Customs, Excise and Gold Tribunal - Delhi
Modi Rayon And Silk Mills vs Collector Of Central Excise on 20 January, 1987
Equivalent citations: 1987(13)ECR1(TRI.-DELHI), 1987(29)ELT933(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. (Misc. Order No. 7 to 18/1987-A). - In these appeals a common question regarding a liability of duty on the element of selling expenses included in the sale price of the goods namely art silk fabrics falling under Item 22 of the Central Excise Tariff arises. Accordingly, a common order is being issued.
2. The appellant contended before the lower authorities that the selling expenses comprising of the following :-
"Salary & Wages, Advertisement expenses, Bank Charges, Business Promotion expenses, Travelling expenses, Commission to Selling Agents, Brokerage to Selling Agents, Incentive to Customers and Rebate to Customers".
were not liable to duty in view of the judgment of Supreme Court in the case of A.K. Roy and Anr. v. Voltas Ltd. 1977 ELT (3) 177 inasmuch as the said judgment stated that excise duty is leviable only on the manufacturing cost plus manufacturing profit.
3. The lower authorities have not accepted the contention of the appellants.
4. The appellants, keeping in view the judgment of the Supreme Court in Union of India v. Bombay Tyre International Ltd. 1983 ELT 1896 (S.C.) and further clarification by the Supreme Court reported in 1981 (17) ELT 329 (SC) with regard to trade discounts restrict their claim now only to "incentive to customers and rebate to customers" which they claim are nothing but trade discounts. These trade discounts, according to the appellants, were denied to them at the time of approval of the price lists. The claims pertained to the period August 1972 to July 1973. All the claims were filed within the time limit of one year stipulated at that time in Rule 173-3 read with Rule 11. The learned advocate appearing for the appellant on 11.7.1986, the date of hearing, urged that the cases be remanded to the original authority for determining the amount of refund in respect of trade discounts referred to above because the original claim was in respect of much larger amount comprising various other selling expenses.
5. On a query from the Bench as to why an appeal against the price list approved by the lower authorities was not filed, the learned advocate submitted that the matter was in correspondence with the lower authorities and in that connection he drew attention to Annexure 'A' to the appeal memo. In any case, he submitted that it is an unconditional right of the appellants to file refund claims in respect of any duty which he claims to have been paid in excess of terms of Rule 11 read with Rule 173-3 as it existed then and Section 11B as it exists now. Only limitation which was stipulated in the Rule was that the refund claim ought to have been filed within one year of the date of payment of duty. In this connection, he relied upon Karnataka High Court's judgment in the case of Shyam Sunder U. Nichani v. Assistant Collector of Central Excise, Bangalore 1985 (22) ELT 751 (Karnataka). In that case, learned advocate for the appellants submitted that the High Court has held that the provisions of Section 11A of the Act for demand of duty were clearly applicable even though the classification had been approved earlier at a lower rate of duty. On this analogy he submitted that provisions of Section 11B (Rule 173-3 read with Rule 11 at the relevant time) would apply even if the price list had been approved at higher value. He also relied upon Tribunal's order No. 142 to 153/86A dated 28.2.86 in ED/SL/T/212/79A and ED/SB/T/A. No. 1177-1187/84-A. In this connection, he read out para 4 of the Tribunal's order. It is reproduced below :-
"The next point argued by the learned Counsel for the appellants in regard to the finding that the appellants should have filed appeal against the approval of the price list and not having done so, it has to be taken that they had agreed to pay the duty at higher assessable value. He pleaded that this finding is erroneous inasmuch as the provision regarding claiming a refund is still available to them notwithstanding the fact that the appeal against approval of the price list has not been filed. He has cited in this regard Tribunal's decision in the case of Sirpur Paper Mills v. CCE, Madras 1984 ELT (15) 461 and also this Tribunal Order in case of Pure Drinks, Calcutta No. C-117 & 118/85 dated 26.2.1985. He read out the relevant portion wherein the law has been clearly settled that provisions of the law are still available for filing the refund claim. We, therefore, hold that refund claims have been filed correctly under the relevant provisions of the law and there is no bar to their being considered."
6. Learned SDR, Shri Ajwani submitted that the appellants ought to have agitated the matter when their price lists were approved at a higher value. That having not been done, the appellants are debarred from filing the refund claim. In this connection, he relied on Tribunal's order No. D-393/85 dated 4.6.1983 in the case of Aditya Mills Ltd., Rajas-than v. Collector of Central Excise, Jaipur (1983 ELT 1853-CEGAT). In para 22 of the said order it has been observed that it was for the appellants to contest the decision at the stage when they were asked to file a revised classification list. Since the appellants therein did not dispute the classification list they could not do so by means of a refund claim.
7. Learned SDR also submitted that incentive to customers cannot be treated as a trade discount as has been held by the Tribunal in its order No. 840/84-A, dated 24.12.1984 in the case of Orient General Industries Ltd. v. Collector of Central Excise, New Delhi 1985 (21) ELT 326 (Tribunal).
8. Pleas advanced on both sides have been carefully considered. It is observed that there is no bar to filing a refund claim in terms of Rule 1733 read with Rule 11 as it then existed or Section 11B as it now exists even if the decision regarding the rate of duty or value is not contested in appeal at the time of finalisation of the classification list or price list. Relevant provisions are wide enough for an assessee to file refund claim which he considers to have paid in excess as long as the claim is filed within the stipulated time limit in the relevant provisions. Karnataka High Court's decision and the decision of the Tribunal dated 28.2.1986 relied upon by the learned advocate for the appellants are very apt in the facts and circumstances of the case. On the other hand, the decision of the Tribunal relied upon by the learned SDR in 1983 ELT 1853 is in the nature of a passing observation; the matter having already been decided on substantive issues involved in that decision.
As regards the plea of the learned SDR that "incentive to customers" is not a discount in view of Tribunal's decision in the case of Orient General Industries, it is observed that the facts of that case are not the same as are available in this case. The Tribunal in that case has not allowed special incentive bonus which is contingent upon the basis of the purchase turn over for the year. It was held, therefore, that such an incentive bonus discount is not a valid trade discount within the meaning of Section 4 of the Act or as clarified by the Supreme Court in 1984 (17) ELT 329 (S.C.). In the instant case, no such bonus discount contingent upon the purchase turn over in a year appears to have been claimed by the appellants. In fact the Supreme Court has clearly mentioned in its clarification referred to supra that the trade discount by whatever name it is described is a permissible deduction from the price of the goods. Therefore, merely because the appellants have named the trade discount as "incentive to customers" or "rebate to customers", it should not be denied. In any case, since the matter is to be remanded to the original authority for determination of the amount of refund on account of trade discount claimed by the appellants, the original authority would also see whether the discount claimed by them clearly falls within the principles laid down by the Supreme Court in its clarification reported in 1983 ECR 2233D. Accordingly, it is ordered that the amount of refund claim be determined by the Assistant Collector of Central Excise concerned in the light of Supreme Court's decision in the case of Bombay Tyre International Ltd. read with the subsequent clarification referred to above.
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(P.C. Jain) Dated : 31.7.1986. Member M. Gouri Shankar Murthy, Member (J) I regret my inability to agree with the order proposed by my learned brother Jain.
2. It would appear from the Revision Application that the appellant had submitted in June, 1973 two price lists bearing Nos. PL/53/73 and PL/54/73 Under Rule 173-C of the Central Excise Rules (effective 19.6.1973 and 20.6.1973) [Para 5 of the Revision Application].
3. However, it was only a copy of PL/53/73 w.e.f. 19.6.1973 that was produced before us and not PL/54/73. [None of the two other price lists filed was PL/54-73. They were in fact earlier price lists effective from 7.7.1972 and 8.7.1972 which were not adverted to at all in the Revision Petition.].
