Customs, Excise and Gold Tribunal - Delhi
Hindustan Gas And Industries Ltd. vs Collector Of Central Excise on 22 October, 1991
Equivalent citations: 1992(59)ELT306(TRI-DEL)
ORDER
Harish Chander, Vice President
1. Hindustan Gas & Industries Ltd. (assessee), Industry House, 10, Camac Street, Calcutta-700 017 as well as the Collector of Central Excise, Calcutta (revenue) have filed the above captioned 85 appeals being aggrieved from the orders passed by the lower authorities. Since the issue involved is common in all the appeals filed by the assessee as well as the revenue, the above captioned 85 appeals are being disposed of by this common order and both the sides have got no objection to the same.
1.2 For the sake of brevity, the facts of appeal No. E/1761/87-A are as under:-
1.3 Hindustan Gas & Industries Ltd., Mouza Parbangla, Nangi, Budge Budge Road, District 24-Parganas, West Bengal, is manufacturer of gases including dissolved Acetylene gas. Excise duty was imposed on the dissolved Acetylene gas with effect from 18th June, 1977 under Tariff Item 14H. The assessee had filed the price list No. 16/HGI(P)/DA/82-83 dated 24th February, 1983 effective from 24th February, 1983 in Part VII. Basic duty payable was at 15%, special duty at 5% and the price inclusive of excise duty to M/s. Shribajrang Electrical and Steel Co. Ltd., 1, Kali Majumdar Road, Howrah was also declared. In column No. 3, the price has been mentioned at Rs. 53.00 and the value has been claimed at Rs. 33.85. After claiming a deduction of 29% on account of post-manufacturing expenses and selling profits, the revenue had assessed the value at Rs. 45.56. The Superintendent of Central Excise, Calcutta had approved the same on 12th September, 1986 in the light of the Assistant Collector of Central Excise, Calcutta, XVI Division, A/o No. 14/PL/83 dated 21st December, 1983 with the benefit of 1/2% turnover tax.
2. Being not satisfied with the order passed by the Superintendent, an appeal was filed before the Collector of Central Excise (Appeals), Calcutta. The Collector of Central Excise (Appeals) has disposed of 9 appeals by a common order. Before the Collector (Appeals), it was contended by the assessee that the price list was filed in a routine manner to the Department for their manufactured products, viz., dissolved Acetylene gas falling under Tariff Item 14H(vi) sold to different categories of customers for approval claiming deduction at the rate of 29% towards post-manufacturing cost and profits and after the knowledge of the decision of the Supreme Court in the case of Union of India v. Bombay Tyre International reported in 1983 (14) E.L.T. 1896, the assessee also claimed the allowability of turnover tax on 21st September, 1984. The assessee wrote a letter to the Assistant Collector of Central Excise, Calcutta 'B' Division, claiming that over and above the deductions claimed in the price list, a further deduction at the rate of 1 % of the sale price on account of turnover tax should be allowed while approving the price list. On 30th April, 1985, the assessee again wrote another letter to the Assistant Collector claiming approval of the price lists after allowing as per Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944 a further deduction of rupee 1/- per cubic metre realised on prorata basis from the customers towards the cost of cylinders which were of durable nature and were returnable by the buyer used for supply of the gas to the customers. In both the aforesaid letters, the assessee sought for Assistant Collector's advice as to whether the assessee should file revised price lists incorporating therein all the aforesaid claims for Assistant Collector's approval to which the assessee did not receive any reply from the Assistant Collector. Lately, the price lists were approved by the Superintendent under his orders dated 22nd September, 1986, 12th September, 1986 and 10th November, 1986, allowing a deduction of 1/2% towards turnover tax, what the assessee had actually paid against their claim of rupee 1/- per cubic metre towards the cost of cylinders. The Collector of Central Excise (Appeals) had observed that the assessee had actually paid turnover tax @ 50% of the tax payable under Section 6B of the Bengal Finance (Sales Tax) Act, 1941 @ 1% for sales effected in the State of West Bengal. Hon'ble Supreme Court in its order dated 14th November, 1983/15th November, 1983 reported in 1984 (17) E.L.T. 329 (SC) had permitted deductions of additional sales tax, surcharge on sales tax and turnover tax from the sale price to arrive at the assessable value, if these taxes were proved to have been paid. The Collector of Central Excise (Appeals), Calcutta had further observed that in the present matter the fact being that the assessee had paid turnover tax @ 50% only, the Superintendent of Central Excise was justified in approving the price lists after allowing a deduction @ 1/2% towards turnover tax and so the orders so far relating to the issue of turnover tax merit for endorsement. The Collector (Appeals) had observed that the assessee's earlier appeals on the identical issue stood decided on the same line.
