Customs, Excise and Gold Tribunal - Delhi
Dhrangadhra Chemical Works Ltd. vs Collector Of Central Excise on 10 February, 1988
Equivalent citations: 1988(16)ECC66, 1988(17)ECR477(TRI.-DELHI), 1988(35)ELT202(TRI-DEL)
ORDER Harish Chander, Member (J)
1. Dhrangadhra Chemical Works Ltd. has filed a Revision Application under erstwhile Section 36 of the Central Excises and Salt Act, 1944 to the Additional Secretary, Government of India, Ministry of Finance, New Delhi being aggrieved from order-in-appeal No. 159 of 1981 dated 27.3.1981 passed by the Appellate Collector of Customs and Central Excise. The said Revision Application stands transferred to the Tribunal in terms of the provisions of Section 35P of the Central Excises and Salt Act, 1944 to be disposed of as an appeal.
2. Thereafter the same appellant has filed two more appeals before the Tribunal mentioned as below :-
i)ED/SB/2324/83-A
ii)ED/SB/ 1993/83-A Since the issue involved is identical in the above appeals, the same are disposed of by this consolidated order.
3. The facts of appeal Nos. 666/81A and 2324/83A are similar. The facts in appeal No. 666/81A are as below :-
The appellants are manufacturing Caustic '.oda and within their factory they have a unit for the manufacture of matal containers. They consume captively the metal containers manufactured in their unit in packing caustic soda, solid flakes and Trichloroethylene/perchloroethylene. No sale of metal containers is undertaken by the company. They submitted price lists for metal containers arriving the value on cost accounting . basis but without inclusion of any profit and the same was originally approved by the Superintendent, Tirunelveli Circle and subsequently revised by him on adding margin of profit with the assessable value. This procedure was continued till the formation of a division at Tirunelveli. When the Circle was upgraded as Division in charge of an Assistant Collector, he issued a show cause notice on 10.1.1972 to them to show cause as to why the assessable value on metal containers should not be revised from an earlier date i.e. from 1.3.1970 based on the cost of drums arrived on cost accounting basis plus margin of profit earned by them and accordingly an order was issued fixing the margin of profit as 15.817% against which the assessee went in appeal. The Appellate Collector vide his order dated 13.3.1973 quashed the orders of the Assis, tant Collector and directed to refix the assessable value in accordance with the provisions of Section 4(b) of Central Excises and Salt Act, 1944. Accordingly the profit of margin was refixed as 15.817% based on the company's annual balance sheet, in the Assistant Collector's order dated 11.4.1977 contending that the profit earned by the company on Caustic Soda is dependent upon both the constituents i.e. the con tainers and contents and therefore it was not necessary to determine the profit margin on metal containers separately. Further, while arriving at the margin of profit, the interest paid on borrowed capital was not excluded from the total profit earned since the interest paid was out of the profit accrued. The appellants again sought remedy with the Appellate Collector by prefering an appeal against the Assistant Collector's order dated 11.4.1977. The Appellate Collector in his order dated 23.12.1977 directed to determine the margin of profit proportionately deducing it from the margin of profit of caustic soda in the ratio of cost of manufacture of drums to the cost of manufacture of caustic soda as it was not possible to determine the margin of profit separately for metal containers. On the basis of the Appellate Collector's order, the assessable value of the metal container was determined vide order dated 25.4.1979 taking into consideration the method suggested by the Appellate Collector. While doing so, it was noticed that they furnished the statement showing profit of margin yearwise in respect of caustic soda and'Tri/ per chloroethylene i.e. for the years 69-1976/77 excluding the depreciation and development investment allowance from the profit actually earned. As the above deduction was not allowable under the law, the exclusion of the above charges were not exploited and the margin of profit was arrived on inclusion of that. Against this the appellants required clarification and they accordingly informed of the .decision of the revenue authorities vide letter dated 13.12.1979 and the appellants wanted a personal hearing which was granted. The Ld. Assistant Collector had held that depreciation and development investment allowance could not be excluded from the assessable value and the earlier orders passed were in order. Being aggrieved from the aforesaid order, the appellants had filed an appeal to the Appellate Collector of Customs and Central Excise, Madras. The Ld. Appellate Collector had confirmed the findings of the Assistant Collector and being aggrieved from the aforesaid order the appellant has come in appeal before the Tribunal.
4. Shri K. Narasimhan, the Ld. Advocate, has appeared on behalf of the appellant. . He has reiterated the facts. He has argued that the issue involved in appeal Nos. 666/81A and 2324/83A is the same and as such his arguments are common for both the appeals. He has referred to Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 and has stated that in terms of the said rules where the excisable goods are not sold by the assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles, the value shall be based if the value cannot be determined on the value of the comparable goods produced or manufactured by the assessee or by any other assessee, on the cost of production or manufacture, including profits, if any, which the assessee would have normally earned on the sale of such goods. Shri Narasimhan, the Ld. Advocate, has referred to the extracts from various books pertaining cost accounting (pages 56 to 59 of the paper book). In particular, he has referred to extracts from the following texts :
(i) Spicer and Pegiers, Book Keeping and Accounts by WE Bigg and R.F.G. Porrins 17th Edition
(ii) Accountancy by William Pickles (4th Edn.)
