Facts

The Appellant while selling goods charged the customers invoices for the price     of goods plus ‘Dharmada’, a charitable donation. Such Dharmada which was paid voluntarily by customers was accordingly credited to charity. Show Cause Notice was issued to the appellant claiming that Dharmada so collected forms a part of transaction value. Due to conflicting views in the cases CIT (Central) Delhi, New Delhi v. Bijli Cotton Mills (P) Ltd. Hathras, District Aligarh (1979) 1 SCC 496  and Collector v. Panchmnkhi Engineering Works 2003 (158) ELT 550 (S.C.), Tata Iron & Steel Co. Ltd. v.  Collector of Central Excise, Jamshedpur 2002 (146) ELT.      3 (SC) the referred the matter to a Larger Bench in order to resolve the conflict      on 29.07.2015.

Issue

Whether the Dharmada collected by the appellant which is clearly an optional payment made by the buyer can be regarded as part of the transaction value for   the sale of goods.

View

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.  The Dharmada so paid, is not for the transaction of sale i.e. for the transfer of  possession of goods and any payment made alongside such a transaction cannot be treated as consideration for the goods. The receipts on account of Dharmada were voluntary, earmarked for charity and in fact credited as such. Furthermore, it would make     no difference to the true character and nature of the receipts even if they were found to be paid compulsorily because the purchaser, purchased the goods out     of their own volition, choice and will. The purchase of the goods is the occasion and not consideration for the Dharmada paid by the customer. Dharmada so paid,  ismeant for charity and is received and held in trust by the seller.

Held

If such amounts are meant to be credited to charity and do not form part of      the income of the assessee they cannot be included in the transaction value or assessable value of the goods. Thus, Dharmada collected by the appellant which    is clearly an optional payment made by the buyer can not be regarded as part

of  the transaction value for the sale of goods. (CA  No. 5282 of  2005 and 531   of 2008 dt. 9-4-2019)

Editorial: Section 15 provides for value (transaction value) of supply of goods and services. Hence, according to me, the ratio of the above ruling would continue to hold good and apply even under the GST regime in as much as ‘the price actually paid or payable for the said supply of goods or services or both’ alone would form part of value. Compulsory extraction would not form a part of value.

“There is a higher court than courts of justice    and that is the court of conscience. It supersedes all  other courts.

– Mahatma Gandhi