4. A perusal of the price list No. PL/53/73 would reveal that, apart from discount for substandard goods, no trade or other discount was claimed for exclusion from the assessable value. The column relating to discount shows a word "Nil".
5. The appellant was, no doubt, agitating about the exclusion of "selling cost and expenses" like for e.g. expenditure incurred on advertisements, marketing and other post manufacturing expenses (paras 6 and 7 of the Revision Application) but not on account of discount; although there is a reference to it in passing, as it Were, in their letter dated 5.7.1973 (Annexure 'C' to the Revision Application) wherein it was stated "The price is ascertainable by taking the actual sale price less discounts". This was more in the nature of a general statement. There was never anywhere a claim for the exclusion of trade discount at a specified percentage of the price and the casual reference to "discounts" in the aforesaid letter may well refer to the discounts afforded for substandard goods, consistently with the declaration in the price list. Nor does the inclusion of "incentive to customers" or "rebate to customers" in "selling expenses" adverted to for the first time in para (6) of the counsel's reply to the notices to show cause pursuant to the claims for refund, more as an afterthought, negate the solemn declaration of "nil discount" in the price list.
6. Once this was so, there is no purpose in a remand, when the appellant cannot now set up a new case, totally inconsistent with the declaration originally made, just because it has been laid down in the Hon'ble Supreme Court's decision in the Bombay Tyres case 1983 ELT 1986 (S.C.) and 1984 (17) ELT 329 (SC) that trade discount is to be excluded in the computation of the assessable value. When there has been no claim, there is nothing to be adjudicated.
7. The other two price lists adverted to supra were printed lists dated 7.7.1972 and 8.7.1972 respectively. They also disclose that discount allowed was "Nil". This was written in hand. The lists contain a printed note at the bottom to the effect that quantitative trade discount is allowed on bulk orders at varying rates. But then this printed matter not only occurs at the extreme left hand bottom of the price lists, rather as foot notes, but is also separated by a line in print from the columns of the price lists. They are not separately signed or initialled for and on behalf of the appellant to indicate or imply that it was part and parcel of the price lists. It is doubtful whether the printed portion can at all be regarded as part of the price lists. Even if it were to be read as if it were an integral part of the price lists, they are in direct conflict with the "Nil" declaration written in hand in the column relating to discount. Now, it is well settled that if there is conflict between what was written in hand in a document otherwise printed and the printed matter, then it is the hand-written matter that prevails over the printed matter as a special variation where the printed Clause would be inapplicable. [See AIR 1962 Cal. 325 - and the decisions cited therein - namely (i) 1947 A.C. 46 where Lord Wright delivering the judgment of the Privy Council observed 'If there is any discrepancy between this printed Clause and the stamped Clause in the margin, the latter on ordinary principles of construction will apply"; (ii) 1893 A.C. 351 - as well as 10 Halsbury's Laws of England (Hailsham Edition) p. 279]. In the premises, the printed portion in these price lists are to be disregarded and the result is, once again, "Nil" trade discount declared in the price lists. For the reasons set forth in para 6 supra, there is no case for remand.
8. I cannot, therefore, agree with the order of remand and in view of our difference, the papers may be placed before the Hon'ble President for his decision.
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(M. Gouri Shankar Murthy) Dated : 4.11.1986. Member (Judicial) S. Venkatesan, President (T) (Order No. 19 to 30/1987- A) These 12 appeals raise a common issue and arise from a combined Order-in-Appeal of the Appellate Collector. They were accordingly taken up together by Special Bench - A, consisting of Members, S/Shri M. Gouri Shankar Murthy and P.C. Jain. Since the two learned Members could not agree on the order to be passed, the matter was referred to me as President in terms of Section 129C(5), Customs Act, as amended and as made applicable to Central Excise.
2. After the date of hearing before the President was fixed, it was observed that the two learned Members had not specified the points of difference as contemplated in Section 129C(5), Customs Act. The representatives of the two sides were therefore, asked to meet me in my Chamber. It was pointed out to the two representatives (Shri V. Lakshmikumaran for the appellants and Shri K. Ajwani for the Department) that the points of difference had not been specified, and that either side would be within its rights to ask that the two learned Members should in the first instance formulate the points of difference. While indicating my willingness to refer the case back to the original Bench if either of the parties so desired, I mentioned for the information of both sides that the two Members constituting the original Bench could come together again only on the 12th January, 1987 (as they would be successively on leave), and that one of the two Members, Shri Murthy, was due to retire on the 2nd February, 1987.
3. After some discussion, the representatives of both sides expressed the view that, while the law required the two Members of the original Bench to state the points of difference, it would not be expedient, in the unusual circumstances of the present case, to refer the matter back to them for this purpose. If that was done, there was a strong possibility that the entire proceedings would become infructuous, due to the retirement of one of the Members of the original Bench. The representatives of both sides agreed that the specific points of difference could be formulated by the President, and they might be given the opportunity to comment on them. If this was done, both sides would undertake that they would not at a later stage question the validity of the procedure adopted in this regard.
4. The matter was taken up in Court on the appointed date. Both sides confirmed that the hearing could proceed on the basis of the points formulated by the President, which read as follows :-
"(1) Having regard to the declarations made by the appellants in the relevant price-lists, could their claims for refund on the basis of deductions from the declared values on account of "trade discounts" be considered ?
(2) If the answer to question No. 1 is in the affirmative, should the cases be remanded to the concerned Assistant Collector of Central Excise for a fresh consideration of the appellants' refund claims in the light of the principles enunciated by the Supreme Court in the case of Bombay Tyre International Limited?"
Both sides were heard and the matters were reserved for orders.
5. Subsequently, it appeared to me that a further aspect needed to be considered, and that this would necessitate an amplification of the first question. Accordingly, the hearing was re-opened, after giving notice to both parties. At the resumed hearing, the learned representatives of both sides were informed of the reason for re-opening the hearing. The text of the questions as reformulated, and handed over to the learned representatives of both sides, ran as follows :-
"(1) Having regard to the declarations made by the appellants in the relevant price lists and the wording of their refund claims, could their case for refund on the basis of deductions from the declared values on account of "trade discounts" be considered ?
(2) If the answer to question No. 1 is in the affirmative, should the cases be remanded to the concerned Assistant Collector of Central Excise for a fresh consideration of the appellants' refund claims in the light of the principles enunciated by the Supreme Court in the case of Bombay Tyre International Limited?"
The learned representatives were informed that the arguments already advanced by them need not be repeated, but they were at liberty to advance additional arguments in the light of the reformulation of question No. 1. Both sides agreed to the reformulation and they were accordingly heard.
6. At the start of the first hearing, Shri Lakshmikumaran submitted that the appellants were now confining their claims for refund only to the amount of "quantitative trade discount". According to him, a reference to this discount had been made in the relevant price-lists. Therefore, the learned Member, Shri Murthy was wrong in holding that the appellants were seeking to set up a new case, totally inconsistent with the declaration they had originally made. He further submitted that the learned Member had been in error in interpreting the word "Nil" (sic) in the price-lists as meaning that no discount was being allowed.
7. In Member Shri Murthy's order a reference had been made to certain price-lists. It had been pointed out by the learned Member that in para 5 of the revision application reference has been made to two price-lists Nos. PL/53/73 and-PL/54/73 (effective 19.6.1973 and 20.6.1973). They had however produced before the Bench a copy of only one of those price-lists, namely PL/53/73. In addition, they had produced two other price lists, effective from 7.7.1972 and 8.7.1972, which were not adverted to at all in the revision application.