2. On the issue of allowing deduction @ rupee 1.00 per cubic metre towards cost of cylinders which were of durable nature and returnable, the Collector (Appeals) had observed that Section 4(4)(d)(i) ibid permits exclusion of charges on such durable and returnable containers. In the instant case, gases were supplied in cylinders of durable nature. The assessee had contended that those cylinders were returnable by the customers in terms of the contract therefor. If that being the fact, on document basis it was proved that the cylinders had actually been returned, exclusion of the cost of such cylinders in the manner as was recovered, from the sale value of the subject goods was valid under law. He had further observed that in approving the price list, the Assistant Collector had not decided the aspect with,respect to the assessee's letter dated 30th April, 1985, which he should have done. With these observations, he had upheld the order passed by the lower authority towards the issue of turnover tax and the order as to the issue of deduction towards cost of cylinders of durable and returnable nature as claimed by the assessee vide their letter dated 30th April, 1985 having not been passed by the Superintendent, he was directed to decide the issue in the light of para 3 of his order.
3. Being not satisfied with the order passed by the Collector (Appeals), the assessee has come in appeal before the Tribunal. The revenue also not being satisfied with the orders passed by the Collector (Appeals) has also come in appeal before the Tribunal.
4. In para No. 12 of the statement of facts internal page 7 and in grounds of appeal No. (g) and (h) on internal pages 8 and 9, the assessee has claimed deductions on account of the interest on receivables. Para No. 12 and grounds of appeal No. (g) and (h) are also reproduced below:-
"12. After passing of the order of the Collector (Appeals), the appellant has come to know that in a recent judgment in the case of the Assistant Collector of Central Excise and Others v. Madras Rubber Factory Ltd. and Others reported in 1987 (27) E.L.T. 553 (SC), the Hon'ble Supreme Court has been pleased to further clarify the scope and the interpretation of Section 4 of the Central Excises and Salt Act, 1944. In terms of the aforesaid judgment, in addition to the deductions allowed by the Superintendent of Central Excise and the Collector (Appeals) in determining the assessable value of the aforesaid goods, further deduction was allowable to the appellant on account of the interest on receivables."
"(g) For that in view of the judgment of the Hon'ble Supreme Court in Madras Rubber Factory Ltd.'s case (supra), deduction was allowable to the appellant on account of Interest on Receivables and the lower authorities should be directed to allow the same in computing the assessable value.
(h) For that the lower authorities should have appreciated that the price charged by the appellant from its customers included interest for the period of credit availed by the buyers and as such the same had to be excluded from the price of the goods in order to arrive at the normal price thereof under Section 4 of the Central Excises and Salt Act, 1944."
5. Shri V. Lakshmi Kumaran, the learned advocate has appeared on behalf of the assessee. He has reiterated the facts. Shri Lakshmi Kumaran has argued that the assessee had claimed deduction of 29% of the post-manufacturing expenses from the assessable value of the price lists and a deduction of rupee 1.00 per cubic metre as cylinder maintenance cost proportionately has also been claimed. He further argued that further deductions in view of the decision of the Supreme Court in the case of Union of India v. Bombay Tyre International and Others reported in 1983 (14) E.L.T. 1896 should be allowed and laid special emphasis on the following:-
(i) Taxes viz. sales tax and turnover tax.
(ii) Interest on receivables.
(iii) Distribution expenses.
(iv) Freight actual.
For his claim for deduction on account of interest on receivables, he relied on earlier decision of the Tribunal in the assessee's own case in order No. 126/1989-A dated 1st January, 1990 in appeal No. ED/SB/81/82-A. He also referred to the Book on Valuation by R.K. Jain page 237. Shri Lakshmi Kumaran, the learned advocate in support of his argument has cited the following decisions:-
(1) 1988 (36) E.L.T. 730 (SC), Collector of Central Excise v. Indian Oxygen Ltd.
Where the Hon'ble Supreme Court had held that rental charges for gas cylinders not includible in the assessable value as supply of cylinders is not a manufacturing activity and had further held that interest earned on deposits - either notional or actual not includible. It was also held that any income either in the shape of interest on deposits notional or real, may be earned on the deposit for the safe return of cylinders would be though ancillary but would not be the price for the manufacture of gas, accordingly it would not constitute part of the assessable value.
