Customs, Excise and Gold Tribunal - Tamil Nadu
Ponds (India) Ltd. vs Cce on 12 January, 2000
Equivalent citations: 2000(92)ECR550(TRI.-CHENNAI), 2000(124)ELT202(TRI-CHENNAI)
ORDER V.K. Ashtana, Member (T)
1. These appeals from assessee and Revenue arise from a common order-in-appeal No. 112/96 (M) dt. 14.5.1996 which had considered the order-in-original No. 22/AC-V/95 dated 20.7.1995 of Asst. Commissioner of Central Excise.
2. In Appeal No. E/V-1320/96, the assessee/appellants are aggrieved with the said order-in-appeal impugned on three grounds as follows:
(a) the amount of freight subsidy need not be netted off from the freight charges incurred which would form the basis for working out average freight.
(b) Free units given to the authorised dealers as replacement for damage stock etc., is in the nature of quantity discount and accordingly the same will not form part of the assessable value of the excisable goods and
(c) All admissible abatements have to be allowed from 01.07.1995 onwards i.e. the date of recourse to provisional assessment.
3. Heard Shri C. Chidambaram, Ld. Consultant appearing for appellants in this appeal and Ld. DR Shri M. Kunhi Kannan for Revenue.
4. Ld. Consultant submits that the issue at (a) above is already covered by a decision of the East Zonal Bench of the Tribunal in the case of Assam Asbestos Ltd. v. CCE as in 1997 (96) ELT 101 (T) : 1997 (73) ECR 56 (T) wherein it was held that because there is no specific provision existing for reducing the cost of transportation on account of receipt of subsidy from the Government, and since the cost of transportation otherwise is not disputed, therefore same is deductible from the assessable value. He submits that in this case similar subsidy is given by the Government of Sikkim on the equalised freight involved in some of these goods. Therefore, the ratio of the aforesaid decision is clearly applicable to the facts of this case and hence the issue needs to be decided in their favour.
5. Ld. DR on the other hand submits that since appellants received certain sums as subsidy, therefore, these additional considerations flowing back to them need to be deducted from the equalised freight to arrive at the actual freight cost involved. Therefore, the subsidy needs to be added to the assessable value.
6. On the question of free units given to the authorised dealers as replacement for damages etc. at (b) as above, Ld. Consultant submits that the matter is no longer res integra and is now well settled in view of the decision of the Tribunal vide final order No. C/11/1952-1959/99/WRB dated 6.8.1999 in the case of Hindustan Lever Ltd. v. CCE as also final order of the Tribunal bearing No. 1715/97A dated 12.8.1997 in the case of Pond's India Ltd. v. CCE. He submits that when the goods are damaged during transit, free units of equivalent quantity given to the dealers as replacements are in the nature of trade discount and this is deductible from the assessable value as has been held in these final decisions of the Tribunal.
7. On this aspect, Ld. DR submits that the assessable value of the goods is to be determined on the factory gate and if the goods are damaged in transit, that is a consideration which is irrelevant to the price at the factory gate and therefore these free replacements cannot be excluded from the assessable value.
8. As far as the grounds of appeal of appellants at (c) above, the Ld. Consultant submits that it is not disputed that from 1.7.1985 onwards the entire assessment had been kept provisional by the department. He submits that it is now well settled law that if an assessment is declared provisionally, it remains provisional on all counts till it is finalised under Rule 9B(5). The present dispute arise out of such a finalised order vide order-in-original noted above. Therefore, it logically follows that all abatements claimed up to the stage of this appeal and legally allowed would be available to the appellants as a consequential relief from 1.7.1985 in view of the continuing provisional assessment till they were finalised, therefore, whether these abatements were claimed in the body of price list or not is of no consequence whatsoever.
9. On this aspect, Ld. DR submits that when the assessee declared the claimed assessable value on price list in terms of Rule 173C, they are required to claim all abatements/deductions on the body of the price list itself. Since these were not claimed on the body of the price list, therefore, the order-in-appeal has rightly held them as not available.