(iii) Advanced Accounts by M. C., Shukla and T. S. Grewal (9th Edn.) Shri Narasimhan, the Ld. Advocate has argued that the depreciation is a part of the cost of seeking profits equal in importance to other revenue expenditure. Depreciation is the fall in exchangeable value of wasting assets computed. Shri Narasimhan, the Ld. Advocate has referred to the grounds of appeal before the Appellate Collector (Pages 49 to 55 of the paper book) and has argued that the appellant had agitated all the issues before the Appellate Collector and had claimed deduction on account of depreciation and development rebate and the Appellate Collector vide his Order dated 23.12.1977 had directed the Assistant Collector to redetermine the profit margin in the light of the following observations contained in his order "It will be quite rational, in the circumstances of the case, to determine the margin of profit for metal containers proportionately deducting it from the margin of profit for caustic soda in the ratio of cost of manufacture of caustic soda, as it is not possible for determining the margin of profit separately for metal containers. It is also correct that the interest on borrowed capital should be deducted from profit accrued, otherwise the profit will not be realone. The amount after exclusion of interest is what accrues to the appellants as profit and, therefore, the net profit is only to be taken into consideration."
Shri Narasimhan, the learned advocate has argued that the profit means the real profit.
Appeal No. 2324 Shri Narasimhan has referred to Assistant Collector's letter dated 25.7.1979 whereby the Assistant Collector had approved the price list finally and has not particularly referred to the annexure attached with the said letter which relates to proportion of drum cost to the cost of defused cost of Tri/perchloroethylene (page 38 of the paper book). He has also referred to the price list of drums for 1977-78 (page 72 of the paper book). Shri Narasimhan has argued that in the remarks column it has been mentioned that profit margin at 2.446% and 28.676% has been added with assessable value of the metal containers used in the packing of , caustic soda and trichloroethylene respectively as per the balance sheet for 1977-78. Shri Narasimhan has referred to the Asstt. Collector's Order dated 30.6.1980 (page 76 of the paper book) where the Assistant Collector has intimated that if the appellant feels aggrieved from the order as to the finalisation of the price list he should prefer an appeal to the authority concerned. He has referred to the Appellate Collector's Order dated 15.1.1981 (pages 86-88 of the paper book). Shri Narasimhan has argued that the Ld. Appellate Collector had observed that the Assistant Collector had acted beyond his jurisdiction and was in violation of the principles of natural justice and the Asstt. Collector was not competent to disobey the orders of the Appellate Collector and had set aside the order and had remanded the matter to the Assistant Collector with the direction that he should revise the price list in the light of the orders contained therein. In support of his arguments he has referred to a judgment ,in the case of Tribhuvandas Par- shotamdas v. Rati Lal Moti Lal Patel and Ors. reported in AIR 1968 SC 372. He has also referred to the Appellate Collector's order dated 5.5.1982 whereby the Appellate Collector had remanded the matter to the Assistant Collector for passing a speaking order and thereafter on 1.6.1982 the Asstt. Collector had issued a show cause notice and has referred to the AC's order dated 10.1.1983 (pages 110 to 116 of the paper bpok). He has also referred to the appeal memos filed before the Appellate Collector (pages 117 to 125 of the paper book) and has also referred to the order passed by the Collector of Central Excise (Appeals) dated 29.6.1983 (pages 134 to 180 of the paper book). Shri Narasimhan has argued that in terms of Rule 6(b)(ii) if the value of the excisable goods under assessment cannot be determined under Rule 4 and 5 and where the excisable goods are not sold by the assessee but are used or consumed by him or on his behalf in the production; or manufacture of other articles, the value shall be based on the cost of production or manufacture including profits if any, which the assessee would have normally earned on the sale of such goods. He has argued that chlorene and acetylene cannot be sold as it is chlorene is saleable only before liquification and no margin of profit should be added. He had also referred to written arguments and has laid special emphasis on issue Nos. 1, 2, 3 and 4. Shri Narasimhan has argued that calculations of profit on the metal containers captively consumed by the appellants have not been made correctly. The depreciation and development rebate has to be deducted from the same.
