 1 crore has been pre-deposited.
4. Basically, the issue concerns five items as follows :-
(i) Whether M/s. Cochin Refineries Ltd. and M/s. Bharat Petroleum Corporation Ltd. (appellants) are related persons or not as held in the orders impugned but not alleged in the show-cause notice ?
(ii) Whether the price of petroleum products fixed by the Ministry of Petroleum is a price fixed by law under Section 4 (1)(a)(ii) or not ?
(iii) Whether the deductions claimed by the appellants in respect of –
(a) surcharge on sales tax; and
(b) turnover tax on sales tax, both levied by the Kerala State Govt. are excludible.
(iv) Whether the RPO charge which is inclusive of the freight from the depots of M/s. Bharat Petroleum Corporation Ltd. concerned to the retail pump outlet as well as the operational expenses of the said petroleum pump and which is fixed by the Oil Coordination Committee of the Ministry of Petroleum is excludible from the assessable value ?
(v) Whether the RPO surcharge which is in effect claimed to be commission to the dealers (petrol pump operator) is excludible from the assessable value ?
5. Briefly, the appellants M/s. Bharat Petroleum Corporation Ltd. are Public Sector Undertaking are buying petroleum products under bond from M/s. Cochin Refineries Ltd. i.e. without payment of duty and are engaged in distribution and supply thereof to the retail pump outlet dealers from where these goods are sold to the individual consumers. The price at which these goods can be sold to the dealers and the price at which the dealers are allowed to sell the goods to the individual consumers are fixed by the Ministry of Petroleum. Public interest requires that these prices in respect particularly of motor spirit and kerosene and LPG are to be subsidised by the Government. For this purpose, there is a Oil Pool Committee formed by the Administrative Ministry. The supply and distribution of these products is covered by the provisions of Petroleum Products (Supply and Distribution) Order, 1972. Section 2(c) thereof defines a “dealer”. Section 2(d) defines “Oil Distributing Companies” and this definition covers the present appellants. Section 2(e) defines “oil refining companies” which covers the manufacturer of these products – in this case M/s. Cochin Refineries Ltd. the impugned-orders held that :-
(a) The price fixed by the Ministry of Petroleum and the three additional charges namely State surcharge, RPO charge and RPO surcharge which are authorised to be collected by the appellants from the dealers and then paid to the Oil Pool Committee are not deductible from the assessable value on various grounds including the finding that M/s. Cochin Refineries Ltd. and M/s. Bharat Petroleum Corporation Ltd. are related parties and their transactions not being at arms length. It is also held that the price fixed for petroleum products is by an executive order of Ministry of Petroleum not deriving any legal authority from any statute and therefore, it does not attract the provisions of Section 4(1)(a)(ii) and not been the price fixed by law, hence the valuation of these products would have to be done on the basis of the normal provisions of Section 4. On this basis, the demands noted above have been confirmed. Aggrieved, the appellants are now in appeal before us.
6. The learned Senior Advocate submitted that in para 8 of the order impugned, it has been held that the price was not at arms-length and the price was not the sole consideration and therefore, M/s. Cochin Refineries Ltd. and M/s. Bharat Petroleum Corporation Ltd. were related. Against this, he submitted that in the show-cause notice there is no allegation regarding the price not been at arms-length or the two parties were related persons, therefore, the order impugned has gone beyond the scope of the show cause notice.
7. He further submitted that in para 10 of the order impugned, it is held that the price fixed was not by law but only by administrative order. He submitted that under Section 4(1)(a)(ii) the words used are that the price should be fixed under law. In this connection, he submitted that Article 13 of the Constitution of India clearly lays down that law includes custom or usage in the territory of India which is having force of law. Therefore, the price was fixed by a legal order of the Government of India since many years has now become an usage and therefore, has the force as per Article 13 ibid. He led us through the said order which is at exhibit “A” to the paper book.
