Customs, Excise and Gold Tribunal - Delhi
Art Rubber Industries Ltd. vs Coll. Of Central Excise on 15 November, 1995
Equivalent citations: 1996(81)ELT389(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. The captioned appeal is directed against the order-in-appeal passed by the Collector, Central Excise (Appeals). The Collector (Appeals) in his order had held :
"5. I have gone through the order-in-original, the appeal petition and record of personal hearing carefully. In view of second proviso to the Notification No. 231/85-C.E., dated 23-12-1985 as amended, the exemption contained in the Notification shall not be applicable.
(i) To a manufacturer, if the aggregate value of clearances of tyres, tubes and flaps falling under said Chapter 40 for home consumption by him or on his behalf from one or more factories during the preceding financial year, had exceeded rupees two crores.
(ii) If the aggregate value of clearances of tyres etc. had exceeded two crores There is no provision such as in Explanation II to Notification No. 175/86 dated 1-3-1986 in the said notification and hence the Assistant Collector is quite correct in taking into consideration value of exempted goods also in arriving at aggregate value of clearances effected in the preceding financial year.
(B) Sales tax. - As regards sales tax Supreme Court Judgment in Bata Ltd., 1985 (21) E.L.T. Page 9 which has been cited, only lays down that value should be computed by deducting from the whole sale cash price the trade discount and the amount of duty payable on the article at the time of removal and that excise duty leviable not to be taken into account while determining the value of goods under an exemption Notification. It is not pertaining to sales tax the said citation is irrelevant in the case. Supreme Court however in case of Union of India and Ors. v. Bombay Tyres International Pvt. Ltd. 1984 (17) E.L.T. 329 SC, has held that "Taxes Additional Saled Tax, surcharge on sales tax and turn-over tax should be allowed to be deducted from the sale price in order to arrive at the assessable value and also octroi payable/paid by the manufacturer. These taxes if proved to have been paid, should be allowed even though they are paid periodically to the relevant taxing authorities in accordance with the relevant provisions of taxing statuted/rules" Second portion of the said decision is specific and unless taxes are paid, assessee does not become eligible for the said deduction. In the instant case appellants do not appear to have paid any tax to appropriate authority and hence Assistant Collector is correct in including sales tax in the assessable value. In the circumstances the appeal is rejected."
2. The facts of the case, in brief, are that the appellants are engaged in the manufacture of tubes and flaps classifiable under Chapter Heading 40 of the Central Excise Tariff Act, 1985. They took clearances of the goods at concessional rate of duty under Notification No. 231/85 dated 11-11-1985. On a scrutiny of the documents of the appellants, the Department found that concession under Notification No. 231/85 was available under certain conditions. One of the conditions was that the value of clearances of tyres, tubes and flaps falling under Chapter Heading 40 for home consumption by an assessee or on his belalf, from one or more factories during the preceding financial year had not exceeded Rs. 2 crores. On a scrutiny of the invoices of the appellants, it was noticed by the Department that the value was not determined in accordance with the provisions of Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944. It also appeared that the appellants were showing different value in GP 1 and different value in the invoices. On a scrutiny of the records of the appellant company, the Department found that the value of clearances of tubes and flaps cleared for animal driven vehicles amounting to Rs. 10,21,552.50 was not included while computing the aggregate value of clearances during the year 1985-86. If this value was included, the value of clearances of the goods for home consumption during the financial year 1985-86 came to Rs. 2,07,63,497.15 in accordance with the invoices. As the value of total clearances during the financial year 1985-86 exceeded Rs. 2 crores, the Department was of the view that they were not eligible to concessional rate of duty under Notification No. 231/85. Accordingly, a show cause notice was issued to the appellants asking them to explain as to why the concessional rate of duty under Notification No. 231/85, dated 11-11-1985 should not be denied to them. It was also alleged that the appellants had mentioned the value of clearance of the said goods less in GP-1 than what they charged in the invoices to the customers. It was also alleged that even if the appellants had been eligible for concessional rate of duty under Notification