(2) 1989 (41) E.L.T. 663 (Tribunal), Collector of Central Excise v. Hindustan Gas & Industries Ltd.
where the Tribunal had held that valuation - packing charges recovered in instalment excludible - Compressed oxygen gas cleared in packed cylinders of durable and returnable nature - Deduction of Re. one per cubic metre of gas representing the phased cost of the cylinder over its total span from the sale price of gas admissible under Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944.
(out of decision dated 20th December, 1986).
Thereafter, this decision of MRF was recalled by the Supreme Court vide order reported in 1989 (41) E.L.T. 703 (SC), Assistant Collector of Central Excise v. Madras Rubber Factory Ltd. where it was held that "valuation - deductions beyond factory gate whether permissible - valuation in case of cum-duty price - Supreme Court judgment reported in 1987 (27) E.L.T. 553 being prima facie inconsistent with the law laid down by Supreme Court in the case of Bombay Tyre International - Recalled for fresh consideration."
Shri Lakshmi Kumaran pleaded that interest on receivables though not finally decided by the Supreme Court should be allowed in view of the earlier decisions of the Tribunal. He also referred to the decision of the Tribunal in the case of Govind Poy Oxygen Ltd. v. Collector of Central Excise, Goa reported in 1988 (34) E.L.T. 725 (Tribunal) where the Tribunal had held that "Valuation - Gas Cylinders - All costs incurred for delivery of the goods at the factory gate includible in the assessable value - As such, cost of supervision, unloading and loading charges of Rs. 2/- per cylinder not excludible from the assessable value of cylinder. Valuation - Gas cylinder being a durable container some cost would be incurred for its maintenance during its life period - As such, not only initial purchase price of the cylinder but also charges incurred on its essential repairs, maintenance and testing are excludible from the assessable value of cylinder" and the Assistant Collector was directed to go into the costing of the testing and maintenance charges and determine the actual cost therefor with a margin of profit (Paras 7, 8 and 9). Shri Lakshmi Kumaran in support of his argument for deduction on account of turnover tax also referred to Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944. He argued that turnover tax is on finished goods. He pleaded that the assessee had paid 50% as per direction of the Calcutta High Court and remaining 50% is also to be paid. He referred to the following decisions:-
(1) 1989 (40) E.L.T. 186 (Tribunal), Associated Pigments Ltd. v. Collector of Central Excise "Valuation - Deductions on account of cost of transportation and delivery charges, turnover tax and octroi duty from the assessable value admissible."
Shri Lakshmi Kumaran, the learned advocate argued that though the assessee had paid 50% of the turnover tax, the balance 50% is to be paid after the decision of the Calcutta High Court. Shri Lakshmi Kumaran, the learned advocate pleaded for the acceptance of the appeals filed by the assessee.
6. Shri V.K. Jain, the learned SDR who has appeared on behalf of the revenue stated that the turnover tax actually paid by the assessee should be allowed, though the assessee had claimed higher deduction. He relied on the decision of the Supreme Court in the case of Union of India v. Bombay Tyres International Pvt. Ltd. reported in 1984 (17) E.L.T. 329 where it was held that "The taxes which are permissible to be deducted under Section 4 from the assessable value cannot be disallowed even if they are paid periodically to the relevant taxing authorities in accordance with the relevant provisions of taxing statutes/rules". Regarding the decision of the Tribunal on interest on receivables, he pleaded that while disposing of the appeal No. ED/SB/81/82-A in the case of Hindustan Gas and Industries Ltd. v. Collector of Central Excise, Calcutta-I, vide order No. 126/1989-A dated 1st January, 1990 the MRF decision recalling the earlier order reported in 1989 (41) E.L.T. 703 was not cited before the Tribunal. Shri Jain further pleaded that the matter be kept pending till the decision by the Supreme court. Shri Jain has also referred to page 237 of Valuation by Shri R.K. Jain. He has pleaded that the interest on receivables should be added in the assessable value, Shri Jain, the learned SDR has pleaded for the dismissal of the appeals filed by the assessee and acceptance of the appeals filed by the revenue.
7. Shri Lakshmi Kumaran, the learned advocate in reply again cited a decision of the Supreme Court in the case of Union of India v. Bombay Tyres International reported in 1984 (17) E.L.T. 329.