8. After obtaining instructions from his clients, Shri Lakshmikumaran clarified that price lists Nos. PL/53/73 and PL/54/73 had been submitted to the Excise authorities but had been returned by them with some objections, under a letter dated 13.6.1973 from the Superintendent. The copy of price-list PL/53/73 was not therefore an approved price-list. In view of this, Shri Lakshmikumaran stated that he would not base his arguments on the copy of PL/53/73 which had been filed before the tribunal.
9. Shri Lakshmikumaran stated that the copies of the other two price-lists, effective from 7.7.1972 and 8.7.1972, had been filed before the original Bench, in compliance with the desire of that Bench to see some typical price-lists. The compilation of papers filed under the letter dated 4.6.1986 of the advocates for the appellants is referred to for convenience as "the Additional Papers". The two price-lists in question are at pages 15 and 16 of the Additional Papers. For convenience these price-lists will be referred to as "PL7" and "PL8" respectively. Shri Lakshmikumaran stated that there would also be other relevant price-lists. However, these two price-lists could be considered to be representative.
10. Drawing my attention to the various entries in PL7, Shri Lakshmikumaran pointed out that it was made out in the prescribed form. There was a repetition of some columns in the price-list. This was because there were three alternative sets of details to be given, depending on whether the sales were to wholesale dealers and consumers, or to sole distributors, sole selling agents or authorised stockists; and in the latter case the price-list had to show the price charged by such sole distributors, etc., to wholesale dealers or consumers. The entries for "price per unit", "discount allowed if any and condition" and "details of taxes including Central Excise duty if any included in the price" were specified in respect of each of the three categories of sales. Shri Lakshmikumaran admitted that the positioning of some of the entries had not been done properly, that is, under the proper column headings. However, on a careful scrutiny, it would be seen that the handwritten entry "Nil" (sic) under the heading "discount allowed if any and condition" occurred only under the set of columns relating to "price charged by the manufacturer to the sole distributors, sole selling agents or authorised stockists" and the further set of columns relating to "price charged by sole distributors, sole selling agents or authorised stockists to the wholesale dealers or to the consumer". Under the set of columns relating to "price charged by the manufacturer to wholesale dealers or consumers if there is a direct sale", reference had been made to various trade discounts for different types of substandard fabrics. It could be seen that the relevant entries were on the following lines :-
"Trade discount Multiple S.L.F. 6-1/4% (illegible) 9% Defect 11-1/2% ...
..."
The expressions "S.L.F.", "Defect", etc., were explained in the printed note (A) at the bottom of the form. "S.L.F." was explained as "sub-standard fabric in short length which is below 8 metres Weaving/Dyeing/Printing minor defects". "D or defects" was explained as "sub-standard fabric is having major defect of weaving and/or Dyeing and/or Printing". The other terms were defined on similar lines. Shri Lakshmikumaran, therefore, submitted that there was a clear indication in the handwritten declaration in the price-lists that certain trade discounts for Sub-tandard fabrics were given.
11. Shri Lakshmikumaran also drew attention to another printed note (B) at the bottom of the price-list form. This was headed "Quantitative Trade Discount allowed on bulk orders booked". According to this note, if the order booked for all suiting qualities totalled together was from 1000 to 2999 metres (2499 metres for one quality), the "quantitative trade discount" (Q.T.D. for short) was 3%. For 3000 metres (or 2500 metres) and above it was 5%. Shri Lakshmikumaran submitted that by virtue of this note (B) it should be considered that the appellants had duly declared in their price-list the quantity discounts given by them.
12. Shri Lakshmikumaran referred to a contract dated 15.11.1972, of which copies had been filed (vide pages 5-6 of the Additional Papers). This was a contract between the appellants and a wholesale buyer, M/s. N. Popatlal & Sons. The goods were described as "K 64" and the quantity as 15,000 metres. On the face of the contract, there was a handwritten endorsement "5% Q.T.D. 2% in Bill and 3% after Completion". Another contract also dated 15.11.1972 for sale of shirtings to M/s. M. Kumar & Co., had also been filed (vide pages 7-8 of the Additional Papers). This was for a quantity of 1800 metres, and bore the endorsement "2% Q.T.D. after completion". Shri Lakshmikumaran submitted that these contracts followed a pattern known to everybody in the trade. He cited the order of the Hon'ble Supreme Court dated 14.11.1983/15.11.1983 in the case of Bombay Tyre International Private Ltd., and Ors., (1983 ECR 2233D SC), wherein it had been observed as follows :-
"Trade Discounts :- Discounts allowed in the trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. Such Trade Discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price."
Shri Lakshmikumaran submitted that the claim of the appellants was squarely covered by the above observations of the Supreme Court, because in the contracts signed with the respective buyers the "Q.T.D." had been clearly specified. In some cases a part of the discount was to be allowed in the bill (i.e. at the time of clearance) and the balance after completion of the contract, in the form of a refund. In other cases the entire discount was to be given after completion of the contract. But so long as the eligibility of the buyers to these discounts and the quantum of discounts were known at the time of clearance, they should not be disallowed only because the benefit was not given at the time of each clearance and deducted from the invoice price.
13. Shri Lakshmikumaran referred to the letter dated 15.2.1973 addressed by the appellants to the Superintendent of Central excise, Modinagar (Annexure A to the revision application). In this letter they had given clarifications regarding various items such as labour charges; forwarding, insurance, loading and Dharmada; discounts; and commission. (In respect of discounts, it was stated "the pattern of discounts allowed by us is being mentioned in the price-list submitted by us from time to time"). He then referred to the Assistant Collector's Order-in-Original. In para 3(2), the Assistant Collector had set out the pleas made by them in support of their claim for refund. He had recorded that the appellants had claimed "selling expenses" in respect of only the following items :-
"Salary & Wages, Advertisement expenses, Bank Charges, Business Promotion expenses, Travelling Expenses, Commission to Selling Agents, Brokerage to Selling Agents, Incentive to Customers and Rebate to Customers".
The Assistant Collector had disallowed the claim on the basis of various judgments. He had not raised the point that the refund claim was inadmissible because an appeal should have been filed against the approval of the price-list. In the Appellate Collector's order also no such objection had been taken.
14. It was pointed out from the Bench that there was an observation to that effect in para 4 of the Appellate Collector's order. The Appellate Collector had observed :-
"The refund claimed is not against any invalid order of the assessment but is claimed as relief under Voltas Judgment. Assuming that the Supreme Court in the Voltas case has made a declaration of new law on the construction of Section 4(a) of the Central Excise Act such declaration cannot be applied in the facts and circumstances of this case because no such deductions were claimed or sought to have been claimed while submitting the price list by the appellants. Assessment had been correctly made on the wholesale cash price which the appellants had declared and received for the sale of goods to the wholesale dealers. The question of deduction of selling cost and the selling profits from their wholesale cash price does not arise because they have never been claimed in their price lists and therefore, the basis on which the refund has been claimed has not been found to be applicable in the facts and circumstances of the case".
Shri Lakshmikumaran's reply was that, as already pointed out by him, the grounds for the refund claim had been mentioned in the price-list.
15. With reference to Shri Lakshmikumaran's reliance on the footnotes to the price-lists, the Bench pointed out that these were in the nature of alternative Clauses, to be retained or struck out according to need. Evidently the entries in the price-lists had not been made with due care, as seen from the fact that some of the entries were made under the wrong columns, and the word "Mill" had been entered where the correct entry would have been "not applicable". Similarly, the appellants had not taken care to strike out inapplicable entries from among the printed notes at the foot of the price-list. For instance, note (C) read "We are submitting it under protest as we want to clear the goods on contract prices". This was applicable to a situation which had not arisen at all in their case. In view of this, a question could arise whether anything contained in the printed footnotes should be taken as a considered declaration by the appellants in the price-list. Shri Lakshmikumaran replied that the notes were present in the price-list. The Assistant Collector had approved the price-list as it stood and had not objected to the footnotes. Hence they should be taken as valid. Shri Lakshmikumaran accordingly submitted that the refund claims of the appellants were fully in accordance with the declarations in the relevant price-lists. Therefore, the appeals should be remanded to the Assistant Collector, as proposed by Member, Shri Jain. He submitted that both questions should be answered in the affirmative.