8. The learned Senior Advocate cited the case of Bongaigaon Refinery & Petrochemicals Ltd. v. Commissioner of Taxes, Assam as reported in 1996 (103) STC 132, wherein the Hon’ble Guwahati High Court had held that the oil price fixed by the Government in the case of petroleum products also involved sums received from the pool fund and that these sums were not part of the sale price of the turnover because it was a subsidy, not the sale price. Therefore, he argued that the Hon’ble High Court had regarded the price fixed by the Government as a sale price and also that the State taxes etc. which were returned to the appellants from the Oil Pool Committee were not part of sale price, being subsidy.
9. The learned Senior Counsel also cited the decision in the case of Ravi Vegetable Oil Industries v. CCE as reported in 1997 (16) CXLT (Tribunal) C.E.-326, wherein the Tribunal held that in the case of vegetable products, whose prices are also fixed by the Government and the distribution charges collected etc. were not includible in the ex-factory price because the ex-factory price had been fixed by the Government. He submitted that in view of this, the RPO charges, which were basically distribution expenses, could not be added to the assessable value.
10. With respect to the RPO surcharges, he submitted that these were basically commissions to the dealers and such commission or discount was not to be included in the assessable value as was held in the case of SAIL v. C.C.E. as reported in 1997 (90) E.L.T. 502 (Tribunal). He also submitted that therein it was held that the charges which were collected by the manufacturer as an agent of Joint Plant Committee (JPC) and Engineering Goods Export Assistant Fund were by order of the Government and as the manufacturer merely as collection agent of the Government and such collections were handed over to the JPC as per law, therefore, the surcharges were not includible in the assessable value not being a part of consideration in sale.
11. He further submitted that as per the decision of the Third Member Bench in the case of Hindustan Petroleum Corporation Ltd. v. C.C.E., Bombay-I as reported in 1985 (19) E.L.T. 425 (Tribunal), wherein it has been held that where the prices were fixed by the Government, such price was the assessable value for the goods removed from the factory of the manufacturer.
12. The learned Senior Counsel also referred to para 84, on dealing with the assessable value of the Departmental Manual on valuation, which was available at page 77 exhibit as “E” in the paper book. In the said Departmental Manual, it is clearly laid down where the prices are fixed by the Government, the same shall bee treated to be assessable value.
13. He. then proceeded to submit arguments regarding the three deductions claimed namely RPO charges, RPO surcharges and State Taxes. In this connection, with regard to the State taxes, he submitted that these included sales tax and turnover tax levied by the Kerala State Government. In this connection, he led us through the exhibit “H” of the paper book, wherein letter No. 4007, dated 31-12-1991 of the Oil Coordination Committee (OCC) established by the Government of India, Ministry of Petroleum and Chemicals prescribed to all the refineries and the distributors to implement the levy of surcharges on account of irrecoverable sales tax/octroi in respect of the products as per the statements annexed on a short confirmation of the implementation of the same. He further cited the case of Bombay Tyres International v. C.C.E. as reported in 1984 (17) E.L.T. 329 (S.C.) and submitted that it has been held that the taxes paid on a date later than the clearance of the goods are deductible from the assessable value. In this connection, he also referred to page 250 of the paper book, wherein the prescribed monthly return regarding State surcharges paid to the State Government was filed to the Assistant Commissioner of Sales Tax. He submitted that these payments made by the appellants were irrecoverable. Therefore, while the State surcharges were paid to the State Government, the amounts recovered in lieu thereof from the customers as per exhibit “H” fixed by the C.C.O. was paid to the Oil Pool. Since taxes paid to the States were not recoverable, the appellants were compensated to some extent by payments made by the said Oil Pool. Page 287 of the paper book showed the proof of payments made to the sales tax office concerned. He, therefore, submitted that in view of the aforesaid State surcharges as explained above were totally deductible from the assessable value. In this connection, he also cited the case of Express Rubber Products as reported in 1998 (101) E.L.T. 495 (Tribunal), wherein it has been held that Section 4(4)(d)(ii) does not contemplate the deduction of amount of excise duty, sales tax and other taxes actually paid, instead even where payments have actually not made, though possible, the same is deductible under the said sub-section. It has also been held therein that in para 17 that the taxes may be paid in advance or immediately or in future depending on the situation existing in each case and that the question of sales tax actually paid and payable has to be decided in the same manner as held regarding excise duty payable above.
