Case: M/S. D.J. MALPANI Vs. COMMISSIONER OF CENTRAL EXCISE, NASHIK

to spend the amount over charities will not affect character of the deposit. 17. This Court also relied on CIT, West Bengal, Calcutta vs. T ollygunge Club Ltd., Calcutta (1977) 2 SCC 790 : (1977) 107 ITR 776. In that case, the Court considered the nature of a surcharge of eight annas over and above the admission fees into the enclosure of the club at the time of the races. The proceeds of this surcharge were to go to the Red Cross Fund and other local charities. This Court approved the decision of the Calcutta High Court and held that the ?surcharge was not part of the price for admission but made for the specific purpose of being applied to local charities? . It observed the admission to the enclosure is the occasion and not the consideration for the surcharge taken from the race-goer. It rejected the contention that the payment was involuntary, observing ?that does not render the payment of the surcharge involuntary, because it is out of his own volition that he seeks admittance to the enclosure?. Applying the above decisions to the case before it, this Court held in Bijli Cotton Mills (supra) that Dharmada amounts cannot be said to have been paid involuntarily by the customers and in any case the compulsory nature of the payments, if there be any, cannot impress the receipts with the character of being trading receipts. 18. We find from the facts of the case before us 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 as held in Bijli Cotton Mills (supra) vide para 15: -15. …… It is true that without payment of ?Dharmada? amount the customer may not be able to purchase the goods from the assessee but that would not make the payment of ?Dharmada? amount involuntary inasmuch as it is out of his own volition that he purchases yarn and cotton from the assessee. The ?Dharmada? amount is, therefore, clearly not a part of the price, but a payment for the specific purpose of being spent on charitable purposes. ……...?19. In this case, the CESTAT decided against the assessee relaying on Panchmukhi (supra). The case of Panchmukhi (supra) was apparently decided not after a discussion on facts and law but because the counsel for the revenue submitted that the matter is covered by the decision in T ata Iron & Steel (supra) and the counsel for the assessee ?was not in a position to dispute this legal position? . The judgment in Panchmukhi (supra) has little precedential value. The point whether Dharmada involved in Panchmukhi (supra) and the surcharge held as price in T ata Iron & Steel (supra) were identical and liable to be included in the transaction value passed sub-silentio. Salmond on Jurisprudence T welfth Edition p.15h states that a decision held is not binding since it was decided ?without argument, without reference to the crucial words of the rule, and without any citation of authority? , therefore, would not be followed. The author also states that precedents sub-silentio and without arguments are of no moment. This is enough reason for not treating the decision in Panchmukhi (supra) as a binding precedent. It is, therefore, necessary to take a look at T ata Iron & Steel (supra). That was a case where the customer paid a surcharge on the price of steel. This surcharge was added to generate money for a steel development fund to implement schemes entrusted to the committee by the Central Government. The surcharge went to the committee for use in its various schemes and for the expenditure incurred towards discharge of the committee?s function. 20. Nonetheless, the surcharge was part of the consideration paid by the customer for the price of steel. The notifications under which the surcharge was added clearly stated as follows: -(i) ?The Committee may add an element to the ex- works prices determined ……..? and (ii) ?The Committee may require members steel plants to add the elements listed below to their ex-works………?The purpose of this addition was to constitute a steel development fund for modernisation, research & development, diversification etc. for improving the quantum of technology and efficiency of production of iron and steel and their quality. 21. The other objects of the fund, were to implement specific schemes entrusted to the Committee by the Central Government and towards the Engineering Goods Export Assistance Fund. This Court considered the question whether the addition would fall under the meaning of the term ?other taxes? within the meaning of Section 4 (ii) which excluded the amount of other taxes payable on such goods from value. It was contended on behalf of the assessee that they were compelled by law to collect this charge over and above the price without the right to appropriate it for themselves and with a duty of making it over to a third party and therefore the charges could not be regarded as part of the consideration of the sale price of goods. This Court held that the charges were clearly added as an element of price and observed, ?thus what was being added was to the price?. Another aspect to be kept in mind is that the ultimate beneficiaries of these amounts are the steel plants themselves. 22. We find that the decision in T ata Iron & Steel (supra) is completely inapposite to the circumstances of the case before us. The reliance placed on T ata Iron & Steel (supra) and Panchmukhi (supra) which was a case of Dharmada, is misplaced. Panchmukhi (supra) cannot be said to be good law.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]14. 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 vide Section 4(3)(d) supra. 