No. 231/85, they would have crossed the value of clearance of Rs. 5 lakhs up to GP-1, dated 9-5-1986. It was alleged that by showing less value of the goods in GP-1, they availed of the concession of the duty up to GP-1 No. 107, dated 8-6-1986. Thus, it was alleged that the appellants had evaded the central excise duty amounting to Rs. 7,85,512.50. However, this amount was already included in the total duty amounting to Rs. 18,47,160.50. The appellants were issued a show cause notice to explain as to why the duty amounting to Rs. 18,47,160.50 should not be recovered from them under Section 11A. The appellants, in reply to the show cause notice submitted that they had cleared the tubes for use on animal driven vehicles to the tune of Rs. 10,21,554.50 which are exempted under Notification No. 221/82 and that this value must not be included for ascertaining the value of clearances during the year 1985-86. It was argued by the appellants before the lower authorities that the meaning of the expression 'value of clearances' occurring in the proviso to para 1 of Notification No. 231/85 dated 11-11-1985 is that only the value of those goods on which some duty is payable would not include the value of those goods which are wholly exempt. It was also argued that in the second proviso where the expression 'value of clearances' occurs does not state that the clearances will also include clearances of goods which are wholly exempted. The appellants cited the judgment of the Hon'ble Supreme Court in the case of Lal Chand v. Radha Krishna reported in 1977 (2) SCC 88,96 in which it was held that "Where the same expression is used in the same statute at different places the same meaning ought to be given to that expression as far as possible." It was claimed by the appellants that if there was any doubt, the benefit should be given to the assessee. It was argued that if the value of the exempted goods is excluded the value of clearances during the financial year 1985-86 would not exceed Rs. 2 crores and hence the appellants were eligible for concessional rate of duty under Notification No. 231 /85. It was also argued by the appellants before the lower authorities that the Notification No. 231/85 superseded the Notification No. 65/81 which provided that to enjoy concessional rate of duty, clearances during the preceding year, the clearances of tyres for motor vehicles should not exceed Rs. 2 crores: that the tariff item 16 indicated that tyres include tubes/flaps also. It was also argued that this by implication meant that the value of tubes/flaps for animal driven vehicles was to be excluded from the preceding year's clearances. On this basis, it was argued that since Notification No. 231/85 was issued on 11-11-1985, therefore, the clearances of tubes and flaps for animal driven vehicles can only be included from 11-11-1985 onwards which worked out to Rs. 1,97,41,944.65 which clearly indicated that the total value of clearances during the financial year 1985-86 did not cross the limit of Rs. 2 crores.
3. it was also contended before the lower authorities that the gate pass alone correctly reflected the value of clearances; that the value shown in the invoices was the selling price and did not reflect the correct assessable value because the sale price shown in the invoice included excise duty payable and sales tax and other taxes. By giving an example, the appellants contended that if the invoice was valued at Rs. 235/-, it included excise duty of Rs. 100/- and sales tax at a rate of 12% and as per Section 4(4)(d)(ii), sales tax and excise duty is excludible. After careful consideration, the lower authorities passed the order as reproduced in the preceding paragraph.
4. Shri A.N. Haksar, learned Senior Advocate with Shri P.K. Ram, learned Advocate appeared for the appellants and submitted that the main allegations against the appellants are as under :
(a) The appellants were not entitled to the benefit of Notification No. 231/85 dated, 11.11.1985 on the ground that the value of clearances during the financial year 1985-86 exceeded Rs. 2 crores;
(b) that assuming the appellants were entitled to the benefit of Notification No. 231/85 it was alleged that during the current year i.e. 1st April, 1986 onwards, the appellants had exceeded their first clearances of the said goods of Rs. 50 lakhs under Notification No. 231/85 with the issue of GP No. 65 on 9th May, 1986 and that up to 8th June, 1986, the appellants had availed duty concession of Rs. 7,85,512.50 in excess of the permissible limit;
(c) that the appellants had shown one set of values on the gate pass and another set of values on the invoices and the allegation was why the value shown in the invoices should not be taken into consideration for purpose of Section 4(4)(d)(ii) of the Central Excises and Salt Act,1944 and;
(d) that there was suppression of correct value.