16. When the hearing was resumed on the basis of the reformulation of the first point, Shri Lakshmikumaran's attention was drawn to the wording of the 11 refund claims, each covering a period of one month, from September, 1972 to July, 1973. (From the Appellate Collector's order it is seen that there were 12 refund claims, from August, 1972 to July, 1973. The set of papers filed by the appellants on 22.7.1986 and referred to as the "Second Paper Book" does not contain a copy of the refund claim for August, 1972. However, it is common ground that all the 12 claims were similar in material respects). It was pointed out that in each case the refund was claimed "on account of excise duty paid during the month of ____due to inclusion of selling expenses (inadvertently) in the value of goods...." In the earlier claims the word "inadvertently" was not present. It appears in the later claims for the periods from December, 1972 onwards. Shri Lakshmikumaran's comments were invited on the question whether the case now being argued for refund on the basis of admissibility of quantity discounts was consistent with the nature of the claim as put forward in the respective refund claims.
17. In reply, Shri Lakshmikumaran took up a particular refund claim, namely the one dated 28.6.1984, pertaining to the month of July, 1973. The claim was on the ground of "inclusion of selling expenses inadvertently in the value of goods". Attached to the claim was a "summary of details", showing in each case the assessable value on which duty was paid, the assessable value excluding 12.53%/7.86% selling expenses, on which duty ought to have been paid (according to the appellants), and the consequential refund due, according to the appellants. (The different percentages of "selling expenses" were with reference to non-knitted and knitted fabrics respectively). Shri Lakshmikumaran submitted that if the "Q.T.D." on which the refund was now claimed was shown to form a part of the "selling expenses", the claim could not be said to be a new claim.
18. Shri Lakshmikumaran drew attention to the appellants' letter dated 5.7.1973, addressed to the Assistant Collector of Central Excise, Ghaziabad, appearing as Annexure C to their revision application. A copy of this letter, with its enclosures, has been filed in the Second Paper Book. In this letter the basis of their claims had been explained, with reference to the appellants' profit and loss account for the year ended 30.4.1972. It could be seen from this account that the net sales (excluding excise duty) amounted to about Rs. 4.54 crores. It could also be seen that the "selling expenses" amounted to about Rs. 57 lakhs. A break up of the selling expenses had also been given. This included an entry "Incentive to Customers" of about Rs. 20.82 lakhs and an item "Rebate to customers" of about Rs. 6.57 lakhs. These two items represented the "quantitative trade discount" on the basis of which relief was not being sought.
19. The Bench enquired how the two items "Incentive to customers" and "Rebate to customers" could be linked with the Q.T.D. Shri Lakshmikumaran stated that if the figures of the Q.T.D. given over the accounting year were added up they would tally to the last paise with the figures shown against the two aforesaid items. The Bench then put a further question why there were two different items, and whether two different names were being given to the same Q.T.D. After consulting the representative of the appellants, Shri Lakshmikumaran stated that the item "Incentive to customers" covered the "Quantitative Trade Discount". The item "Rebate to Customers" covered a 2% discount allowed for cash payment. Shri Lakshmikumaran added that in a recent judgment dated 20.12.1986 in a case relating to Madras Rubber Factory, the Supreme Court had confirmed the admissibility of cash discounts for exclusion from the assessable value.
20. Shri Lakshmikumaran submitted that the refund claims in question had all been filed after the letter dated 5.7.1973, and accordingly they should be read with that letter. In that letter a reference had also been made to the appellants' previous letter dated 15.2.1973 to the Superintendent, Modinagar (Annexure A to the revision application). As already mentioned by him earlier (vide para 13 supra), that letter contained an explanation of their pricing pattern and there was a specific statement that "the pattern of discounts allowed by us is being mentioned in the price-list submitted by us from time to time".
21. Shri Lakshmikumaran therefore reiterated that the ground for the refund claim was not a new one and therefore, should be taken into account.
22. Without prejudice to these requirements, Shri Lakshmikumaran submitted that even if it was considered that the refund claim was sought to be amended, this was permissible. In this connection he cited the order of the Tribunal in the case of Premier Tyres Ltd. v. Collector of Customs, Madras, 1984 (16) E.L.T. 419. This was a case under the Customs Act. the goods were assessed under Item 82(3) of the Indian customs Tariff (the First Schedule to the Indian Tariff Act, 1934). A refund claim was made to the Assistant Collector, claiming re-classification under Item 87 ICT but it was rejected. The assessees went in appeal to the Appellate Collector, but this time they claimed classification under Item 39 ICT. The appeal was also rejected and the original classification under Item 82(3) was upheld. In the meantime, the Supreme Court, in the case of Dunlop India Ltd., (AIR 1977 SC 597), held that the goods (V.P. Latex) were classifiable under Item 39 ICT. In their revision application," which was transferred to the Tribunal to be heard as an appeal, the appellants again sought classification under Item 39 ICT and consequential refund.
23. Before the Tribunal there was no controversy regarding the classification, which had been finally settled under Item 39 ICT in view of the judgment of the Supreme Court. However, it was argued by the learned Departmental Representative that the amount of refund should be limited to the amount which would have been admissible to the appellants on the basis of their original claim under Item 87. (The classification under Item 39 would have resulted in a higher refund). After referring to various authorities, the Tribunal held that where an amendment was allowed on the ground not set out in the memorandum of appeal but allowed to be raised, such amendment, if accepted, would relate back to the date of suit or claim as originally filed (except where an amendment added a new party or arose out of events subsequent to the institution of the suit). The Tribunal, by a majority order, directed reclassification of the goods under Item 39 ICT with consequential refund.
24. Shri Lakshmikumaran submitted that on the same principle, even if the reliance on the quantitative trade discount was regarded as an amendment to the appeal, it should be taken as relating back to the date of the original claims and should be allowed.
25. It was put to Shri Lakshmikumaran that such a principle could have a very sweeping application. For instance, a refund claim might originally have been made on the ground of wrong classification. Subsequently, the applicant might wish to give up the ground of wrong classification but pursue the claim on the basis that some goods had been short-landed. On the basis of the authorities cited, could it be contended that the claim should be allowed to be amended, with effect from the date of its filing?
26. Shri Lakshmikumaran's reply was that an amendment on the basis of new facts, such as would be involved in the above hypothetical case, might not be permissible. But if the amended claim could be sustained on the basis of the same facts and records on which the original claim was based, the amendment should be allowed. In this connection, he referred to the provisions of Section 11B(3) of the Central Excises and Salt Act.
27. On a point of clarification, the Bench pointed out to Shri Lakshmikumaran that reference had been made to certain contracts with wholesale dealers, providing for discounts of 2%f and 5% (vide para 12 supra). It had been stated that the "Q.T.D." referred to in these contracts was the same as had been referred to in the footnotes to the price-list. It was further observed that whereas the "Q.T.D." as shown in the representative price-lists PL7 and PL8 was 3% or 5%, depending on the quantity of goods ordered, the contracts referred to Q.T.D. of 2% and 5%. Shri Lakshmikumaran was asked how the figure of 2% Q.T.D. (e.g. in the contract with M/s. Kumar & Co.) could be reconciled with the figures of 3% and 5% shown in the price-lists.