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. `Consideration? means, vide Garner?s Dictionary of Legal Usage, 3 rd Edition: `the act, forbearance or promise by which one party to the contract keep the promise of another?. The term valuable consideration refers to an act, forbearance or promise having an economic value. In this 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 construedfairly 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.This takes us to the nature of the ?Dharmada? when given along with the sale price of goods. 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. This Court considered the nature and character of Dharmada in Bijli Cotton Mills (supra). That case arose under the Income T ax Act. The assessee used to realise certain amounts on account of Dharmada from his customers on sales of yarn and bales of cotton. The rate was one anna per bundle of ten pounds of yarn and two annas per bale of cotton. The receipts of Dharmada were not credited to the trading account but the assessee maintained a separate account known as the Dharmada account. The authorities under the Act held that the amounts held by the assessee could not be regarded as having been held under trust for charitable purposes.The High Court, however, held that the impugned amounts paid as Dharmada were never the income of the assessee and assessee was merely acting as a conduit for passing on the amounts to the objects of charity. These amounts were never treated as trading receipts or as surcharge on the sale price which was evident from the fact that such realisations were never credited to the trading account nor shown in the profit and loss statement for anyCourt considered the question in great detail and after referring to Professor Wilson?s Glossary and Molesworth?s Dictionary observed that Dharmada means ?an alms or a gift in charity?. This Court observed that though there might be some vagueness as a matter of law, in the word Dharma, there was none in relation to Dharmada or Dharmadaya and such a payment would not be invalid for vagueness or uncertainty. This Court accepted the decision of the Allahabad High Court in Thakur Das Shyam Sunder vs. Additional CIT 93 ITR 27   and observed that?it cannot be disputed that among the trading or commercial community in various parts of the country, a gift or payment for Dharmada is by custom invariably regarded as a gift for charitable. This Court observed that the answer to the question depended on the nature of the obligation created by the customer and approved the finding of the Allahabad High Court to the effect that merely because under the law relating to trust legal ownership over the trust fund and the power to control and dispose of always vest in the trustees, the discretion vested in the trustee to spend the amount over charities will not affect character of thethe above decisions to the case before it, this Court held in Bijli Cotton Mills (supra) that Dharmada amounts cannot be said to have been paid involuntarily by the customers and in any case the compulsory nature of the payments, if there be any, cannot impress the receipts with the character of being trading receipts.We find from the facts of the case before us 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.In this case, the CESTAT decided against the assessee relaying on Panchmukhi (supra). The case of Panchmukhi (supra) was apparently decided not after a discussion on facts and law but because the counsel for the revenue submitted that the matter is covered by the decision in T ata Iron & Steel (supra) and the counsel for the assessee?was not in a position to dispute this legal. The judgment in Panchmukhi (supra) has little precedential value. The point whether Dharmada involved in Panchmukhi (supra) and the surcharge held as price in T ata Iron & Steel (supra) were identical and liable to be included in the transaction value passed sub-silentio. Salmond on Jurisprudence T welfth Edition p.15h states that a decision held is not binding since it was decided?without argument, without reference to the crucial words of the rule, and without any citation of authority?, therefore, would not be followed. The author also states that precedents sub-silentio and without arguments are of no moment. This is enough reason for not treating the decision in Panchmukhi (supra) as a bindingis, therefore, necessary to take a look at T ata Iron & Steel (supra). That was a case where the customer paid a surcharge on the price of steel. This surcharge was added to generate money for a steel development fund to implement schemes entrusted to the committee by the Central Government. The surcharge went to the committee for use in its various schemes and for the expenditure incurred towards discharge of the committee?s function.The other objects of the fund, were to implement specific schemes entrusted to the Committee by the Central Government and towards the Engineering Goods Export Assistance Fund. This Court considered the question whether the addition would fall under the meaning of the term ?other taxes? within the meaning of Section 4 (ii) which excluded the amount of other taxes payable on such goods from value. It was contended on behalf of the assessee that they were compelled by law to collect this charge over and above the price without the right to appropriate it for themselves and with a duty of making it over to a third party and therefore the charges could not be regarded as part of the consideration of the sale price ofCourt held that the charges were clearly added as an element of price and observed, ?thus what was being added was to the price?. Another aspect to be kept in mind is that the ultimate beneficiaries of these amounts are the steel plants themselves.We find that the decision in T ata Iron & Steel (supra) is completely inapposite to the circumstances of the case before us. The reliance placed on T ata Iron & Steel (supra) and Panchmukhi (supra) which was a case of Dharmada, is misplaced. Panchmukhi (supra) cannot be said to be good law.