Appeal No. 1993 Shri Narasimhan, the learned Advocate, has argued that appeal No. 1993 relates to the manufacture of acetylene gas which emerges from the reaction of calcium carbide with water. The appellant is a manufacturer of trichloroethylene/per chloroethylene in his factory and the acetylene gas was manufactured is not the same which falls under T.I. 14H of the Central Excise Tariff as the same does not conform to the specific standards contemplated in respect of acetylene gas known in the trade and sold in the market. He has argued that the appeal has been rejected by the Assistant Collector in the process of the approving of the provisional price list filed by the appellate and the appeal against the said order as well as the revision application filed before the Government of India were unsuccessful and the Government of India in their order in revision dated 22.9.1982 had decided that the said acetylene gas was classifiable under Item 14H and the duty was payable on that basis. Thereafter the appellant had filed a writ petition under Article 32 of the Constitution of India challenging the excisability of the acetylene gas and the said writ petition was admitted on 30.3.1983. The Hon'ble Supreme Court had passed the stay order staying the recovery of 1715205.50 for the year 1977-78 to 1979-80 and Rs. 2750664.29 for the years 1980-81 to 1981-82 and also staying further demand on acetylene gas manufactured by the appellants. However, there was no order restraining the appellate authority from deciding the appeal. Shri Narasimhan has argued that the learned Collector (Appeals) had confirmed the assessable value of acetylene and confirmed the orders as to the assessable value of the acetylene captively consumed by the appellants as determined by the lower authority viz. the Assistant Collector in accordance with the provisions of Rule 6(b)(ii) viz. by determining the cost of production or manufacture as furnished by the appellants from year , to year and adding to this cost the gross margin of profit earned by them from year to year on the basis of this receipt the profit margin, they would have secured if they had sold acetylene gas in the normal course. Shri Narasimhan has argued that the appellant has come in appeal before the Tribunal against that order. Shri Narasimhan has argued that his arguments are as contained in paper book No. 2 on acetylene. Issues raised as well as reply in the form of written arguments are reproduced below :-
"i. The order of the Collector of Central Excise (Appeals) is wrong, illegal and not justified in law.
ii. The appellate authority has not appreciated the various arguments that were advanced before him.
iii. The appellate authority is not justified in his view that the issue of liability of the acetylene gas to excise duty had been decided at various levels by the department earlier failing to appreciate that the question as to whether in view of the provisions of the Explosives Act and the Notification issued thereunder the Acetylene gas will at all be liable to excise duty had not been considered at any earlier stage and hence ought to have gone into the issue and taken a decision.
iv. The Appellate authority ought to have in any event postponed consideration of the disposal of the Appeal till after the decision of the Supreme Court in the Writ Petition No. 3586 of 1983 filed by the Appellant in view of the fact that this question had been directly put in issue before the Supreme Court.
v. The Appellate Collector ought to have applied his mind to the correct interpretation of Rule 6(b)(ii) of the Valuation Rules and ought to have held that the profit if any to be included should be that which the appellant should have earned on the sale of the product in question and not that had been earned on the sale of the end product.
vi. The Appellate authority ought to have appreciated that the margin of profit of the end product cannot be adopted for determining the margin of profit of the intermediate product viz. Acetylene gas, captively consumed and hence his adoption of margin of profit of 48.66% for 1977-78, 34.593% for 1978-79 and 18.297% for 1979-80 is not justified as it is not fair or reasonable to expect that the sale of acetylene gas even if made will fetch such a high margin of profit.
vii. Even if the Appellate authority considered that the profit could be determined on the basis of the profit of the end product, he is not justified in his view that the principles of the decision of the Appellate Collector of Central Excise in his order-inappeal No. 1477/77, dated 23.12.1977 cannot be applied to the instant case merely because the said order did not consider Rule 6(b)(ii) of the Valuation Rules.
viii. The Appellate authority ought to have appreciated that the said decision was rendered in connection with the determination of the margin of profit in respect of captively consumed articles and consequently the same principle would apply in respect of Acetylene gas which is also captively consumed.
ix. The Appellate authority is not justified in not adopting the margin of profit adopted in the case of Sriram Vinyl and Chemical Industries by the Government of India order in Revision No. 535/82, dated 22.9.1982.
x. The Appellate authority ought to have given due weight to the fact that Sriram Vinyl and Chemical Industries also produce acetylene gas in the same manner as the appellant and also use the same captively without sealing the same and hence the same can be considered as comparable goods and consequently the margin of profit adopted in the said case can reasonably be adopted in the case of the appellant as well especially when the Government had held that the said margin of profit cannot beheld to be unreasonable;
xi. In any event the margin of profit adopted by the Assistant Collector and confirmed by the Appellate Authority is without any basis or justification and is highly excessive.
xii. the Appellate authority is not justified in distinguishing the said order of the Government of India.
xiii. The Appellate Authority is not justified' in his view that the words 'Profits' in Rule 6(b)(ii) will take in only gross profit and not net profit on the ground that the concept of net profit will be relevant only in the scheme of Incometax and not applicable while interpreting Central Excise Valuation Rules.
xiv. The Appellate Authority ought to have noticed that even Rule 6(b)(ii) speaks of 'cost of production' meaning thereby the cost On the basis of costaccounting and hence when the said Rule provides for inclusion of profit it should be on the same basis as worked out by cost-accounting and not on general principles.
xv. The Appellate Authority is not justified in his view that the margin of profit in Rule 6(b)(ii) would mean the difference between the selling price and the cost price.
xvi. The Appellate Authority is not justified in his view that appellant had considered depreciation as an allowance from the profits a second time after having taken note of the same in arriving at the cost of production.
xvii. The Appellate Authority is not justified in confirming the order of the Assistant Collector merely because the appellant had not furnished the details of profits which the assessee would have, earned on the captively consumed goods.
xviii. The Appellate Authority ought, to have appreciated that the appellant had given an instance of another similarly placed assessee viz. Sriram Vinyl and Chemical Industries wherein the margin of profit of 10% was considered reasonable and hence ought to have at any rate adopted the said precentage.
xix. The Appellate Authority had merely confirmed the order of the lower authority that the margin of profit of the ultimate product will be the margin of profit of the intermediate product which is captively consumed.
xx. The Appellate Authority ought to have appreciated that it was for the department to determine the value of the margin of profit on the basis of Rule 6(b)(ii) and it is for the department to justify the margin of profit on the basis that the sale of acetylene gas would yield that profit, and in the instant case the department had not discharged the burden cast upon it.
xxi. The Appellate Authority is not justified in merely confirming the order of the Assistant Collector.
xxii. The Appellate Authority ought to have in any event remanded the matter for consideration of the margin of profit on the basis of comparable goods of calculation of the profit on the basis of trade in the case of captively consumed articles."