8. We have heard both the sides and have gone through the facts and circumstances of the case. After the conclusion of the arguments, we had desired the learned advocate for the assessee to file a detailed chart as to the issues involved in the above appeals. To this direction the assessee's advocate has filed the Chart annexure T to this order. We have examined at length the arguments advanced by both the sides In the appeals filed by the revenue, the only claim is as to the deduction of proportionate cost of cylinders at the rate of rupee 1.00 per cubic metre and in some matters interest on receivables, whereas in the appeals filed by the assessee the dispute is in respect of the allowance of deduction of turnover tax to be allowed in full instead of 50% allowed by the lower authorities, cost of distribution at duty paid retail sales depot, interest on receivables and proportionate cost of cylinders @ rupee 1.00 per cubic metre. As earlier reproduced above the claim of interest on receivables in the assessable value was not made before the lower authorities. It has been made before the Tribunal for the first time. There is no bar for raising a fresh plea before the Tribunal on the basis of the material already available on record. It was so observed by the Andhra Pradesh High Court in the case of CIT v. Gangappa Cables reported in 116 ITR 778. Similar were the observations of the Patna High Court in the case of Hindustan Malleables and Forgings Ltd. v. Commissioner of Income-tax reported in 191 ITR 110. Hon'ble Supreme Court in the case of Union of India v. Bombay Tyres International reported in 1983 (14) E.L.T. 1896 had held as under:-
"This brings to a close in these cases the question whether the value of an article for the purpose of the excise levy must be confined to the manufacturing cost and the manufacturing profit in respect of the article. In our judgment, the question has to be answered in the negative.
47. We now proceed to the question whether any post-manufacturing expenses are deductible from the price when determining the "value" of the excisable article. The old S. 4 provided by the Explanation thereto that in determining the price of any article under that section no abatement or deduction would be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid. The new S. 4 provides by sub-section (2) that where the price of excisable goods for delivery at the place of removal is not known and the value is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery has to be excluded from such price. The new S. 4 also contains subsection (4)(d)(ii) which declares that the expression "value" in relation to any excisable goods, does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale. Now these are clear provisions expressly providing for deduction, from the price, of certain items of expenditure. But learned counsel for the assessees contend that besides the heads so specified a proper construction of the section does not prohibit the deduction of other categories of post-manufacturing expenses. It is also urged that although the new S. 4(4)(d)(i) declares that in computing the "value" of an excisable article, the cost of packing shall be included, the provision should be construed as confined to primary packing and as not extending to secondary packing. The heads under which the claim to deduction is made are detailed below:-
(1) Storage charges.
(2) Freight or other transport charges, whether specific or equalised.
(3) Outward handling charges, whether specific or equalised.
(4) Interest on inventories (stocks carried by the manufacturer after clearance).
(5) Charges for other services after delivery to the buyer.
(6) Insurance after the goods have left the factory gate.
(7) Packing charges.
(8) Marketing and Selling Organisation expenses, including advertisement and publicity expenses.
49. We shall now examine the claim. It is apparent that for purposes of determining the "value", broadly speaking both the old S. 4(a) and the new S. 4(1)(a) speak of the price for sale in the course of wholesale trade of an article for delivery at the time and place of removal, namely, the factory gate. Where the price contemplated under the old S. 4(a) or under the new S. 4(1)(a) is not ascertainable, the price is determined under the old S. 4(b) or the new S, 4(1)(b). Now, the price of an article is related to its value (using this term in a general sense), and into that value how poured several component, including those which have enriched its value and given to the article is marketability in the trade. Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on account of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacturer after clearance), charges for other services after delivery to the buyer, namely after-sales service and marketing and selling organisation expenses including advertisement expenses cannot be deducted. It will be noted that advertisement expenses, marketing and selling organisation expenses and aftersales service promote the marketability of the article and enter into its value in the trade. Where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate, the expenses incurred by the assessee upto the date of delivery under the aforesaid heads cannot, on the same grounds, be deducted. But the assessee will be entitled to a deduction on account of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold. The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery.
50. Where freight is averaged and the averaged freight is included in the wholesale cash price so that the wholesale cash price at any place or places outside the factory gate is the same as the wholesale cash price at the factory gate, the averaged freight included in such wholesale cash price has to be deducted in order to arrive at the real wholesale cash price at the factory gate and no excise duty can be charged on it."
Hon'ble Supreme Court in the case of Collector of Central Excise v. Indian Oxygen Ltd. reported in 1988 (36) E.L.T. 730 (SC) has held as under:-
"7. Mr. A.K. Ganguli, learned counsel appearing for the revenue, sought to urge before us that there are two different classes of buyers, one class of such buyers was who used to bring their own cylinders and the others used to get their supplies through the cylinders of the suppliers. According to him, different rates for these two classes of buyers, in fact, constitute two different markets and are permissible. This, according to him, is contemplated under the first proviso to Section 4(1)(a) of the Act, which reads as follows:
"(i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each class of buyers."
