The Supreme Court has held that charitable donations charged in invoice while selling goods cannot be included in the assessable value while determining excise duty.
The appellant-assessee M/s D.J. Malpani, manufacture goods falling under Chapter 24 of the Schedule of the Central Excise Act, 1944. While selling goods, the appellant-assessee charged the customers invoices for the price of goods plus Dharmada, a charitable donation. According to the appellant, the Dharmada was paid voluntarily by customers and was meant for charity. It was accordingly credited to charity. The Superintendent, Central Excise, Nashik issued show cause notices and raised a demand of duty in respect of Dharmada, claiming it was part of the price for the sale of manufactured goods and included it for computing assessable value.
Initially, the Adjudicating Authority held that the Dharmada component was not part of the trading receipts and could not be included in the assessable value and dropped the demand for excise duty and the penalty. Thereafter, in an appeal filed by Revenue, the Commissioner (Appeals), however, held that the Dharmada was liable to be included as a part of the assessable value and therefore the goods were liable to be assessed on the basis of their price plus Dharmada.
The Central Excise and Service Tax Appellant Tribunal (CESTAT), in an appeal filed by the appellant, partly allowed the appeal and held that the duty amount needs to be recalculated. The CESTAT, however, rejected the appellant’s contention that Dharmada was not part of the transaction value.
Justice S.A. Bobde, Justice Deepak Gupta and Justice Vineet Sarani, while allowing the appeal of the assessee, based on the precedence in Collector vs. Panchmukhi Engineering Works, held, “The Dharmada collected by the appellant which is clearly an optional payment made by the buyer cannot be regarded as part of the transaction value for the sale of goods. The judgment of the CESTAT is accordingly set aside.”
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