Shri Narasimhan has again argued that the acetylene gas manufactured by the appellants cannot be sold as such and as such the same is not excisable. He has pleaded for the acceptance of the appeal.
5. Shri P. K. Ajwani, the learned S.D.R. puts forth the arguments in respect of the three appeals as under :-
(1) 666/81 :- Shri Ajwani has argued that in this appeal the period involved is 1st March, 1970 to 4th May, 1971 and Old Section 4(b) of the Central Excises and Salt Act is applicable. New Section came into force w.e.f. 1st October, 1975. Shri Ajwani has argued that in the old Section 4(b) it was provided that where such price, was not ascertainable the price at which an article of the like kind and quality was sold or being capable of being sold by the manufacturer, or produced or its agent at the time of removal of the article chargeable from duty from such factory or their place of delivery to the place of manufacture or production or if such article was not sold or was not capable of being sold at such place, at any other place nearest thereto. Shri Ajwani has argued that the metal container manufactured by the appellants were capable of being sold and the whole sale cost price was to be determined after adding margin of profit to the cost of production. In support of his arguments he has referred to the judgment of the Tribunal in the case of Dharampur Leather Cloth Co. Pvt. Ltd. v. Collector of Central Excise, Pune reported in 1986 (25) ELT 445. He has referred to para 11 of the said order. He has argued that the learned Assistant Collector has rightly calculated the margin of profit at 5.87%. Thereafter the Collector (Appeals) had remanded the matter to the Assistant Collector and the Assistant Collector had recalculated the margin of profit. Shri Ajwani has referred to the order passed by the Appellate Collector on 13th March, 1973 which appears on page 18 of the paper book and has referred to his findings in particular on internal page 4 of his order which appears on page 15 of the paper book. He has argued that the Appellate Collector had given some directions to the Assistant Collector and the appellants did not go in appeal against that order and that order becomes final. He has referred to the order-in-original dated 11th April, 1977 which appears on page 26 of the paper book. The learned Assistant Collector had added the interest on borrowed capital and the allowance of depreciation and development rebate was not in dispute in any way. He has again referred to the order-in-appeal which appears on page 36 of the paper book and the appellant could not raise the issue of depreciation and development rebate at the appellate stage. He has also referred to the Assistant Collector's letter dated 25th July, 1979 .approving the price list for the year 1969-70 to 1975-76. In particular he has referred to annexure 3 of the said letter which appears on page 37 of the paper book where the percentage of profit of metal container has been calculated. He has referred to the Assistant Collector's order dated 7th July, 1980 which appears on page 48 of the paper book and has also referred to internal page 3 of the said order. Shri Ajwani has argued that the Assistant Collector has exceeded his authority in giving findings on depreciation and development rebate. The Ld. S.D.R. has argued that the Assistant Collector has exceeded his jurisdiction. He has argued that the Assistant Collector could not have gone beyond the directions issued by the Ld. Appellate Collector. In support of his arguments he has relied on the judgment of the Hon'ble Calcutta High Court in the case of Municipal Commissioner, Howrah v. Calcutta Electric Supply Co. reported in AIR 1970 Cal. 414 where it was held that there was constructive resjudicata suit for declaration that the holding was void and illegal, earlier judgment no longer operates finding thereunder that impugned impositions in regard to the holding had become final and such judgment operates as constructive resjudicata. He has also referred to another judgment in the case of Commissioner of Sales Tax v. Babu Lal Marmanand reported in 1982 (49) STC 181 where the Hon'ble High Court had held that where in an appeal the assessment had not been set aside and the case had not been remanded for fresh assessment under U.P. Sales Tax Act, 1948 but a part of the assessment was confirmed while in regard to a particular question the case was remanded with a direction to decide it afresh after giving an opportunity to the assessee to establish its case, the jurisdiction or the assessing authority after such remand was confirmed only to the subject matter which was remanded to it. In such case if the assessee did not challenge the order of the appellate authority by way of revision, that order became final and that being so, the assessee could not reagitate that part of the case, which had become final in proceedings after such remand. He has referred to another judgment of the Hon'ble Delhi High Court in the case of 3.K. Synthetics v. Union of India reported in 1981 ELT 328 and has referred to para Nos. 15 and 20 in particular where the Hon'ble High Court had held that an authority can depart from his earlier stand only for cogent reasons, such as fresh facts are brought on record or the process of manufacture has changed or the relevant tariff has undergone modification of subsequent to the earlier decision there has been a pronouncement of a High Court or the Supreme Court which necessitates the reconsideration of the issue. Shri Ajwani states that in the matter before the Tribunal there are no such changed circumstances and as such the findings of the Appellate Collector giving directions, the adjudicating authority should not have gone beyond that. Lastly, he has referred to another judgment of the Tribunal in the case of Hind Lamp Ltd. v. CCE Kanpur reported in 1987 (28) ELT 429 and in particular referred to para Nos. 4 and 5 where it was held that the plea of resjudicata is applicable to taxation matters so that the financial assessment of one year cannot constitute resjudicata for assessment of another year but it will not apply when the question decided by the High Court is not assessment of any year or assessment of jjoods in respect of any particular price lists before it but the question of value of the goods relevant to continuing assessments has been decided.