The learned Senior Advocate submitted that tubes and flaps for use on animal drawn vehicles were completely exempted from excise duty under Notification No. 229/82 dated 15-10-1982. It was argued that while computing the clearances in the financial year 1985-86, the value of clearances of the exempted goods should be excluded; that the value of exempted goods cleared during the financial year 1985-86 amounted to Rs. 10,21,552.50; that if this amount is excluded then the total value of clearances amounted to Rs. 1,97,41,944.65 which is clearly less than Rs. 2 crores. It was also argued that the appellants had not taken into account the value of exempted goods while computing the clearances under Notification No. 231/85.
5. It was argued by the ld. Senior Advocate that the gate passes alone correctly reflected the value of clearances of the goods under Section 4 of the Central Excises and Salt Act, 1944; that it was necessary to deduct from the invoice price the value of effective excise duty paid and the sales tax which was payable by the appellants to the State Government to arrive at the said value. It was argued by the learned Senior Advocate that whereas the sales tax payable to Central Government was deducted, however, the sales tax payable to the State Government which was exempted in their case was not deducted. The learned Senior Advocate argued that sales tax was not in fact paid, however, the same was deductible to arrive at the assessable value. Arguing further, the ld. Counsel submitted that the value shown in the gate pass was the correct value and the proper value for the purposes of computing the clearances of goods for availing the benefit of Notification No. 231/85. It was also argued that during the financial year 1985-86, the sales tax payable aggregated to Rs. 12,78,446.59 and if this sum is deducted from the total value shown in the invoice, then the aggregate value of clearances during the financial year 1985-86 would be less than Rs. 2 crores; that the Notification No. 231/85 speaks about tyres, tubes and flaps on which some duty of excise is payable and does not concern itself with fully exempted goods; that partial exemption from excise duty to the extent of 50% of duty leviable under Notification No. 231 /85 can only be applicable when some duty is payable on the said goods and that partial exemption canot be granted if the goods are already fully exempted; that the learned Collector was wrong in relying upon the Notification No. 175/86 to come to the conclusion that the clearance of exempted goods is to be included in the value under Notification No. [231/85] as the same have not been specifically excluded by the [exemption] notification itself; that the Hon'ble Supreme Court in the case of Coromandal Fertilizers Ltd. reported in 1986 (25) E.L.T. 861 (SC) held that it is not permissible to construe one notification with the aid of another notification; that the construction sought to be placed on the notification by the lower authorities leads to unreasonable results inasmuch as if exempted, clearances are also taken into account for computing aggregate value of clearances for purpose of Notification No. 231/85 then those manufacturers who have cleared goods which are fully exempted of over Rs. 2 crores and only a small quantity of non-exempted category would be excluded from the benefit of exemption notification. While a manufacturer who manufactured and cleared goods of the value of Rs. 1,99,00,000/- on which excise is payable would be entitled to the benefit of Notification No. 231/85. The ld. Sr. Counsel therefore, argued that the value of the clearances of the exempted goods as well as sales tax payable on the goods should be excluded in arriving at an aggregate value of clearances during the preceding financial year for allowing concessional rate of duty under Notification No. 231/85. It was also argued by the learned Sr. Counsel that under Incentive Scheme framed by the State Government, the liability for payment of sales tax was always existing on the appellants and hence sales tax should be excluded from the invoice value of the goods.
6. Shri Sanjeev Sachdeva, the learned SDR appearing for the respondent, submitted that the admitted position was that the aggregate value of all clearances for the financial year 1985-86 amounted to Rs. 2,07,63,491.15; that this value included the value of clearances of tubes and flaps cleared for animal driven vehicles which amounted to Rs. 10,21,552.50. This value further included an amount of Rs. 12,78,446.59 claimed as sales tax.
7. The learned SDR pleaded that Notification No. 231/85 provided concessional rate of duty if the aggregate value of clearances during the preceding financial year did not exceed Rs. 2 crores. The ld. SDR therefore, submitted that the issues for determination before the Tribunal are whether the value of tubes and flaps cleared as exempted goods should be included while computing the aggregate value of clearances for the financial year. The second issue is whether the rebate on account of sales tax could be extended to the appellants having regard to the fact that no sales tax was being paid by the appellants. He submitted that the Notification No. 231/85 does not provide that the value of the exempted goods shall not be included for computing the aggregate value of clearances during the financial year. He submitted that had the intention of the Govt. been to exclude the value of exempted goods, they would have provided for such rebate. In the absence of such provisions in Notification No. 231/85, the ld. SDR submitted that the question of excluding the value of tubes and flaps cleared as exempted goods does not arise.