14. With respect to RPO charges, the learned Senior Advocate submitted that these included transport charges, when the goods delivered beyond 39 kms. from their depots and operational expenses of the retail pump outlet. These were clearly excludible from the assessable value being post-manufacturing expenses and that these were also fixed by the Government and transport charges were excludible as was held in the case of Dalmia Industries as reported in 1993 (66) E.L.T. 108 (Tribunal). As regards the operational expenses for the RPO, he submitted that the Government had fixed these charges in order to ensure that the said retail pump outlets function efficiently and the basic configuration of equipment required therein was installed by the distributing agents including the appellants and further that it was maintained properly, so that the customers were not inconvenienced and also there was no safety hazard. He further submitted that sales from these outlets represented retail sales as the petroleum products were sold to individual customers for their consumption in small quantities. Therefore, any charges levied for the maintenance of the retail pump outlet was having nexus only to the retail sale activity and was clearly removed from the jurisdiction of any wholesale sale. On this count also these charges were deductible from the assessable value.
15. With respect to RPO surcharges, the learned Senior Advocate submitted that these were in the nature of commission to dealers. He drew our attention to exhibit “F” at page 251 of the paper book which contained circular by the appellants to all dealers concerned dated 5-11-1993 announcing advance revised dealer commissions with effect from 1-9-1993. He submitted that the said commission was based on slab basis depending on the volume as well as the mode of payment i.e. through a demand draft or other than that. These were, therefore, clearly in the nature of quantity discounts and cash discounts. He submitted that the entire system of giving these discounts were made known through such circulars to all dealers and therefore, even a part of the discount was paid to the dealer later, as per the existing case law, the entire discount was deductible from the assessable value. In this connection, he cited the case of Bombay Tyres International as reported in 1984 (17) E.L.T. 329 (S.C.), wherein it has been held that if such trade discounts are known before but paid later, they are deductible from the assessable value.
16. Concluding his arguments on the deductions available, the learned Senior Counsel also cited the case of MKF Ltd. as reported in 1995 (77) E.L.T. 433, wherein it was held that the assessable value was equal to the cum-duty selling price (-) minus permissible deductions and the excise duty. He submitted that once the RPO charges, RPO surcharges and State surcharges are read along with gross price fixed by the Ministry, the total amount which is collected from the dealers is cum-duty price as discussed in the said judgment. Therefore, to arrive at the assessable value, the only way available under Section 4 would be to work backwards by deducting the permissible deduction on the three counts as well as excise duty. This is the practice which is being followed by the appellants and the same is within the legal parameters of the said judgment. The learned Counsel then referred to exhibit “K” at page 323 of the paper book, which contains a statement and claimed that as per the said judgment, they had calculated the assessable value after deducting the permissible deductions, transportation cost and the dealers’ commission and this has resulted in excess duty per kilolitre as indicated therein. Therefore, the question of any payment on this issue does not survive and therefore, appeal merit favourable consideration.