28. Shri Lakshmikumaran's reply was that in the contract with M/s. N. Popatlal the total discount was 5%, consistent with the quantity of goods booked. However, it was given in two slabs of 2% and 3%. In the case of M. Kumar & Co., where there was only a "Q.T.D." of 2%, it was likely that in the relevant price-list provision had been made for a Q.T.D. of only 2%.
29. Replying for the Department, Shri Ajwani stated that he would support the view taken by Shri Murthy.
30. Shri Lakshmikumaran had argued that Shri Jain had explicitly held that the refund claims were maintainable, although the decision on the price-list was not contested in appeal. Member, Shri Murthy had not explicitly disagreed with this conclusion, and therefore need not be taken as having differed from it. Shri Ajwani submitted that in this case silence did not mean consent, and it was clear from Shri Murthy's order that he was not in agreement with Member, Shri Jain on this point.
31. Shri Ajwani submitted that PL7 and PL8 had been filed as representative of the relevant price-lists. He commented in detail on the handwritten entries in the two price-lists. He submitted that although there were some errors in the positioning of the entries under the different columns, there were handwritten entries reading "Nill" under the latter two columns headed "discount allowed if any and condition". These entries could not be explained as being due to any errors in positioning. They amounted to a categorical statement that the discount allowed was "Nill". These entries should therefore be given due weight.
32. Referring to the printed notes at the foot of the form, Shri Ajwani submitted that if reliance was to be placed on any of the notes it should be placed on all. The first note, which had not been struck out, stated that the goods were stock goods of odd shades and designs and had been sold at lesser rate as no better price could be realised in the market. It was thus clear that these two price-lists related only to substandard goods. The two contracts dated 15.11.72 and on which Shri Lakshmikumaran had relied were for standard goods. This could be seen from para 3 of the terms of contract, which read that "the quality of goods shall in all cases, accord with the recognised standard quality of such goods manufactured by the company". Further, it could be seen that the quality numbers shown in the two contracts did not tally with any of the quality numbers mentioned in the "description" column in the two price-lists. Accordingly, the two contracts produced had no relation to the price-lists and could not be relied upon for interpreting them.
33. Shri Ajwani submitted that the printed footnotes to the price-list covered all possibilities. Those not applicable were required to be scored out. This however had not been done by the appellants. Note (C) relating to submission under protest was clearly inapplicable, but it had not been struck out. In such circumstances writing by hand would supersede a printed entry, as observed by Member, Shri Murthy.
34. Shri Ajwani submitted that in any event the quantity discounts shown in footnote (B) were only for Sub-tandard goods and not standard goods, in view of he first printed note in the form (vide para 17 above). He further submitted that in price-list PL/53/73 (which was stated to have been returned to the appellants) they had taken care to strike out inapplicable entries. This showed that they were aware of the need to strike out irrelevant entries.
35. Shri Ajwani pointed out that in both the price-lists the appellants themselves had written the words "trade discount", with reference to discounts for Sub-tandard goods. From this it was clear that they were aware of the significance of the expression "trade discount". Nevertheless, they had entered "Mill" under the columns for "discount allowed if any and condition". This should be taken as a declaration consciously made.
36. As an alternative argument, Shri Ajwani submitted that the contracts filed by the appellants were with reference to orders booked and to be executed. What was to be excluded from the price was a trade discount allowed at the time of removal in respect of the goods. A discount which was conditional on the performance of the buyer was not covered by this. He drew attention to Clause 7 of the conditions in the contract form, which gave the appellants the option to deliver the goods in one or more instalments. In this connection, he referred to the judgment of the Gujarat High Court in the case of Ahmedabad Manufacturing and Cloth Printing Company Ltd., reported in 1983 ECR 1. It had been held therein that the assessable value in terms of Section 4 was the wholesale price at the factory gate, and no deduction from it was permissible.
37. Shri Ajwani also referred to the judgment of the Supreme Court in the case of Coromandel Fertilizers Ltd., reported in 1984 (17) E.L.T. 607 (SC). In para 18 of that judgment it had been observed as follows "It is possible that in a given case, payment of what is termed as commission may, depending on the facts and circumstances of the case (be) in the nature of trade allowance. But every kind of trade allowance does not necessarily qualify for deduction in assessment of excise duty."
Shri Ajwani submitted that merely because a deduction was called a trade discount, it was not ipso facto eligible for exclusion from the assessable value.
38. Shri Ajwani also referred to the order of the Tribunal in the case of Orient General Industries Limited, reported in 1985 (21) E.L.T. 326. In that case, the Bench had to deal with a "special incentive bonus". In para 13 to 16 of its order, the Tribunal had held that since the sale price had already been paid at the time of purchase and the bonus discount was determined after the end of the year, it could not be termed as trade discount. It was a sort of reward or gift of incentive for promoting sales, or a contingent concession dependent on the basis of the purchased turnover or performance. The Bench had taken note of the clarification 1984 (17) E.L.T. 329 SC of the Supreme Court of its main judgment in the case of Bombay Tyre International, on which clarification Shri Lakshmikumaran had relied. The above decision of the Tribunal was applicable to the present case. (Though that case before the Tribunal was not under the old Section 4, the Supreme Court had clarified that the basic interpretation would be the same for the new Section 4). The deduction claimed by the appellants in the present case had been described by them as "incentive to customers". This also was contingent of performance, and either a part of it or the whole of it was given only at the end.
39. Referring to para 3 of the Order-in-Original, Shri Ajwani submitted that the so-called "incentive" was claimed under the heading of "selling expenses" or "selling profits". These terms would not include a trade discount.
40. Shri Ajwani submitted that in terms of Section 4 as amended, a trade discount to be admissible should be one "allowed in accordance with the normal practice of the wholesale trade". In the Bombay Tyre International case 1983 (14) E.L.T. 1896 the Supreme Court had observed that there was no material difference between the old and new provisions. In the present case, the discount was an allowance for encouraging the clearance of Sub-tandard goods. This could not be considered a normal trade discount.
41. Member, Shri Jain had in para 8 of his order distinguished the present case from the case of Orient General Industries. Such a distinction was not valid, because the circumstances were identical.
42. Shri Lakshmikumaran had referred to the letter dated 15.2.73 addressed by the appellants to the Superintendent of Central Excise, Modinagar. That letter was not relevant for the following reasons:-
(i) It was written in February, 1973, subsequent to the submission and approval of the price-list PL.7 and PL.8.
(ii) It was addressed to the Superintendent of Central Excise, whereas the refund claims were adjudicated by the Assistant Collector.
(iii) It was in reply to a "Verbal query" by the Superintendent. It had not been indicated what that query was.
(iv) It stated "the matter had since been re-examined and the correct position... is as follows". This meant that the representations made in that letter were not the same as those made in the price-lists.
43. Shri Ajwani submitted "worst comes worst", that a remand even if otherwise considered necessary, would be a fruitless exercise at this stage. The Bench enquired why he was saying so. Assuming a remand to be ordered, it would be for the appellants to show from contemporaneous records that discounts in accordance with the relevant price-lists had been given. Shri Ajwani reiterated that it would not be possible to determine the amount of refund at this date.
44. In conclusion, Shri Ajwani submitted that if remand was ordered, it should not be in terms of Question No. 2 as formulated by the President. No reference should be made to the Supreme Court judgment in the case of Bombay Tyre International Ltd. If necessary, the question could be reworded to say that the remand to the Assistant Collector was for a fresh consideration of the appellants' refund claims "as per law".
45. With reference to the submissions of Shri Lakshmikumaran at the resumed hearing, Shri Ajwani submitted that the modification of Question No. 1 did not affect his earlier submissions. Any refund claim had to have a basis. In the present case, the basis was the price-list. As already submitted by him, there was nothing in the price-lists to support a claim for refund.