Appeal No. 666/81 -A On merits, Shri Ajwani has argued that the provisions of Old Section 4 and Valuation Rules are similar to the new Section 4. The interest on borrowed capital has to be added back and in calculating the value, the cost of production and profits have to be added. He has referred to another judgment of the Tribunal in the case of Apollo Zipper Co. (P) Ltd. v. CCE Calcutta [1987 (29) ELT 126] where the Tribunal had held that Rule 6(b) of the Central Excise (Valuation) Rules, 1975 required that when excisable goods produced by the manufacturer are not sold but are captively used by him and when the value of comparable goods is also not available, the value of the goods captively consumed should be determined on the basis of the cost of production or manufacture and "including profits, if any, which the assessee would have normally earned on the sale of such goods". This would mean that if an assessee has normally been making profit but in one particular year incurs loss due to some reasons as is in the instant case, it cannot be inferred therefrom that the assessee would have normally sold his goods without profit or loss. Normally speaking, no businessman or industrialist would like to sell his goods without adding a reasonable margin of profit. It is thus normal margin of profit which is required to be added to the cost of production under Rule 6(b), irrespective of the fact that during an exceptional period, the assessee's financial results actually showed some loss, as in the appellant's case. In the circumstances, the action of the lower authorities to add margin of 7% cannot be faulted.
No. 2324/83-A Shri Ajwani argues that new Section 4 is similar to old Section 4 and Rule 6(b)(ii) of Central Excise (Valuation) Rules, 1975 is applicable. His arguments are same as in Appeal No. 666/81 A. Shri Ajwani has argued that the judgment in the case of Apollo Zipper (P) Ltd. earlier cited by him is also applicable in this case.
Appeal No. 1993/83-A Shri Ajwani has argued that he does not agree with the contention of Shri Narasimhan that acetylene gas captively consumed by the appellant is different from the acetylene sold in the market. He has argued that acetylene gas is acetylene gas and the same is subject to Jevy of Central Excise duty under the Central Excise Tariff. Shri Ajwani has pleaded for the dismissal of the appeals.
6. Shri K. Narasimhan, Ld. Advocate, has argued that the judgment cited by the Ld. SDR in the case of Dharampur Leather Co. Pvt, Ltd reported in 1986 (25) ELT W5 is not applicable in the case of the appellants. The facts are different. He has argued that the depreciation and development rebate have been added back in computing the gross profit by the revenue authorities whereas in the earlier proceedings the depreciation and development rebate were not added back. He has argued that the argument of the Ld. SDR as to the applicability of resjudicata has got no relevance here and it is not applicable. He has also referred to the doctrine of precedence. For the case Apollo Zipper Pvt. Ltd. v. CCE Calcutta reported in 1987 (29) ELT 126 the Ld. Advocate has stated that it was an exparte order and the appellant was not represented and as such has no relevance to this case. Shri Narasimhan has pleaded for the acceptance of the appeals.
7. We have heard both the sides and have gone through the facts and circumstances of the case. In appeal Nos. 666/81A and 2324/83A the main issue is whether depreciation and development rebate should be deducted in computing the normal profits for arriving at the value of the goods captively consumed by the appellants the same should have been determined on the basis of cost of production or manufacture and "including profits", if any, which the assessee would have normally earned on the sale of such goods. Before we come to any conclusion whether the depreciation or development rebate has to be allowed as deduction in computing of the profits, we would first like to make our observations as to Shri Ajwani's arguments that the Appellate Collector's order No. 1477/77, dated 23.12.1977 had become final and it was not open to the Assistant Collector' to give a finding as to disallowance of depreciation and development rebate. Undoubtedly, the appellant did not file any appeal against this order and as such the order passed by him becomes a finality in law and the same is binding on the appellant before us as well as respondent. On the other hand, Shri Ajwani had argued that the Assistant Collector had exceeded his authority in giving his finding. If the revenue had any grievance to the findings of the Assistant Collector in his order C. No. V/46/30/48/70, dated 7.7.1980, the revenue could have reviewed the order in terras of the provisions of earstwhile -section (2) of Section 36 of the Central Excises and Salt Act, 1944. The Assistant Collector's order dated 7.7.1980 was confirming his earlier decisions vide his office letters dated 25.7.1979 and 13.12.1979 mentioned in the last para of his order. The learned Appellate Collector had observed that it would be quite rational, in the circumstances of the case, to determine the margin of profit for metal containers proportionately deducting it from the margin of profit for caustic soda in the ratio of cost of manufacture of drums to the cost of manufacture of caustic soda as it is not possible to determine the margin of profit separately for metal containers. The Ld. Appellate Collector has nowhere said that what system of accountancy principles had to be followed by the Assistant Collector in computing the margin of profit for metal containers proportionately and margin of profit for caustic soda proportionately in the ratio of cost of manufacture of drums to the cost of manufacture of caustic soda. Accordingly, we are of the view that the Assistant Collector in computing the margin of profit and the cost of manufacture could have adopted the manner of computation to the best of his judgment. The Assistant Collector passed order and if the revenue was aggrieved from the aforesaid order passed by the Assistant Collector the revenue could have reviewed the same in terms of the erstwhile Section 36(2) of the Central Excises and Salt Act, 1944. Since the revenue has not reviewed the order and at this stage the revenue did not review the order passed by the Assistant Collector as well as the Appellate Collector's Order No. 159/81, dated 27.3.1981. The revenue cannot take this issue before the Tribunal that the Assistant Collector was not competent to give a finding that deduction on account of depreciation and development rebate was not admissible and as such the appellant has got a right to agitate the same and as such we hold that the appellant has got a right to agitate this issue before the Tribunal. Before we proceed further, we would like to reproduce the relevant extracts from old and new Section 4 of the Central Excises and Salt Act, 1944.