17. Heard learned Additional Solicitor General of India, Shri N.R. Chandran, who submitted as follows :-
(i) On the question of whether the petroleum products prices were fixed by law, he submitted that there was no judicial decision till date on this issue and while the sale price, the petroleum products was prescribed by the Under Secretary to the Government of India, Ministry of Petroleum, the RPO charges and RPO surcharges were fixed by the OCC, which is constituted by the Government of India and is, therefore, not even a Ministry/Department in the Government of India. He submitted that both these constituted at best administrative orders of either the Government body or authorised in this behalf (OCC). However, this was different from law, which required the authority of a statute passed by the legislature. The appellants have not been able to produce any statute which either directly fixes the said prices or which empowers the Ministry of Petroleum/OCC to fix such charges periodically. Therefore, these prices are not fixed by law. In this connection, he further submitted that the argument of the learned Senior Counsel that this should be viewed in the light of Article 13 of the Constitution of India is misplaced because the said article deals with the protection of provisions contrary to Fundamental Rules in Part-Ill of the Constitution and therefore, the portion relied upon by the appellants has to be read in the entirety of the Article 13 and not in an isolated manner. Therefore, he concluded that any order by a non-statutory body or any order by an executive in the Government of India is not law because enforceability is not a test of law and reference to Article 13 is to be confined to questions of fundamental rules only. In this connection, he also emphasized that Petroleum Products (Supply & Distribution) Order, 1972 is different from the Essential Commodities Acts, inasmuch as that the said Order of 1972 does not cover the issue of fixation for prices at all and therefore, very rightly the Central Government has not thought it fit to fix the prices under Section 3 thereof or under any law. As against this, Section 3 of Essential Commodities Act, empowers the Government to fix the price of those essential commodities in the public interest. He also referred to the decision of the Hon’ble Supreme Court as reported in AIR 59 S.C. 249. The substance of this was that these prices were not fixed under law as per Section 4(1) (a) (ii) of the Central Excise Act.
(ii) The learned Additional Solicitor General further submitted that the invoices of the appellants on which the goods have cleared do not show any break-up of deductions but consolidate all these alleged deductions available to them under the heading “Other Charges”. He submitted that under Rule 173C, it was bounded duty of the assessee to show detailed break-up of these deductions claimed by them from the assessable value, since they have not done so, their claim was tainted.
(iii) With respect to RPO charges, the learned Additional Solicitor General relied on page 51 of the Order-in-Original and page 68 of the Order-in-Appeal. He submitted that these charges were collected and paid to the OCC. He argued that as per Section 4(2) transport charges are excluded only in cases where the place of removal is not known but in this case place of removal is known. He further submitted that the appellants relied on the case of MRF Ltd. (supra) was not correct, inasmuch as the said .case-law did not deal with average transport charges but actual transport charges. However, in the appellants case what involved was average transport charges and therefore, the same were not available as permissible deductions. With respect to installation expenses, he reiterated the orders-in-original and order-in-appeal on this issue.
(iv) With respect to RPO surcharges, he submitted that the appellants claimed it to be a commission but another commission has already been deducted in the invoices, therefore, the second commission is clearly not deductible. Further with respect to State surcharge, he submitted that since the appellants paid actual taxes to the sales tax department then collected a prescribed amount on this count from their dealers, therefore, in the guise of collecting State surcharges, they were also collecting irrecoverable taxes, even though of a lesser amount. Since the taxes were recovered back, he submitted that they were not available for deductions.
18. Continuing his argument on 30-11-1998, the learned Additional Solicitor General submitted that remand of the proceedings to the original authority is inevitable, in view of the prayer made by the appellants for admission of new documents, as these documents had not been placed before the lower authorities. He again repeated his earlier submissions that no detailed break-up of “Other Charges” in invoices was given with respect to contention and composition of each of those, the onus on the claimants had not been discharged. With respect to RPO charges, he conceded that the cost of transportation was deductible and proof being shown. However, he maintained that the charges of components, outlets etc. were not deductible as per the decision in the case of Bombay Tyres International (supra). He submitted that as explained in page 43 of the order-in-original, since this is a continued operation from the refineries to the petrol pump outlet stage and as per the agreement with the pump operator and the appellants, therefore, these charges cannot be deducted from the assessable value. In this connection, he relied on page 49 of the decision in the case of Bombay Tyres International, With respect to RPO surcharges, he submitted that the commission or trade discount claimed by the appellants has actually not shown because the dealers are not wholesale dealers but only selling agents for the reasons that:
(a) He has appointed by the Government and not by the appellants under Section 2 of the Petroleum Products (Supply & Distribution) Order, 1972.