46. On the basis of the appellants' letter dated 5.7.73, it had been argued that the refund claims arose out of the Supreme Court judgment in the Voltas case. According to Shri Ajwani, that judgment related to the exclusion of "P.M.E." (post manufacturing expenses). The concept of trade discounts which were to be excluded from the assessable value was already known and accepted even prior to the Voltas judgment.
47. Shri Ajwani referred to the Assistant Collector's order. In para 2 it had been mentioned that the appellants had been given a notice to show cause why their claim should not be rejected on the ground that the assessments had been made on the wholesale cash price declared and charged by the mills for goods delivered at the factory gate and the asessable value had been correctly approved after allowing the abatement of admissible deductions of the trade discount. In response to this show-cause notice the appellants had submitted a written reply. In that reply they did not make any mention of a trade discount. They based their case on the ground of exclusion of "selling expenses". They had also referred to their "selling organisation" which was said to be distinct from the general organisation of the mills. Shri Ajwani submitted that a quantity discount could not be considered as a part of "selling expenses" or expenditure on a "selling organisation".
48. Referring to the Tribunal's order in the case of Premier Tyres, Shri Ajwani submitted that that case related to the amendment to the grounds of appeal. The question was not whether a claim could be made in place of "no claim". Further, in that case the Tribunal had before it a judgment of the Supreme Court on the classification of the very item in question. Therefore, the benefit of that judgment had to be given in a case pending before the Tribunal. In the present case there was no such specific judgment of the Supreme Court.
49. Shri Ajwani referred to paras 13, 14 and 18 of the Tribunal's order, wherein there was reference to the principles applicable in allowing amendment. Those principles were not applicable to the present case. Specifically, in para 14 the Bench had referred to the Supreme Court judgment in the case of L.J. Leach & Co. v. Jardine Skinner & Co. (1957 SCR 438). The Supreme Court had approved the principles enunciated by the Bombay High Court in the case of Kishan Das Rup Chand, wherein it had been observed that -
"All amendments ought to be allowed which satisfy two conditions:
(a) of not working injustice to the other side and
(b) of being necessary for the purpose of determining the real questions in controversy between the parties".
In the present case, allowing an amendment would work injustice to the Revenue, and it was also not necessary for determining the question before the Bench.
50. As regards the judgment said to have been recently delivered by the Supreme Court in the case of Madras Rubber Factory, confirming the admissibility of cash discounts, that judgment was not available to him and therefore he could not comment on it. In any case the question of applying that judgment would not arise so far as the scope of the present Bench was concerned.
51. When Shri Lakshmikumaran started his reply, he was asked by the Bench whether the original carbon copies of price-lists PL.7 and PL.8 were available, since these might contain writing in ink which had not come out on the photocopies. Shir Lakshmikumaran had the carbon copies, which were seen by the Bench and by Shri Ajwani. Apart from the endorsements appearing in the photocopies they did not contain any other writing.
52. Shri Lakshmikumaran submitted that the present hearing was not an appeal from the decisions of the two Members constituting the original Bench. Those Members had not given any finding on the question whether the "incentive" and "rebate" were trade discounts. It would not be proper for the present Bench to give any finding on this question.
53. As regards Shri Ajwani's submission (para 15 supra) that "silence does not mean consent", Shri Lakshmikumaran disagreed. Since Member Shri Murthy had not specifically disagreed with the finding of Shri Jain, his disagreement could not be presumed.
54. The Bench pointed out to Shri Lakshmikumaran that disagreement could be explicitly or implicitly expressed. In holding that the appellants could not set up a new case, totally inconsistent with the declaration originally made (in the price-lists), it could be said that Member Shri Murthy was disagreeing with Member Shri Jain's view. Shri Lakshmikumaran submitted that this would not be a correct interpretation. Further, Member Shri Murthy's observations proceeded on the basis (which according to Shri Lakshmikumaran was erroneous) that there was no reference to discounts in the price-lists.
55. As regards the entry "Nill" in some columns of the price-lists relating to trade discounts, Shri Lakshmikumaran submitted that even if those entries had been consciously made, they were not applicable to the present case because those columns related to different categories of buyers.
56. As regards the printed footnotes, and Shri Ajwani's submission that these were of a general nature and irrelevant ones had not been struck out, Shri Lakshmikumaran submitted that the footnotes were there. If the appellants were entitled to a benefit in terms of those footnotes, the benefit should be given to them.
57. As regards the interpretation of the expression "trade discount", the Supreme Court judgment in the Voltas case had been delivered in December 1972, whereas the price-lists PL. 7 and PL. 8 had been filed in July 82, when the law has not been finally laid down. Some difference in terminology should not be given undue weight. If the discount had been given in accordance with established practice, the appellants should not be deprived of the benefit.
58. In price-list PL/53/73, it was true that irrelevant items had been scored out. This was because the relevant information had been included in the body of the price-list. This should not lead to a conclusion adverse to the appellants in regard to PL. 7 and PL. 8.
59. Shri Lakshmikumaran submitted that if there was a change in the contract price, whether upwards or downwards, after a contract had been concluded, the assessable value of goods sold in terms of that contract should change correspondingly. In the present case if the price was effectively reduced at the conclusion of the contract, the appellants should be entitled to the consequential relief.
60. Referring to Shri Ajwani's point that the claim of the appellants was in respect of "selling expenses", and this would not include a quantity discount, Shri Lakshmikumaran submitted that a deferred discount meant a payment by the manufacturers linked with increased purchases from them. It could accordingly be considered as "selling expenses".
61. Shri Ajwani had referred (para 38 supra) to the case of Orient General Industries. The present case could be distinguished. In that case the "incentive bonus" had relation to the level of purchases in the previous year. A lump sum was paid by the manufacturers to the dealers if they exceeded the target based on the performance of the preceding year as fixed by the manufacturers. It was a payment of that nature which was held to be inadmissible. In the present case the facts were different, because the Q.T.D. was based on performance under the contract.
62. Shri Lakshmikumaran referred to the judgment of the Supreme Court in the case of Moped India Ltd., reported in 1986 (23) ELT 8. In that case what was at issue was called a "commission". It was held by the Supreme Court that the amounts described as commission were clearly trade discount liable to be excluded from the assessable value. The Supreme Court clarification reported in 1986 ECR 2233 was clearly applicable and should not be rendered nugatory.
63. In the case of Standard Electric Appliances, reported in 1979 ELT 53, the Madras High Court had accepted that a "quantitative discount" was a trade discount. This decision was also in favour of the appellants.
64. Accordingly, Shri Lakshmikumaran submitted that both the questions should be answered in the affirmative, and the cases remanded to the concerned Assistant Collector of Central Excise. He did not agree that the reference to the judgment of the Supreme Court in the case of Bombay Tyres International should be omitted, since that was an important judgment on the principles of valuation. There should not be any apprehension that the Assistant Collector would be misguided by referring to that judgment and would not apply his mind. If at all the terms of remand were to be modified, this could be done by adding the words "and other cases".
65. With reference to the arguments advanced by Shri Ajwani at the resumed hearing, Shri Lakshmikumaran submitted that the Supreme Court judgment in the Voltas case did not relate to post manufacturing expenses. It related to the price at the factory gate. The reference to post manufacturing expenses was a casual observation.
66. Shri Lakshmikumaran submitted that although Shri Ajwani had opposed his arguments, he had not said that the "incentive to customers" and "Rebate to customers" did not form part of the 12.53% or 7.86% claimed as selling expenses. It was the sales department which did the invoicing of the goods and gave the discounts. Therefore these could be considered as expenses of the sales department.
67. Shri Ajwani had argued that trade discounts had always been admissible. However, it was necessary for the Supreme Court to say that trade discounts, by whatever name they were known, were admissible.