Old Section 4 "Determination of value for purposes of duty where under this act any article is chargeable with duty at a rate dependent on the value of the article. Such va]ue_ shall be deemed to be
(b) Where such price is not ascertainable, the price, at which an article of like amount and quality is sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of removal of article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production or if such article is not sold or is not capable of being sold at such place, at any other place nearest thereto."
New Section 4 Valuation of excisable goods for purposes of charging of duty of excise :-
"(1) Where under this Act, the duty of Excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section be deemed to be
(b) Where the normal price of such goods is not ascertainable for ther eaeason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed.
In the matter before us the appellant manufactures metal containers and captively consume the same. The Ld. Appellate Collector in his Order No. 1477/77, dated 23.12.1977 had given directions that the margin of profit for metal containers should be proportionately deducted from margin of profit for caustic soda in the ratio of cost of manufacture of drums to the manufacture of caustic soda. He had also held that interest on borrowed capital should be excluded and only the net profit after such exclusion will have to be taken into consideration and accordingly directed the Assistant Collector to redetermine the margin of profit. We would like to observe that in computing the margin of profit on metal containers captively consumed by the appellant, there was no relevance of the margin of profit earned in the sale of caustic soda duly packed in the metal containers. There is no question of profit of margin to be added in the end product and it cannot but be held that the sale of such goods can mean profit on the sale only on the goods used in the captive consumption and not the profit earned by the end product manufactured out of the goods used in the captive consumption. The Tribunal while coming to a conclusion has to impart broad based justice. The Hon'ble Supreme Court in the case of Hukum Chand Mills Ltd. v. The Commissioner of Income-Tax Central Bombay reported in AIR 1967 SC 455 had held that the word "thereon" in Section 33(4) of course, restricts the jurisdiction of the Tribunal to the subject matter of the appeal. The words "pass such orders as the Tribunal thinks fit" include all the powers (except possibly the power of enhancement) which are conferred upon the Appellate Assistant Commissioner or the Income Tax Officer to hold a further enquiry and dispose of the case on the basis of such enquiry. The Hon'ble Supreme Court had further observed that the Tribunal has, therefore, sufficient power under that section to remand the case to the Income Tax Officer in the manner he thinks fit. Para No. 8 from the said judgment is reproduced below :-
"8. The sole question argued on behalf of the assessee in these appeals is that the Tribunal was not competent to go into the question whether the provisions of paragraph 2 of the Taxation Laws Order were applicable to the present case and the respondent should not have been allowed to raise the contention for the first time before the Tribunal. It was also argued that the Tribunal ought to have remanded the case to the Income Tax Officer for ascertaining whether any depreciation was allowed under the Industrial Tax Rules and whether such depreciation should be taken into account for the purpose of computing the written down value. In our opinion, there is not justification for this argument. In the first place, objection was raised before the Tribunal or before the High Court that the Department should not have been allowed to raise the question for the first time with regard to the application of paragraph 2 of the Taxation Laws Order. We shall, however, assume in favour of the assessee that the question was implicit in the question actually framed and referred to the High Court. Even upon that assumption we are of opinion that the Tribunal had jurisdiction to permit the question to be raised for the first time in appeal. The powers of the Tribunal in dealing with appeals are expressed in Section 33(4) of the Act in the widest possible terms. Section 33(3) of the Act states that "An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner". Section 33(4) reads as follows :
(4) The Appellate Tribunal may after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner." The word "thereon" of course, restricts the jurisdiction of the Tribunal to the subject matter of the appeal. The words 'pass such order as the Tribunal thinks fit1 include all the powers (except possibly the power of enhancement) which are conferred upon the Appellate Assistant Commissioner by Section 31 of the Act. Consequently the Tribunal has authority under this section to direct the Appellate Assistant Commissioner or the Income-Tax Officer to hold a further enquiry and dispose of the case on the basis of such enquiry. Rule 12 of the Appellate Tribunal Rules, 1946 made under Section 5A(8) of the Act provides as follows :
"The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal; but the Tribunal, in deciding the appeal shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule :
Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground." Rule 27 states :
"The respondent, though he may not have appealed, may support the order of the Appellate Assistant Commissioner on any of the grounds decided against him."