(b) Under Section 3 of the said order, the Government regulates the supply and distribution and therefore, there the transaction between the appellants and his dealer is not on principal to principal basis, instead, the dealer has to succumb to all the instructions of the appellants in terms of the Government’s regulations. He referred to case law of Coromandel Fertilisers Ltd. v. Union of India and Ors. as reported in 1984 (17) E.L.T. 607 (S.C.) and relied on paras 12 and 13 thereof. With respect to State surcharges, he submitted that the case law of MRF Ltd. was not applicable to the facts of this case because here it was not that the taxes were borne by the appellants themselves. In this connection, he cited the case of Anand Swarup as reported in (46) STC 477 (S.C.).
19. Learned Additional Solicitor General of India, therefore, concluded that the benefit of price fixed by law was not available in this case and also the three charges in question were not deductible except the transport charges.
20. Learned Senior Counsel Shri Habibullah Badsha countered and submitted that State surcharge was a surcharge on sales tax and charges of turnover tax are never recoverable from the customers. If they are recovered, it may be an offence under the Sales Tax Act, but these recoveries in the form of State surcharges fall under exclusive order of the Central Government and therefore, it does not in any way affect the value under the Central Excise Law.
He further submitted that under Section 4(4)(d)(ii) of the Act mentions that the value does not include other taxes. He submitted that while legislating the law as there was no mention whether such taxes should be recoverable or irrecoverable, so this section applies and deductions are available. He further submitted that in the case of Peico Electronics as reported in 1994 (71) E.L.T. 1053 (Tribunal) (paras 31 & 40) it has been held that the taxes are deductible, even if, recoverable from the customers. With respect to RPO surcharges, the learned Senior Advocate submitted that the person to whom the petroleum products are sold by the appellants is a dealer and not a selling agent because title of property changes hands; as against this, the selling agent is one who receives the goods without the title changing hands. He further explained that the commission for sale was on slab basis, which is a normal practice in trade, therefore, the RPO surcharge was a true dealer’s commission and available for deduction. Since the quantum had to be calculated, these commissions were paid later. With respect to RPO charges, he once again submitted that the maintenance charges of the petrol pump outlet cannot entered into the concept under Section 4 of the Act, as these are the charges for maintenance of property and do not in any way enhance the value of the goods. He again argued that operations at the pump stations being at retail level, there is no nexus to the wholesale price.
21. We have carefully considered the submissions on both sides and the records of the case and we now proceed to examine the five questions noted on pages 3/4 of this order.
22. As far as the findings on relationship between M/s. Cochin Refineries Ltd. and M/s. Bharat Petroleum Corporation Ltd. in the impugned order is concerned, we find that the same are liable to be set aside as they are beyond the scope of the show cause notice. Even the order-in-original does not discuss it and during the course of the appeal before him, learned Commissioner (Appeals) is not on record for having received a prayer from revenue to raise this new ground and to have allowed it for reasons stated. Therefore, since this was not Revenue’s case either at original stage or at first appellate stage, so we allow the appellants prayer to introduce this new ground and order that, that part of the order impugned which deals with relationship between M/s. Cochin Refineries Ltd. and M/s. Bharat Petroleum Corporation Ltd. affecting the price and assessable value is set aside even without going into the merits of that issue.
23. We find that our considered answer to the question as to whether the price of petroleum products is fixed by law is in the negative for the following reasons :-
(a) Administrative fiat is distinguishable from statutory law. The Petroleum Products (Supply & Distribution) Order, 1972 nowhere provides the power to government to fix prices thereof. The appellants have not shown any other statute empowering government to fix prices. Therefore, any administrative action by government in Ministry of Petroleum is at best an executive order but not a price fixed by “Law”;
(b) No doubt the said administrative order fixing prices etc. is enforced by Government, but enforceability alone is not the sole pre-requisite of law. Were it so, an extortionist in a powerful position to enforce his illegal demands would also claim legality! Fundamentally, only sovereign power can be the source of written law ..Such sovereign power may delegate legislation under a statute. In the case of petroleum products, no evidence has been led to show this empowerment of the Ministry of Petroleum. Hence, the OCC, being a creature of this Ministry is also not so empowered and hence both fixation of prices and of RPO charges/surcharges and State surcharges are only administrative orders and not fixtures by law.