68. As regards the Tribunal's order in the Premier Tyres case, the distinction sought to be drawn by Shri Ajwani was not valid. It was not necessary for an appellant formally to ask for an amendment to the grounds of appeal. The ratio of that case was that a higher refund than had been originally claimed could be allowed. Shri Lakshmikumaran also submitted that no question of injustice to the Revenue could arise if the appellants' claim was considered. On the other hand, there would be an injustice to the appellants if it was not considered. He therefore submitted that the question before the Bench should be answered in the affirmative as already proposed by him (vide para 15 supra).
69. I have carefully considered the points at issue, in the light of the orders proposed by the learned Members, the authorities relied upon by them and the arguments advanced before me by the learned representatives of both sides. In considering the answer to the two questions posed, the following aspects would require consideration:-
(1) the respective classification lists having been approved on the basis of the declarations of the appellants, and no appeals having been filed against the approvals of those classification, lists, could they in effect seek to revise the declarations in and approvals of the classification lists by filing refund claims in relation to specific assessment?
(2) could the declarations in the classification lists submitted by the appellants be read as indicating that approval was sought for allowing specified quantitative trade discounts (Q.T.D's)?
(3) could the Q.T.D.'s or quantity discounts be regarded as covered by the expression "selling expenses"? and if not, (4) could refund on the basis of allowing the Q.T.D.'s be nevertheless considered, on the principle that amendment of the ground of claim would relate back to the date of making the original claim?
70. Taking the first aspect, Member Shri Jain has accepted the authorities cited by the learned advocate for the appellants. He has held that the decision to the contrary relied upon by the SDR was in the nature of a passing observation. The learned Member has held that "there is no bar to filing a refund claim in terms of Rule 1733 read with Rule 11 as it then existed or Section 11B as it now exists even if the decision regarding the rate of duty or value is not contested in appeal at the time of finalisation of the classification list or price-list".
71. As against this, Shri Murthy has observed that, apart from discounts for Sub-tandard goods, no trade or other discount was claimed for exclusion from the assessable value. He has observed that "the appellant cannot now set up a new case, totally inconsistent with the declaration originally made... when there has been no claim, there is nothing to be adjudicated".
72. Thus, there is some difference in approach between the two learned Members, and also between the decisions cited before them.
73. Considering the matter from first principles, it is clear that the purpose of Rules 173B and 173C is that an assessee should state what according to him is the correct classification and rate of duty on goods manufactured by him, and the price, with trade discount if any, of such goods. The two declarations, regarding rate of duty and assessable value, are to be approved, with or without modification, by the proper officer. "Proper officer" has been defined in Rule 2(xi) of the Central Excise Rules, as meaning, in substance, the officer in whose jurisdiction the premises of the assessee are situated. Rule 5 ibid makes it clear that the Collector and the Deputy Collector are authorised to exercise the powers of any officer subordinate to them.
74. The purpose of Rules 173B and 173C, in the context of self-assessment and self-removal, is obviously that questions relating to classification and valuation of goods proposed to be cleared should be determined in advance by the proper officer, so that thereafter the assessee may proceed to clear his goods on his own, subject to submission of the prescribed returns. It is also a fact of which the Bench can take notice that if the declaration of rate of duty or value in a classification list or price-list is not approved as claimed by the assessee, the latter is free to go up in appeal against that decision.
75. It is also a fact of which notice can be taken that the R.T.I2 returns furnished by the assessee are subsequently scrutinised and finalised by the Central Excise Department with reference to the approved classification lists and price-lists.
76. Under this scheme, it can legitimately be expected that an assessee whose declaration of classification or value is approved only with modification by the proper officer (which in effect means it is not approved) would seek a modification of that officer's decision. We can take note that this is actually being done in a large number of cases.
77. The question could then arise as to what would be the purpose of Rule 11 or Section 11B in such circumstances. If the assessee has either to challenge the approval of the classification list or price-list, or abide by those approvals, what is the use of a provision giving him the right to claim refund of duty (which could be on the ground of incorrect classification or valuation) within six months (or other prescribed period) from the applicable date?
78. To this the answer can be that a claim for refund may lie even without challenging the approval of the classification list or the price-list. One type of case may be where the rate of duty or the value on the basis on which a particular clearance was made may not be in accordance with the approved classification list or price-list. The assessee himself may have inadvertently adopted a wrong rate of duty or value. Alternatively, the officer completing the assessment on the R.T.12 "form may have applied a rate of duty or value which is not in accordance with the approved rate of duty or value. A second type of case may be where there has been a typographical or arithmetical mistake in the clearance document, leading to payment of excise duty. There could be other cases also where a claim for refund of duty would lie even on the basis of the approved rate of duty or value. In such cases Rule 11 or Section 11B would certainly come into operation. It cannot therefore be said that the proposition advanced in para 76 supra renders these provisions redundant.
79. The view urged on behalf of the appellants would involve some other difficulties with reference to the scheme of the Central Excises and Salt Act and the rules thereunder. Chapter VIA of the Act lays down a detailed procedure for appeals against any decision or order passed under the Act by any Central Excise Officer. Section 11B, in Chapter II ibid, provides a procedure for claiming refund of duty. That section specifically provides that it is the Assistant Collector of Central Excise to whom the refund claim should be addressed. It also makes it the duty of the Assistant Collector to order a refund, if he is satisfied that one should be made. Now a classification list or price-list is ordinarily approved at the level of an Assistant Collector: on occasion it may be approved at the level of the Deputy Collector or even the Collector. It could hardly have been the intention of the Legislature that an Assistant Collector, in the course of considering a refund claim, should be able in effect to sit in appeal over a decision (on the classification list or price-list) of his Collector. This difficulty would remain even if such a refund claim were to be referred upwards to the Deputy Collector or the Collector.
80. The position that emerges is that an assessee who does not agree with a decision on a classification list or a price-list can challenge it directly by appealing against that decision and not indirectly by filing a refund claim on an assessment based on that decision. In taking this view, it will be seen that no provision of the Central Excises and Salt Act and Rules is rendered redundant, not in there any apparent illogicality or injustice in their application. It is for the assessee to make his declaration or classification (including rate of duty) and value. If his declaration is not accepted in toto, but approved with some modification, it is open to him to appeal against such modified approval, and in the meantime to make effect clearances on the basis of the modified approval. (Section 11B(1) refers also to payment of duty under protest. In such cases, the making of a protest may be superfluous, in view of Section 11B(3), but there could be other types of claims where it would be necessary). If subsequently the assessee considers that duty has been paid in excess, even on the basis of the approved price-list or classification list, he can make a refund claim on that basis, within the prescribed limitation period. However, in the event of his winning his appeal, the duty which would be determined as having been paid in excess in terms of the decision in appeal would be refundable to him even without a specific claim for refund, in view of the provisions of Section 11B(3).
81. In the light of this understanding of the relevant provisions, we may consider the authorities cited on both sides. Member Shri Jain has referred to the judgment of the Karnataka High Court in the case of Shyam Sunder U. Nichani v. Assistant Collector of Central Excise, Bangalore 1985 (22) ELT 751. That judgment, by a learned Single Judge of the Karnataka High Court, had reference to Section 11A, which is a recovery provision. Sections 11A and 11B, although in a sense complementary, are not really pari passu. Thus, Section 11A provides for two different time limits. It also provides for issue of a show-cause notice before a demand is actually made. Section 11B does not contain corresponding provisions. It would not therefore be proper to apply to Section 11B observations made with reference to Section 11 A.