8. On the question whether sales tax payable by the factory though it was not actually paid should be excluded, the ld. DR submitted that as there was no payment of sales tax by the company, therefore, there was no question of any rebate on this count. He therefore, submitted that the lower authorities have rightly held that the aggregate value of clearances during the financial year 1985-86 exceeded Rs. 2 crores and therefore, the demand is legally and fully justifiable.
9. Heard the submissions of both sides. On careful consideration of the submissions made by both sides, case law cited and relied upon as also the evidence on record, we find that the entire issue is about the determination of aggregate value of clearances during the financial year 1985-86 for purpose of claiming concessional rate of duty under Notification No. 231/85.
10. In terms of second proviso to Notification No. 231/85 as amended, the exemption contained in the notification shall not be applicable to a manufacturer if the aggregate value of clearances of tyres, tubes and flaps falling under the said Chapter 40 for home consumption by him or on his behalf from one or more factories during the preceding financial year had exceeded Rs. 2 crores. Examining the words 'used in the proviso', we find that we have to ascertain the aggregate value of clearances of tyres, tubes and flaps cleared for home consumption during the financial year 1985-86. For purposes of calculation of the aggregate value of clearances, we have invoices of the appellant company as well as gate passes. There is a dispute which of the two documents should be accepted for purpose of calculating the aggregate value of the clearances for the financial year 1985-86. Whereas the appellants submitted that the value shown in the gate passes should be accepted as aggregate value of clearances, the Department was of the view that it is the value shown in invoices which is material for calculating the aggregate value of clearances. It may be mentioned here that one set of value was shown in the gate passes whereas a different set of value was shown in the invoices. It has been claimed by the appellants that the value shown in the invoices includes excise duty and sales tax. The contention of the appellants was that the value is to be determined under the provision of Section 4 of the CESA, 1944. It is agreed by both sides that the value is to be determined under Section 4(4)(d)(ii). Section 4(4)(d)(ii) provides : 'value', in relation to any excisable goods, - "does not include the amount of the duty of excise, sales tax and other taxes if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale." From this provision of Section 4, we find that there is a provision for deduction of sales tax from the invoice price if the invoice price includes sales tax. There is no dispute that excise duty will be deductible
11. On the question of sales tax, the appellants have contended that there was a special Incentive Scheme provided by the Govt. of Maharashtra and in case they fail to comply with the condition of the Scheme, they would have been asked to pay that quantum of sales tax and therefore, argued that the word used in the statute is 'payable' and not actually paid. The ld. Counsel therefore, submitted that in their case, sales tax amounting to Rs. 12,78,446.59 was payable in case they defaulted and therefore, from the invoice price, this amount should be deducted. It was argued that if this amount was permitted to be deducted, the aggregate value of clearances will be less than Rs. 2 crores and therefore, they will be eligible for concessional rate of duty under Notification No. 231/85. The Department is of the view of that the appellants are exempted from payment of sales tax and therefore, there is no question of deduction of sales tax from the aggregate value of clearances calculated from the invoice. We find that in the case of UOI v. Bombay Tyre International reported in 1984 (17) E.L.T. 329, the Hon'ble Supreme Court had held that "Additional sales tax, Surcharge on sales tax, and Turnover tax should be allowed to be deducted from the sales price in order to arrive at the assessable value, and also octroi where payable/paid by the manufacturer. These taxes if proved to have been paid, should be allowed even if they are paid periodically to the relevant taxing authorities in accordance with relevant provisions of taxing statutes/rules." From this ruling of the Apex Court, we find that the condition for rebating these taxes, to these taxes is 'if proved to have been paid'. The condition here is that the rebate is permissible only when these taxes are paid. In the instant case there is no denying the fact that sales tax was not paid by the appellants and therefore, in terms of this ruling, no rebate on account of sales tax likely be paid shall be permissible to the appellants. The Hon'ble Bombay High Court in the case of Extrusion Processes Pvt. Ltd. and Ors. reported