(c) We also find great merit in the submission of learned Additional Solicitor General of India that the appellants submissions on “custom and usage” under Article 13 of the Constitution is misplaced as that is only in the context of Fundamental Rights.
(d) The parallel of prices of vegetable products fixed by government by citing case of Ravi Vegetable Oil Industries supra, is also not on par with the facts of this case, because those prices are fixed by government under a law which clearly provides for the same.
24. Therefore, we hold that the prices of petroleum products are not fixed by law and hence the question of assessable value thereof would be governed by the relevant provisions of Section 4 of the Central Excise Act, 1944 but not Section 4(1)(a)(ii). The same position also applies to RPO charges/surcharges and State surcharges. The gross price charged to the dealer is available on the invoice. This includes duties/taxes and ‘other charges’. So this is a cum-duty price. Therefore, as per Section 4, the assessable value has to be computed working backwards and deductions are allowed for admissible deductions.
25. We now, therefore, come to the question of the deductions claimed (from the total invoice value) on Various counts. The appellants have submitted that RPO charges constitute two elements viz. transport charges and maintenance of outlet charges, both quantums being fixed by OCC and hence binding on them. Learned Additional Solicitor General of India at one point of his submissions, has graciously and fairly conceded that the transport charges may be excludible but as per law. The undisputed facts are that when goods are supplied from storage installations (depots) of appellants to pump outlets (petrol pump stations) beyond a distance of 39 kms, the transport cost involved is recovered from these ‘dealers’ as a part of the RPO charges. Revenue submits that these are not actual charges but fixed on an average basis and that since clearance operations being at M/s. Cochin Refineries Ltd.’s gate and end at petrol pump only, therefore, freight charges may be includible. We find that it is not disputed that when these products are cleared from the factory gate of M/s. Cochin Refineries Ltd. to appellants designated depot (installation), a clear wholesale level sale is involved (irrespective of the movement being under duty bond), because the title of the goods changes hands from M/s. Cochin Refineries Ltd. to M/s. Bharat Petroleum Corporation Ltd. Therefore, there is no question of logically viewing the movements from M/s, Cochin Refineries Ltd. to the petrol pumps as one ongoing and continuous process. When goods are supplied to outlets by M/s. Bharat Petroleum Corporation Ltd., another sale takes place, which we may for the sake of convenience label as “second level wholesale”. Now, we find that the law on exclusion of transport charges from beyond the factory gate of excisable goods is a clearly settled one, as can be seen from the following decisions :-
1979 (4) E.L.T. (J 490) (Ker.)
1980 (6) E.L.T. 193 (Bom.)
1980 (6) E.L.T. 220 (Bom.)
Learned Additional Solicitor General of India also fairly conceded. Therefore, the freight element in this “second level wholesale” (from installation/depot to pump) is clearly deductible from the assessable value under Section 4 irrespective of whether quantum thereof is fixed by OCC or not. The Revenue’s argument on averaging of transport costs also does not hold much water, as this issue is finally settled by the Hon’ble Supreme Court in the case law of Baroda Electric Meters as reported in 1997 (94) E.L.T. 13 (S.C.). It is, therefore, now well-settled law, that where such freight charges are averaged on regional or national basis (to keep retail prices to specified levels throughout the country), then even such average freight is deductible. We, therefore, conclude that the freight element in RPO charges is deductible from the assessable value.
