Customs, Excise and Gold Tribunal - Delhi
V.S.T. Industries vs Collector Of Central Excise on 26 June, 1994
Equivalent citations: 1994(73)ELT49(TRI-DEL)
ORDER
S.K. Bhatnagar, Vice President
1. This is an appeal against the Order No. 172/85 dated 20-11-1985 passed by the Collector of Central Excise (Appeals), Madras.
2. Learned Counsel stated that appellants are manufacturer of cigarettes. During the relevant period, the effective Excise Duty was required to be calculated based on the maximum price declared on each package of cigarettes (exclusive of local taxes) only (vide Notification No. 211/83, dated 4-8-1983).
3. Anticipating a change in rate of duty in the Budget for 1984, the appellants were confronted with the problem that it normally takes the cigarette industry 10 to 20 days after the Union Budget to finalise its new prices of cigarettes upon the change in the rates of duties. This would mean that the cigarette manufacturer would not be in a position to decide what prices would have to be declared on each package of cigarettes manufactured on or after 29-2-1984 (i.e. the date of presentation before Parliament of the Union Budget for 1984) until such time as the prices had been finalised by them. Since this was a problem being faced for the first time (as the basis for calculation of excise duties upon the prices declared on each packet was introduced for the first time only from 1st March, 1983 onwards), the Chairman of the appellant Company met the Collector of Central Excise, Hyderabad and discussed the problem with him, well before the Union Budget, on 17th February, 1984 in order to determine the proper course of action to be followed.
Subsequently, on 20th February, 1984, the Chairman of the appellant company made a written representation to the Collector of Central Excise, Hyderabad (page No. 39 of the paper book) explaining the problems that could be faced by the cigarette industry in making the price declaration on the 'packages' of cigarettes manufactured after the presentation of the Union Budget 1984 on 29-2-1984, till such time thereafter as the prices were fixed by the manufacturers for all their brands of cigarettes. In their written representation the appellants had suggested a procedure during the interim period after the presentation of the Union Budget 1984 until such time as the prices were finalised by the cigarette manufacturers and agreed to clear the said stocks of cigarettes upon payment of duties at the rates prescribed in the Union Budget 1984 applied on the revised prices after the Union Budget 1984, declared and approved by the Assistant Collector of Central Excise. This methodology, if adopted, would ensure that the correct amount of duty would be paid upon stocks manufactured during the interim period until the prices were fixed, and cleared after the fixation of such prices, from the factory. The appellant's representation also described the mechanics by which the above proposal could be implemented in relation to the various types of packing used by the cigarette industry.
The appellants thereafter received supplementary instructions from the Collector of Central Excise, Hyderabad, vide his Order C. No. V/4-H(2)/30/4-84 MP, dated 24-2-1984 (page No. 39 of the paper book) prescribing the procedure to be followed for marking the prices on stocks of cigarettes manufactured, for a period of a fortnight from the date when the Budget proposals for the Finance Bill, 1984 were to be presented in the Parliament. This procedure specified that :-
(a) Existing slides with the old price markings could be used in the reverse manner, so that the old price was not visible.
(b) Use of plain slides without any price markings, if the slides mentioned in (a) above were exhausted.
(c) Similar use as in (a) and (b) above of the existing stickers (strap labels) with the price markings in the reverse manner, for soft cup packets.
The supplementary instructions also laid down that upon determination of the prices by the appellants, such prices are to be marked on a sticker and fixed on cartons of 200 cigarettes/outers containing cigarette packages instead of on individual packages of cigarettes. No cigarettes were to be cleared until the appellants had finally determined their prices.
Following the Union Budget 1984, all the above instructions of the Collector of Central Excise were duly complied with in respect of the stocks manufactured during the interim period from 29-2-1984 to 11-3-1984, to the full and complete satisfaction of the proper officers stationed in the Range Office within the appellant's factory premises. Although the instructions of the Collector were to apply for a period of a fortnight from 29-2-1984, in actual fact the appellants filed their revised price list on 8th March, 1984 before the Assistant Collector of Central Excise, and the same was approved by him on 9th March, 1984, so that clearances of cigarettes commenced from the appellant's factory from 12th March, 1984. In respect of all such clearances of stocks on and from 12th March, 1984, were applicable, in accordance with the Collector's supplementary instructions, stickers carrying the inscription "stocks cleared under permission dated 24-2-1984 of the Collector of Central Excise, Hyderabad, at Max Price ... per packet. LT extra" (sample sticker on page No. 39 of paper book) were affixed on cartons/outers and all the necessary clearance documents were counter-signed by the proper Central Excise Officials, and the appropriate rates of duties were paid as required under the Finance Bill, 1984, based on the revised prices declared and approved on 9th March, 1984 by the Asstt. Collector of Central Excise in respect of the entire stock manufactured during the interim period. Thus, it can be clearly seen from the above that the appellants have scrupulously followed the supplementary instructions issued by the Collector of Central Excise, Hyderabad, and the correct amount of duty was paid to the Government, without any loss of revenue whatsoever, when these stocks were finally cleared from the factory from 12th March onwards.