10. We have carefully considered these rival submissions as well as records of this case. As far as the question of deductibility of the subsidy given by the Sikkim Government on freight from the assessable value is concerned, we find that the issue has already been decided by the Tribunal in the case of Assam Asbestos Ltd. (supra). In that case, the Tribunal had considered where such a subsidy provided by the Central Govt. for factories which were situated in North Eastern Region of the country as an incentive for the manufacturers located at that place but the decision was based on the legal premise that since there was no specific provision existing in law for reduction of cost of transportation on account of receipt of such subsidies, therefore their abatement could not be disallowed. In the present case, the subsidy is granted by the State Govt. of Sikkim but is granted to all goods which are sold by the units set-up in the State of Sikkim. This is to promote industrialisation of Sikkim State which is located in remote location of the country having less infrastructure facilities etc., than the more highly industrialised belts of the country. Therefore, we find that the facts of this case are pari-materia with the facts of the case considered by the Tribunal in the case of Assam Asbestos Ltd. (supra) because whether the incentive is given by the Central Govt. or the State Govt. is immaterial to the issue and the logic of the decision in the case of Assam Asbestos Ltd. (supra) also clearly apply here because there is no provision in Section 4 for reducing such subsidy from the cost of transportation which in this case is equalised freight claimed. In view of this, respectfully applying the ratio of the above decision, we hold that the claim of the assessee in this appeal is legally correct and therefore they are entitled to this claim.
11. With respect to giving of free units to dealers as replacements for damage in transit etc., we again find that the Tribunal has already considered this situation in the two final orders noted above. In the case of Hindustan Lever Ltd. (supra) the West Zonal Bench of the Tribunal has considered this aspect in para-7 of their final order and have followed the ratio of their earlier final order in the case of Hindustan Lever Ltd. vide order No. C-I/880/WZB/1999 dated 6.5.1999 and had accepted the excludability of discount on damaged goods. Similarly, the Tribunal at New Delhi had also allowed the similar claim in para-4 thereof. They had relied on the ratio of the decision of the Tribunal in the case of Assam Valley Plywood Pvt. Ltd. v. CCE as in and Tungabhadra Industries Ltd. v. CCE as in . The facts in the present case are exactly identical in as much as the goods are replaced equivalent to the quantity of goods damaged and claimed to be so by buyers/dealers from the appellants. Therefore, respectfully applying the ratio of this decision, we hold that the replacement for damaged stock would be in the form of trade discount and would not be includible in the assessable value of the excisable goods.
12. As far as the question of disallowing admissible abatements from 1.7.1985 onwards only because same were not claimed is concerned, we find that it is now well settled law that once the assessment of goods during a certain period was done as provisional assessment under Rule 9B, then the such a provisionality extends to the entire gamut of this assessment. Since the assessments were provisional and such a provisionality entitles the claim of the appellants on such abatements, therefore we cannot be a party to disallowing these abatements on the mere technicality that they were not claimed on the price list. These abatements were known to the department because that was the reason why the department had resorted to provisional assessment and that was the reason why the present show cause notice had been issued proposing to deny the said abatements. Therefore, we find great merit in the contention of the Ld. Consultant that all the admissible abatements would have to be allowed from 1.7.1985 onwards which was the date on which the department took recourse to provisional assessment which were sought to be finalised by the Order-in-Original leading to the Order-in-Appeal impugned before us.
13. In view of the aforesaid findings, the Order-in-Appeal impugned stands modified to this extent and appeal of the appellants on the above three grounds succeeds with consequential relief as per law.
14. With respect to Revenue appeal No. E/V-2035/98, Ld. DR submits that Revenue is aggrieved with the same order-in-appeal as mentioned above on the following grounds:
(1) The Cost of Packing for Transportation (COPT) which is in the form of Master Outer cartons should be included in the assessable value because this does not represent the packing for ease transport but was integral to the sale of the goods itself. He also submits that the said master outer bore all the printings of the products contained therein. He reiterates the detailed grounds of appeal of Revenue in this respect.
(2) The second ground of Revenue appeal is concerning with the terms "Consumer Offer". This is nothing but supply of free gifts viz. eye-brow pencil, shampoo sachet, one small soap which are given free after being termed as bought out items on payment of duty along with the goods under assessment in this order-in-appeal for the purpose of sales promotion. Ld. DR submits that Revenue is aggrieved on this system for two reasons. Firstly, the effect of this offer is to reduce the assessable value artificially and secondly, this scheme is only made available in bits and operates for brief periods. He reiterates the grounds of appeal on this issue.
(3) Revenue is also aggrieved on the deductibility of collection charges and related bank charges which have been allowed as deductible by the order-in-appeal impugned. Ld. DR submits that since these constitute additional payment received by the assessee, therefore they are includible in the assessable value. He reiterates the detailed grounds of appeal before us.
(4) The last item on which Revenue is aggrieved before us on the order consists of the scheme on invoices and the scheme after invoices. Ld. DR submits that as is agitated in the grounds of appeal, these schemes are available only on selected products, only periodical, and only to selected dealers. Therefore, they are in the form of an attempt to balance the margin of profit of those dealers who are otherwise getting less margin of profit. He reiterates the grounds of appeal in this respect.