There may be different classes of buyers for different classes of goods. Section 4(1)(a) of the Act emphasises that if the goods is of the same type, the prices should also be the same. The proviso to the said section postulates that where in accordance with normal practice such goods, namely, the gases are sold to different classes of buyers then different prices may be charged. If gases had been sold to different classes of buyers at different rates, it is possible that there might be different markets for the same. But here the charges like rentals for the cylinders and the notional interest income, are for ancillary or allied services and that is not an activity of manufacture. Hence, Section 4(1)(a) proviso can be of no avail to the revenue.
8. It is a case of two different supplies. One is supply of gases and the other is incidental supply of cylinders for rent. In that view of the matter, in our opinion, the Tribunal was right in the view it took. The interest, notional or real, accruing on deposits for the safe return of cylinders as well as the rentals would not constitute part of the assessable value."
The Tribunal in the assessee's own case in Appeal No ED/SB/81/82-A vide Order No. 126/1989-A dated 1st January, 1990 had held as under:-
"5. Shri Sharma appearing for the Department submitted that he has no objection for remanding the matter on point of allowing distribution expenses to the extent if they were incurred after clearance and included in the assessable value. As regards interest on receivables, he argued that Department was justified in determining the assessable value based on invoice price without allowing deduction' towards interest on receivables as neither it was known to the Department nor deduction was sought by the assesee at the time of removal of the goods. Section 4 speaks of normal price which refers to price shown in the invoice at the time and place of removal. Neither interest amount was specified nor time element was known to the assessee at the time of removal of goods, hence such deduction was not permissible. In rejoinder, Sri Laxmikumaran stated that details of interest was known to the appellants at the end of the year and it was rightly claimed as deduction out of the assessable on the same analogy of claiming equalised freight subsequently. He said that interest on receivable cannot be included in the assessable value and in support of his contention he cited the following decisions:-
1. A.K. Roy v. Voltas Ltd. - 1977 (1) E.L.T. (J 177) (SC)
2. Indian Explosives v. Union of India - 1989 (40) E.L.T. D 190.
6. We have anxiously considered the arguments advanced on both the sides. In view of the submissions made by the appellant's counsel and as per the wordings of Section 4(1)(a) of the Central Excises and Salt Act, we fully concur with the arguments advanced by the counsel in principle that 'interest on receivables' cannot be included in the assessable value. Further the decision cited (supra) also supports this view although Supreme Court has dealt with old Section 4 (i.e., prior to amendment) in Voltas case cited (supra), the observation made by the Supreme Court is relevant on this issue even under new Section 4 of the Act as there is no material change while determining the assessable value. The relevant portion of the observations by the Hon'ble Supreme Court in the above case is reproduced below:-
"Excise is a tax on the production and manufacture of goods (see Union of India v. Delhi Cloth and General Mills - AIR 1963 SC 791. Section 4 of the Act, therefore provides that the real value should be found after deducting the selling cost and selling profits and that the real value can include only the manufacturing cost and the manufacturing profit. The section makes it clear that excise is levied only on the amount representing the manufacturing cost plus the manufacturing profit and excludes post-manufacturing cost and the profit arising from post-manufacturing operation, namely selling profits. The Section postulates that the wholesale price should be taken on the basis of cash payment thus eliminating the interest involved in wholesale price which gives credit to the wholesale buyer for a period of time and that the price has to be fixed for delivery at the factory gate thereby eliminating freight, octroi and other charges involved in the transport of the articles."
Following the observation of the Supreme Court in view of the wordings under new Section 4 interest on receivables cannot be included in the assessable value. In principle it cannot be added. But it is purely a matter of evidence. These aspects have to be examined in detail on facts. If there is evidence to show thatthe difference is not attributable to interest for deferred payment or that the sale price is not genuine or no sales are made at lesser price to any buyer then price shown in the invoice would be the price under Section 4 of the Act."
9. In view of the above discussion, we do not find any merit in the appeals filed by the revenue. The learned SDR's argument that MRF decision was not brought to the notice of the Tribunal does not help him. In view of our above discussion, we remand the matters to the Assistant Collector of Central Excise to read judicate the same after observing the principles of natural justice and allow necessary deductions in the light of the decision of the Supreme Court in the case of Union of India v. Bombay Tyres International reported in 1983 (14) E.L.T. 1896, Union of India and Others v. Bombay Tyres International Pvt. Ltd. reported in 1984 (17) E.L.T. 329 (SC) and Collector of Central Excise v. Indian Oxygen Ltd. reported in 1988 (36) E.L.T. 730 (SC). The Assistant Collector while readjudicating shall observe the principles of natural justice. The appeals are being disposed of in these terms.