82. Shri Jain has also reproduced para 4 of the Tribunal's order in another set of cases of the same appellant (but for a different period and apparently in somewhat different circumstances). In that order reference has been made to a reported decision of the Tribunal in the case of Sirpur Paper Mills 1984 (15) ELT 461, and also unreported orders Nos. C.117 and 118/85 dated 26.2.85. It is also recorded that the learned advocate read out the relevant portions of these decisions. The reference to the Tribunal's decision in case of Pure Drinks, Calcutta, does not appear to be correctly cited, since the two orders bearing the numbers given relate to some other parties and bear dates other than 26.2.85. I have however seen the Tribunal's decision in the case of Sirpur Paper Mills. On a careful consideration it appears that the decision there was given with reference to the facts of that particular case, the important fact being that even to begin with the assessee protested against the action of the Assistant Collector in changing the classification of the goods in question. It is difficult to derive from this order a categorical enunciation of the principle that a claim for refund would lie even in a case where there was not merely no protest against the Assistant Collector's decision on the price-list, but the price-list was approved by the Assistant Collector without any modification.
83. The order of a two-Member Bench of the Tribunal in another batch of cases of the present appellants in which the above cases find mention, does not contain any independent discussion of the issue and therefore does not require separate consideration.
84. As against the above mentioned cases, there is the case of Aditya Mills Ltd., Rajasthan, relied upon by the SDR (1983 ELT 1853). In that case a three-Member Bench of the Tribunal observed as under:-
"We also do not find any merit in the contention that the procedure of Rule 173B was not observed because it was for the appellants to contest the decision at that stage when they were asked to file a revised Classification List. The Assistant Collector is right in observing that since they did not dispute the Classification List, they could not do so by means of a refund claim".
The learned Member Shri Jain has considered this as in the nature of a passing observation. However, it cannot be said to be a casual observation or one without weight. As a matter of interest, it may be seen that one of the Members of the Bench in the case of Sirpur Paper Mills was also a Member of the Bench in the case of Aditya Mills Ltd.
85. Accordingly, even without having to go into the other aspects which I have mentioned, I would agree with Member Shri Murthy that, in the light of the contents of the price-lists, (which were not contested through appeals there is nothing to be adjudicated, and therefore no purpose in a remand.
86. Although this finding in effect disposes of the reference made to me, I shall comment briefly on the other aspects to which I have referred, since these were argued at some length before me and have been referred to in detail earlier in this order. One of the aspects referred to was whether the declarations in the classification lists submitted by the appellants could be read as indicating that approval was sought for allowing the quantitative trade discounts or Q.T.Ds. In this context I felt constrained to point out during the hearing that neither the price-list form as printed by the appellants for their purpose, nor the manner in which the form was filled in, was satisfactory. There are several misprints in the form and even the positioning of some of the entries is defective. Thus, if, as appears to be the case, the endorsement of approval by the Assistant Collector was also one of the pointed entries in the form - so that all he had to do was to sign on (or below) the dotted line, this endorsement appears below the entries on the form and above the signature of the controller of Accounts of the appellants. It appears as if the appellants are countersigning the Assistant Collector's endorsement! Again, taking representative price-lists PL.7 and PL.8, the positioning of the handwritten entries is defective: entries have been made under the wrong columns, and the handwriting is so bad that some of the entries are quite illegible. Despite these handicaps Shri Lakshmikumaran made the point that the price-list form was in three parts, and that the handwritten endorsement "Nill" to which reference had been made by Member Shri Murthy as an indication that no discount had been allowed, had reference to prices charged by sole distributors etc. to the consumer. In regard to the price charged by the manufacturer to wholesale dealers (which would apply to these cases), with reference to the column "discount allowed if any and condition" there was the mention of "trade discounts" and specific figures were given (vide para 10 supra). Further, the printed footnotes at the bottom of the price-list form, specifying various Q.T.D's should be taken into account.
87. On this point again, I am in agreement with the views of Member Shri Murthy. The learned Member had taken note of the fact that reference was made in the price-list to certain discounts for Sub-tandard goods. There is a reference in the price-list to "trade discount", but under this are the discounts allowed for Sub-tandard fabrics. If at all these entries prove anything, it is that the appellants were aware that trade discounts were eligible for exclusion from the assessable value. No doubt there were printed footnotes at the bottom of the form, but these were comprehensive footnotes meant to be retained or deleted according to need. Thus footnote (C) reads "we are submitting it under protest as we want to clear the goods on contract prices". This note had obviously no relevance to these price-lists, as the appellants did not in fact follow up their "protest". If the appellants wanted to save trouble or space by printing the particulars of specific discounts, they should at least, in their hand-written declaration, have given a cross-reference to the relevant printed item. Since they did not do so, and under the heading "trade discount" referred only to certain specific discounts for Sub-tandard fabrics, it has to be taken that these were the only discounts which they claimed in the said price-lists.
88. A point which came out at the resumed hearing would also be relevant. This is the explanation that the entire sum which was claimed as deduction from the assessable value was not a quantity discount, but part of it was a cash discount (vide para 19 supra). Even assuming that the declaration is the price-list could be construed as including a reference to quantity discount, there was no reference at all to cash discounts which, on the basis of the accounts for the year ending 30.4.72, amounted to Rs. 6.57 lakhs out of the total of Rs. 27.39 lakhs.
89. Next is the question whether a quantity discount (or for that matter a cash discount) could be considered as a part of "selling expenses". On this aspect the arguments of the learned SDR have force. The admissibility of trade discounts per se was not a matter of controversy even prior to the judgment of the Supreme Court in the Voltas case. Even the old Section 4 specifically referred to the trade discount as an admissible deduction. The appellants based their case on the "selling expenses" because they thought that could be pressed for in the light of the Voltas judgment. In reply to the Assistant Collector's show-cause notice they shifted the emphasis from trade discount to "selling expenses". I am in agreement with Shri Ajwani that the concept of selling expenses is different from that of trade discounts. It is not however necessary to elaborate on this, in view of the conclusion reached by me on the first aspect.
90. The last aspect to be considered is the one based on Shri Lakshmikumaran's argument that an amendment to a ground if admitted would go back to the date of the initial claim. When it was pointed out to him that this could lead to a complete switch in the ground of appeal, Shri Lakshmikumaran submitted (para 25 supra) that this was permissible if the changed ground was on the same facts and fresh facts did not have to be gone into. This itself would stand in the way of the appellants in the present case. No doubt the appellants had furnished information in their letter of 5.7.73 regarding their "selling expenses", and this was directly relevant to their claim that these were post manufacturing expenses and should be excluded from the assessable value. But for considering their case for exclusion of quantity discount (or as now mentioned, cash discount), much more has to be done. It would be necessary to link up the quantum of these discounts with the amounts shown as "Incentive to customers" and "Rebate to customers". Even on the basis of the representative documents filed (e.g. the two price-lists PL.7 and PL.8 and the contracts with M/s. N. Popatlal and M. Kumar & Co.) there are some obvious discrepancies, which have been pointed out in para 27 supra). Clearly, even if it was possible for the appellants to make out a convincing case that the Q.T.D. was in fact the amount of quantity discount allowed to customers, and that it was equal to the amount shown as "Incentive to customers", this could only be done by submitting a considerable amount of fresh material. The appellants cannot therefore benefit from the decision of the Tribunal in the case of Premier Tyres Ltd. (para 22 supra) or the judgments on which the decision in that case was based.
91. Shri Lakshmikumaran made a brave attempt on behalf of the appellants and advanced some interesting arguments. However, there are too many serious weaknesses in their case. For the reasons set out by me above, my decisions on the point of difference are as follows:-
(1) No (2) Does not arise.
92. These cases should now go back to the Bench which first heard them, for passing orders in accordance with the above decision.
Sd/-
(S. Venkatesan) Dated : 9.1.1987. President In view of the decision of the Hon'ble President on the point of difference between both of us, the appeals fail and are, accordingly, dismissed.