15. Ld. Consultant submits on the question of COPT i.e. excludibility of the cost of master outer cartons, that the reliance of Revenue on the decision of the Geep Industrial Syndicate Ltd., and cited by Revenue in the grounds of appeal is not final orders on that issue. Instead, he cites the decision of the Hon'ble Apex Court in the same matter as in wherein the Hon'ble Supreme Court has clarified the earlier decision in the case of Geep Industrial Syndicate Ltd. on this issue. The Hon'ble Apex Court has laid down that the true test to decide the exclusion or inclusion of such a packing would be in terms of Hon'ble Apex Courts' decision in the case of CCE v. Pond's India Ltd. as in . The Hon'ble Apex Court had also observed that this was in line with the terms considered by the Hon'ble Supreme Court in the case of GOI v. MRF Ltd. as in . The net result of this decision, Ld. Consultant submits, is that the test to be applied in this case would be whether this packing is one in which it is ordinarily sold in the course of wholesale trade to wholesale buyer at the factory gate and if it is not, then the cost of such packing has to be excluded.
16. On a query from the Bench, the Ld. Consultant fairly concedes that the onus of establishing their case in this regard would lie on the manufacturer as has been noted by the Hon'ble Supreme Court in para-7 of the judgment of the Geep Industrial Syndicate Ltd. (supra). Ld. Consultant submits that this burden has already been discharged by them before the lower authorities by filing affidavits of recipient dealers to the effect that the consignment of Dreamflower Talcum powder are received by the deponent in inner carton packing of two dozens also. He submits that a number of invoices have also been submitted to show that the goods concerned are capable of not only being marketed but are actually marketed in many instances packed only in inner containers i.e. without resorting to packing them in the outer master carton. These deliveries are made at the factory gate. He further submits that these wooden boxes have since been replaced by thick quality of outer cartons, and to that extent the decision of the Hon'ble Supreme Court in the case of Geep Industrial Syndicate Ltd. would be on facts which are similar to this case. Ld. Consultant also submits that Final Order No. 1415/98 of the South Zonal Bench of the Tribunal dated 28.7.1998 which has followed the same decision as cited above.
17. With respect to the issue of "consumer offer", Ld. Consultant submits that the issue has already been considered and decided in their favour by the Tribunal in the case of Hindustan Lever Ltd. v. CCE as in as also in the case of Tribunal final order No. 1527/97 dated 19.5.1997. The issue considered therein was similar to the facts of this case. i.e. the gifts given free along with the goods assessed were treated as discounts in kind rather than in cash. He therefore submitted that the same ratio would be applicable in their case also.
18. With respect to the question of collection charges, and other bank charges, Ld. Consultant submits that the issue has already been considered by the Tribunal in their final order No. 842 to 844/96 dt. 28.2.1996 wherein in para-3, it has been clearly held to be deductible from the assessable value.
19. With respect to the schemes on invoices and schemes after invoices, Ld. Consultant submitted that these are two independent schemes. As far as the scheme on invoices is concerned, it concerns the supply to the dealers of a unit quantity of the excisable goods free of cost on purchase of a certain specified quantify thereof, for example, for every 10 tins of talcum power, one tin may be supplied free. He submits that as sales promotion measure, these were naturally restricted to a brief periods and was supplied only on selected products whose sales needed to be promoted. However, he contends that this scheme was available uniformly to all dealers who qualified under the scheme and not only was the scheme announced to all in advance but was also mentioned on the body of the invoices themselves. Therefore, it has satisfied all the conditions of trade discount namely that it should be known before hand; that it should not be discriminatory, and that it was even mentioned on the invoices. Hence it should be allowed as deduction in the form of trade discount in kind instead of cash which issue has already been considered by the Tribunal in the decision of the Queen Chemist Manufacturing Department v. CCE as reported in 1979 ELTJ 454 (para 10).
20. With respect to scheme after invoices, Ld. Consultant submits that one aspect of this scheme was to reimburse or replace with the same number of pieces to recipient dealer as was reported by him to be damaged in transit. He submits that the deductibility of this from the assessable value is already considered by the Tribunal in their own case vide final order No. 1715/97A dt. 12.8.1997 as well as by final order No. C/11/1952-1959/99/WRB dated 6.8.1999 in the case of Hindustan Lever Ltd. v. CCE. Therefore, the ratio of the same is claimed as applicable to their case.
21. Ld. Consultant further submits that there were other free schemes given to the dealers from time to time which were not reflected on invoices. He submits that since some times these schemes were given to selective dealers on the basis of their performance, therefore, they do not press their claim for deductibility from the assessable value before us.