Rule 28 is to the following effect;
"Where the Tribunal is of opinion that the case should be remanded it may remand it to the Appellate Assistant Commissioner or the Income Tax Officer, with such directions as the Tribunal may think fit."
In the present case, the subject matter of the appeal before the Tribunal was the question as to what should be the proper written down value of the buildings, machinery etc. of the assessee for calculating the depreciation allowance under Section 10(2)(vi) of the Act. It was certainly open to the department, in the appeal filed by the assessee before the Tribunal, to support the findings of the Appellate Assistant Commissioner with regard to the written down value on any of the grounds decided against it. It was argued on behalf of the appellant that the action of the Tribunal in remanding the case is not strictly justified by the language of Rule 27 or Rule 12. Even assuming that Rules 12 and 27 are riot strictly applicable, we are of opinion that the Tribunal has got sufficient power under Section 33(4) of the Act to entertain the argument of the Department with regard to the application of paragraph 2 of the Taxation Laws Order and remand the case to the Incometax Officer in the manner it has done. It is necessary to state that Rules 12 and 27 are not exhaustive of the powers of the Appellate Tribunal. The Rules are merely procedural in character and do not, in any way, circumscribe or control the power of the Tribunal under Section 33(4) of the Act. We are accordingly of the opinion that the Tribunal had jurisdiction to entertain the argument of the Department in this case and to direct the Income Tax Officer to find whether any depreciation was actually allowed under the Industrial Tax Rules and whether such depreciation should be taken into consideration for the purpose of computing the written down value."
The Hon'ble Eiombay High Court in the case of New India Life Assurance Co. Ltd. v. Commissioner of Income Tax, Bombay reported in AIR 1958 Bombay 143 had observed as to the general powers of the Tribunal. Para Nos. 3 and 4 of the said judgment are reproduced below :
"3. Before we look at the authorities and before we look at the section and the relevant rules, it is desirable, to consider on general principles what are the powers of an appellate court. When an appellant comes before a Court of appeal, he comes there because he is dissatisfied with the decision of the trial court and he challenges that decision; and he challenges that decision on certain grounds which are set out in the grounds of appeal or in the memo of appeal. The respondent, if he has not appealed or has not crossobjected, is satisfied with the decision of the trial court and he is before the Court of appeal to support the judgment of the trial Court. The appellant may challenge the decision of the trial Court even on grounds not contained in the grounds of appeal if the Court of appeal grants him leave to do so. Undoubtedly in granting leave the court of appeal would consider various factors; whether the question raised would involve questions of fact which may necessitate a remand ; whether the conduct of the appellant is such as to disentitle him to raise the new ground; and so on. But if leave is granted and if the other side has notice of the new ground which the appellant seeks to urge, there does not seem to be any reason why the Court of appeal should not permit the appellant to challenge the decision of the trial court on the ground other than that taken in the grounds of appeal. The position with regard to the respondent is different; it is not open to him to urge before the Court of appeal and get a relief which would adversely affect the appellant. If the respondent wanted to challenge the decision of the trial Court, it was open to him to file across appeal or crossobjections. But the very fact that he has not done so shows that he is quite content with the decision given by the trial court. Therefore, under these circumstances, his only right is to support the decision of the trial court. It is true that he may support the decision of the trial court, not only on the grounds contained in i the judgment of the trial Court, but on any other ground. In appreciating the question that arises before us, one must clearly bear in mind , the fundamental difference in the positions of the appellant and th& respondent. The appellant is the party who is dissatisfied with the' judgment; the respondent is the party who Is satisfied with the judgment. Now what we have just said is nothing more than really a summary of the provisions with regard to appeals and cross-objections contained in OAl of the Civil Procedure Code; and as we shall present point out, the position of the Appellate Tribunal is the same as a Court of appeal under the Civil Procedure Code and the powers of the Appellate Tribunal are identical with the powers enjoyed by an appellate Court under the Code."