4. In spite of it all, they received the impugned Show Cause Notice. During adjudication proceedings, the Assistant Collector himself found that the appellants had strictly followed the supplementary instructions but held that this did not conform to the statutory provisions under the notification and duty was payable at the standard rate in respect of cigarettes in packages which did not bear the declaration of maximum sale price thereon. The Collector (Appeals) confirmed the Assistant Collector's order partly and has set aside that part of the order which concerned cigarettes cleared with price declaration in reverse manner and directed the Assistant Collector to adjudicate the case de novo. However, till date the appellants have not received any fresh Show Cause Notice.
5. It was their contention that the Collector was competent to issue supplemental instructions issued under Rule 233 and other authorities of the department like Assistant Collector and Collector (Appeals) should not disregard them.
6. Learned Counsel emphasised that the appellants have scrupulously followed the procedure agreed upon and there was no cause for demand of duty at the tariff rate in any eventuality; the breach, if any, was of a very minor and technical nature which does not warrant denial of the benefit of the Notification and levy of duty at the tariff rate.
7. In support of his contentions, the learned Counsel drew the attention to letter of the Chairman of M/s. V.S.T. Industries Ltd. addressed to Collector, Hyderabad dated 20-2-1984 and the reply of the Additional Collector dated 24-2-1984 indicating the facility granted. He also drew attention to the specimen sticker (reproduced below the endorsement in the above letter).
8. Learned DR stated that the benefit of exemption notification could be granted to the appellants only subject to the fulfilment of conditions mentioned therein. One of the most important conditions related to printing of the retail sale price on the cigarette packets and the requirement to apply the effective rate(s) of duty prescribed in the Notification with reference to such price. Since the appellants have cleared the cigarettes without due compliance with these conditions, the demand was justified.
9. As regards the permission granted by the Collector, he stated that the Additional Collector's letter dated 24-2-1984 makes it clear that the facility was granted to enable them to determine the price of the finished goods as a consequence of the Budget proposal so that the production in the factory is not hampered but it clearly mentions that it was only an interim facility and the goods should not be cleared till the final price is determined.
10. In response to queries from the Bench, the Ld. Counsel clarified that they had cleared the goods only after the revised prices were determined and declared to the excise authorities and approved by them. He emphasised that this has not been disputed by the department. Learned Counsel also emphasised that the stickers on the cartons containing the packets indicated that the stocks were being cleared under permission dated 24-2-1984 at the maximum price per packet declared thereon.
11. In response to a further query Ld. Counsel confirmed that the goods were cleared only after determination and declaration of new price and approval thereof.
12. We have considered the above submissions. We observe that the appellants in this case had rightly anticipated practical problems which they were going to face and had not only filed a representation and discussed the matter with the concerned authorities but obtained a written permission dated 24-2-1984. Their contention that the procedure agreed upon was strictly followed has not been contradicted or shown to be wrong. On the other hand, the reading of the Assistant Collector's order shows that there was no doubt about the same. Again, the letter of the Additional Collector dated 24-2-1984 shows that the interim facility was granted so that the production is not hampered. It only puts a condition that no clearance is effected till the final price is determined. According to learned Counsel, they cleared the goods in question only after the revised prices had been determined and declared by them and approved by the authorities; and this again has not been contradicted or shown to be wrong. In other words, they had acted according to the permission granted. In the circumstances, it will neither be fair nor proper to deny the benefit of the Notification No. 211/83.
Looking at it slightly differently, the very purpose of the exemption notification appears to be to take the price printed on each packet for retail sale into account for determining the slab indicated in Col. 1 of the table annexed thereto and calculating the effective rate of duty accordingly. This purpose, which is evidently the principal purpose, has been served by filing of the declaration of the revised rates before the proper authority obtaining its approval. The secondary object of letting the public know is also served to a large extent by affixing of the stickers on the cartons the revised price per package as per the permission granted. Hence, in our opinion, in the context of the practical problems, their representation, the permission granted by the Collector, and admitted strict adherence with the procedure prescribed by Collector, the appellant's action amounted to sufficient although not literal, compliance with the basic requirements of the Notification.
13. We are aware that an exemption notification is required to be construed strictly but that does not mean that such practical considerations should not weigh in judging its application and effective compliance.
14. Furthermore, in the facts and circumstances of this case, the Counsel was justified in his plea that minor procedural infraction, if any, should not be allowed to come in the way of extending the intended benefit. It was indeed not proper to be hypertechnical in such cases and substantial compliance shown should be considered sufficient. As such the demand of the duty at the tariff rate was not justified. We, therefore, set aside the impugned orders and allow the appeal.