22. We have carefully considered the rival submissions and the records of the case.
23. With respect to COPT i.e. Master Outer Cartons, we find that in view of the decision of the Hon'ble Apex Court in the case of Geep Industrial Syndicate Ltd. (supra) (clarificatory decision of the Supreme Court), we proceed to apply the test as noted above to the facts of this case. In this respect, we find that in view of the affidavits submitted by the assessee before the lower authorities, copy of which is also shown to us, as well as in view of a number of invoices showing sales from factory gate of goods packed only in inner cartons, we are of the considered opinion that respondents, in this appeal, have discharged their burden of showing that the goods were capable of being marketed in the inner cartons. In view of same, we find that there is considerable force in their submission that the outer master cartons were utilised only when more number of goods were to be supplied and were hence more in the nature of a packing which was for ease and safety of transportation. In any case, as against the affidavits and the invoices submitted on record, the only ground on which Revenue is aggrieved is that these represent few sales from the factory gate and therefore they cannot take the place of majority of the sales. We are of the considered opinion that the law laid down by the Hon'ble Apex Court in this regard does not prescribe the percentage of sales. The only test to be applied is whether these goods are marketed for delivery at the factory gate in the inner packing. Since this has been demonstrated by the assessee by way of affidavits as well as invoices and since the veracity of these affidavits and invoices has not been challenged by Revenue, and also because the outer master cartons are bearing thickness equivalent to the 7-plywood outer cartons considered in the case of Geep Industrial Syndicate Ltd. (supra), therefore, the benefit of doubt in this regard is clearly with the assessee/respondents. The cost of this outer master carton are therefore deductible from the assessable value.
24. With respect to the question of "Consumer Offer", i.e. the gifts of single piece of eye brow pencil, shampoo, small soap etc., given free after being bought out, out of duty paid stock, since the issue has already been decided by the Tribunal in the case of Hindustan Lever Ltd. (supra) as well as vide final order No. 1527/97 dt. 19.5.1997 and there is no dispute that the facts in this case are identical, therefore, respectfully applying the ratio thereof, we allow this as admissible deduction from the assessable value and therefore reject the contention of the Revenue in this behalf.
25. With respect to collection/bank charges also, we respectfully apply the ratio contained in final order No. 842 to 844/96 dated 28.2.1996 of the Tribunal and find that facts are exactly identical to the one considered therein, therefore the said charges are deductible from the assessable value and to that effect the grounds of appeal of Revenue is rejected.
26. With respect to the scheme on invoices regarding the delivery of free units of excisable products for the purchase of specific number of units, we find that there is no legal force in the grounds of appeal agitated before us by Revenue. Of necessity, such sales promotion drive would have to be periodical and on selected products. That by itself would not disallow them to be regarded as trade discount. The law with respect to trade discount is now well settled. This Tribunal has repeatedly held that as long as the trade discount is available uniformly to all the buyers of the same goods, such trade discount by virtue of announcement is made known to all buyers before delivery of goods, and does reflect on the invoices, and these transactions would be at arm's length, then would qualify as trade discount. The facts on record was that these tests are satisfied. To the question, whether such trade discount can be given in kind and not cash, the Tribunal has already answered in the affirmative in the case of Queens Chemist Manufacturing Deptt. (supra). Therefore, there is no issue which requires to be considered by us. Respectfully, applying the ratio of the decision of the Tribunal in the case of Queens Chemist Manufacturing Dept. (supra), as well as in view of our finding that the pattern adopted by the assessee satisfied all the tests with respect to the trade discount admissible, we find that there is no force or merit in the Revenue's grounds of appeal and the same is rejected.
27. With respect to the scheme after invoices, as far as the supply of goods in lieu of goods damaged in transit is concerned, we find that the issue is now no longer res integra in view of two final orders of the Tribunal cited above. Therefore, applying the ratio of the same to this case, we again find that there is no merit in Revenue's appeal on this ground against deduction of such element from the assessable value. Therefore, the same grounds of appeal is also rejected.
28. We find that since respondents are now not pressing the issue of other free gifts given to the dealers as excludible from the assessable value, we refrain from considering the same. Therefore, the effect of this is that no abatement would be available to the respondents on these schemes.
29. In view of the aforesaid analysis, and findings, the party's appeal No. E/V-1320/1996 is allowed with consequential relief as per law, and the Revenue appeal No. E/V-2035/98 is rejected except on non-availability as abatements of free schemes in scheme after invoices as mentioned above.
(Pronounced & dictated in open court).