26. With respect to the maintenance component (for outlets i.e. pump stations), we find that even though such ‘dealers’ are appointed by Government as per law, they are not canvassing or selling agents of M/s. Bharat Petroleum Corporation Ltd. and transactions between them are on principal to principal basis. We also find that the operations at these petrol pump outlets are at retailers level and not wholesale level because only individual consumers in their vehicles are the buyers. No further trading for sale in wholesale quantities is done by these outlets normally. Admittedly, the balance of the RPO charges are towards maintenance and operation of this retail outlet facility, particularly for ensuring safety as well as easy purchase by consumers. Such charges, therefore, do not have any nexus with the wholesale value of the goods and are therefore not includible in the assessable value under Section 4, which prescribes the value in the course of wholesale trade at ex-factory gate and at “arms-length”.
27. In view of the above findings on both the components of RPO charges, we are of the considered view that the entire RPO charges are to be excluded from the assessable value.
28. With respect to the RPO surcharges, the revenue and learned Additional Solicitor General of India have contended that these are not deductible from the assessable value for the following reasons :-
(a) the ‘dealers’ are in fact selling agents;
(b) a commission is already deducted in the invoices; and
(c) cited Coromandal Fertilisers Ltd. (supra).
We are not convinced that simply because dealers are appointed by government in public interest and because these RPO surcharge rates are fixed by government, therefore, they are not in the nature of quantity and cash discounts, as claimed by the appellants for the following reasons
(a) since the title of goods change hands from appellants to the said ‘dealers’, therefore this involves a ‘sale’. Thus the ‘dealers’ are ‘buyers’ and not selling agents of the appellants and therefore, the ratio of Caromandal Fertilisers case (supra) is not applicable here;
(b) the nature of this surcharge is clearly that of a quantity-cum-cash discount because it is related to two quantity slabs uplifted and gives different discounts for sales on payment by demand draft (where sale proceeds are available instantly) and on payment by cheques (whose liquidation takes time);
(c) the exact rate of discount is announced by the appellants in advance in writing and with effect from a specified date;
(d) it is available-to all who qualify accordingly;
(e) if some discount is given in invoices in addition, that, per se, does not prohibit the availability of this additional discount, particularly as revenue has not agitated against that discount before us; and
(f) as per the case of Bombay Tyres International (supra), if the discount is known beforehand but paid later, they are deductible.
29. As far as State surcharges are concerned, it is not disputed that these concern only sales tax and turnover tax, that these are actually paid by appellants to the Kerala State Government, that monthly returns prescribed are used to do so and that proof of of payment is on record now. The only point of dispute is that because they are recovered from buyers and paid to OCC, therefore, they are a part of the price. We find that this very issue was considered in the case of Peico Electronics & Electricals Ltd. as reported in 1994 (71) E.L.T. 1053 (Tri.), wherein a three-member Bench of the Hon’ble Tribunal had held that additional salestax, turnover tax, surcharge oh sales tax and octroi payable whether at the time of clearance or at a future date and whether recoverable from customers or not, are deductible for arriving at the assessable value. In view of undisputed facts noted above, the ratio of this decision is squarely applicable hereand applying this ratio, we find that the State surcharges, even if/recovered and paid to OCC, are. deductible from the assessable value. As against this, the facts in the case of Anand Swamp (supra) are different.
30. Learned Additional Solicitor General of India has also submitted that these charges are not bifurcated and contents explained in the invoices and hence they are not deductible. We are unable to accept this submission as the facts in this case are that the OCC/Ministry have clearly bifurcated these quanturms through their letters. These were both with department as well as with dealers i.e. the content and nature of these charges were known to all concerned. Therefore, their clubbing together in invoice is at best a procedural issue which cannot overrule the substantive merits discussed above.
31. Since the aforesaid findings are that RPO charges, RPO surcharges and State surcharges are deductible under Section 4, even if the price is held to be not fixed bylaw in this case, therefore, the orders impugned do not survive and are ordered to be set as aside. The appeals are hence allowed with consequential relief as per law, if any.