4. Now, in the first place, we must look at the section which confers jurisdiction upon the Tribunal to hear appeals from the decisions of the A.A.C. Sub-section (4) of Section 33 provides that the Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner. The expressions "thereon" has come in for considerable judicial comment and observation, and the authorities lay down that the power of the Tribunal is confined to dealing with the subject matter of appeal is constituted by the grounds of appeal preferred by the appellant. This sub-matter cannot be expanded even by the appellant unless leave is granted' to him to do so by the Appellate Tribunal. The subject-matter can certainly not be expanded by the respondent, as already pointed out, if he has not either appealed or cross-objected. Now, there is a rule of procedure framed by the Tribunal with regard to the hearing of appeals which rule is in the following terms :-
"12. The appellant shall not, except by leave of the Tribunal urged or be heard in support of any ground not set forth in the memorandum of appeal; but the Tribunal in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule :
Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground. It will be noticed that this rule is identical in terms with R. 2 of 0.41. What has happened in this case it, that the appellant (the Commissioner) undoubtedly has travelled outside the subject-matter of the appeal in that he has pressed upon the Tribunal a point of view with regard to apportionment, which is not covered by the grounds of appeal; but he being the appellant, it was open to him to do so if leave was granted by the Court of appeal, it was true that on the record there does not appear any formal leave. It is also true that the appellant has not amended his grounds of appeal. But leave may be implied and the very fact that the Tribunal permitted the Commissioner to urge this ground goes to show that leave was granted to him. With regard to the proviso, it is not suggested by the assessee that he did not have a sufficient opportunity of contesting this ground. Therefore, this rule is satisfied. Indeed, if the case had arisen under the Civil Procedure Code and the question was of interpreting 0.41, R.2, it could not possibly have been urged by the respondent that the Court of appeal could not permit the appellant to argue the appeal on a different ground from the one taken up by him in the grounds of appeal."
As we have observed, there was no justification in the linking of margin of profit with the end product and in view of the judgment of the Hon'ble Supreme Court in the case of Hukamchand Mills v. C.I.T. reported in AIR 1967 SC 455 and Bombay High Court's judgment reported in AIR 1958 Bombay 143, the extracts from which have been reproduced above, we feel that the lower authorities did not come to a proper conclusion. We feel that ends of justice require that the Assistant Collector should reexamine the matter and recompute the margin of profit on the metal containers manufactured by the appellant without linking to the end product on the basis of the margin of profit calculated by the Chartered Accountant acceptable to the revenue authorities in , accordance with the accountancy principles. Accordingly, we set aside the impugned orders in appeal Nos. 666 and 2324 and remand the matter to the Assistant Collector. While re-adjudicating the Assistant Collector shall not be bound by anything done or anything ordered by him or by the Appellate Collector/Collector (Appeals) in the past in these proceedings. Since the matter is very old, we shall appreciate, if the Assistant Collector readjudicates the matter within six months. Since we are remanding the matter, we feel that it is not necessary for us to give our findings on the other issues.
Appeal No. 1993/83A The brief facts of the case are that the Appellants are manufacturing acetylene gas falling under Tariff Heading 14-H(vi) from 18.6.1977 and consuming captively the same in the manufacture of trichloroethylene/perchloroethylene in the factory itself. The question of computation of the quantity of acetylene gas manufactured and determination of the assessable value of acetylene gas so manufactured and captively consumed was being examined from 3une, 1977. The appellants had contested duty liability of acetylene gas and this issue was examined vide order-in-appeal No. A.342/80 in which it was held that acetylene gas was liable to central excise duty. The valuation aspect was also agitated before the appellate authority and in order-in-appeal No. 343/80 (No. 2258/80, dated 15.12.1980). It was observed by the appellate authority that the value has been determined provisionally and since final assessment was yet to be made, appellants had no locus standi to agitate the matter before the appellate authority. The Appellate Collector had also directed lower authorities to finalise the valuation of acetylene gas as to end uncertainty in the matter of duty liability. Consequently the lower authorities after observing prescribed procedure had adjudicated the matter. The Ld. Assistant Collector had added the margin of profit earned on the end product to the cost of acetylene gas for arriving at the assessable value. Being aggrieved from the aforesaid order the appellant had filed an appeal to the Collector of Central Excise (Appeals), who had confirmed the findings of the Assistant Colleotor to the effect that the assessable value of acetylene gas captively consumed was correctly determined by lower authorities in accordance with Rule 6(b)(ii) viz. by determining the cost of production or manufacture as furnished by the appellant from year to year and adding to this the margin of profit earned by them on the finished product from year to year, on the basis that this represented the margin of profit they would have secured if they would have sold the acetylene gas in the normal course. Being aggrieved from the aforesaid order, the appellant has come in appeal before the Tribunal. Shri Narasirnhan, the Ld. Advocate had pleaded before us that acetylene gas produced and captively consumed by the appellant was not goods and was not saleable product. We donot find any force in the argument of Shri Narasimhan and hold that acetylene gas manufactured and captively consumed by the appellant in the manufacture of trichloroethylene/perchloroethylene is acetylene gas and as such the same will come within the perview of Central Excise duty under Tariff Item 14-H(iv). On the issue of calculation of margin of profit, we have already observed in appeal Nos. 666/81-A and 2324/83-A that the margin of profit should be added on the goods manufactured and captively consumed by the appellant and not on the end product. Accordingly, we set aside the impugned order and remand the matter to the Assistant Collector to recalculate the margin of profit on the basis of computation as to, the manufacturing cost filed by the Chartered Accountant in accordance with accountancy principles and add margin of profit on the goods captively consumed viz. acetylene gas and not on the end product while readjudicating the Assistant Collector shall not be bound by anything done or anything ordered by him or by the Appellate Collector/Collector (Appeals) in the past in these proceedings. In this matter too, we shall appreciate if the readjudication is done within six months from the date of the receipt of this order. In the result, the above captioned appeals are allowed by way of remand and revenue authorities are directed to give consequential effect to this order.