in 1984 (17) E.L.T. 866 had held that "Under Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944 duty does not include sales tax and other taxes payable on such goods. Therefore, it is open to the petitioners to claim such deduction before the Asstt. Collector who will take into account this fact as and when proper material is placed before him by the petitioners." Here also, we find that the Hon'ble Bombay High Court has relied upon the judgment of the Apex Court in the case of Bombay Tyre International cited supra. In the case of Kwality Printers reported in 1994 (73) E.L.T. 901, this Tribunal had held that "Value to be computed by deducting the duty payable on the article at the time of removal in terms of Section 4(4)(d)(ii). It is clear from the wording of Section 4(4)(d)(ii) that duty payable if any is to be deducted and not the actual duty paid. Irrespective of the fact whether duty element was shown in the invoice or not if the duty is payable such duty is to be deducted while determining the assessable value. Accordingly, value of clearance is to be determined in terms of Section 4(4)(d)(ii)." We find that the emphasis here is on the words 'duty payable'. In the instant case, we find that the Incentive Scheme was such as did not make payment of duty essential for the appellants. Having regard to the findings of the Apex Court followed by the Hon'ble Bombay High Court, we hold that as no sales tax was being paid by the appellants in the instant case, therefore, there was no question of allowing rebate for purpose of sales tax from the price shown in the invoices.
12. The second issue is whether value of tubes/flaps cleared by the appellants without payment of duty as exempted goods under Notification No. 229/82 was excludible from the aggregate value of clearances. We have reproduced the proviso to Notification No. 231/85 and have also pointed out what the important terms of that notification are. We agree with the arguments of the ld. SDR that in the absence of a clear provision for excluding the value of exempted goods while computing the aggregate value of clearances, such value cannot be excluded. We find that there is no provision for excluding the value of clearances of exempted goods. We find that the aggregate value of clearances of tyres, tubes and flaps is to be computed for such clearances as are for home consumption. There is no restriction as to the type of clearances of exempted goods. The exempted goods are also clearances for home consumption. We do not see any reason to exclude the clearances of exempted goods. In an identical case of U.P. Laminations reported in 1988 (35) E.L.T. 398, this Tribunal had held that "There is divergence of judicial opinion on the point whether goods wholly and unconditionally exempted under a notification issued under Rule 8(1) become non-excisable. The Tribunal in a series of decisions has preferred the views of Delhi, Karnataka, Patna and Madras High Courts and has held that after such exemption, goods continue to remain excisable. It has, therefore, to be without hesitation that goods, even though wholly and unconditionally exempted under a notification issued under Rule 8(1), remain excisable and, as a consequence, in absence of anything to the contrary in notifications, the value of clearances of such goods would have to be clubbed for determining the appellants' eligibility to benefit of exemption under the Notifications."
13. It is pertinent to indicate here that the Hon'ble Supreme Court in the case of Novopan India Ltd. reported in 1994 (73) E.L.T. 769 held that the ambiguity or doubt in exemption provision will be resolved in favour of the Revenue and not in favour of the assessee. Further, the Hon'ble Supreme Court in the case of Union of India v. Wood Papers Ltd. reported in 1990 (47) E.L.T. 500 (SC) held that an exemption provision is like an exception and on normal principle of interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. The Hon'ble Supreme Court in the case of Rajasthan Spinning and Weaving Mills reported in 1995 (77) E.L.T. 474 had held that "liberal construction which enlarges the term and scope of the notification is not permissible nor extended meaning assignable to exempted item."
14. In the instant case, we find that we have to compute the value of clearances. There is no prohibition in the notification that particular type of clearances shall be excluded. In the absence of such prohibition, we do not see any reason as to why the value of clearances of tubes and flaps cleared under the category of exempted goods should not be taken into accounbwhile computing the aggregate value of clearances. We accordingly, hold that the value of such clearances shall be included while computing the aggregate value of clearances for determining the concessional rate of duty under Notification No. 231/85 and we hold accordingly.
15. Having regard to the above findings, the impugned order is upheld and the appeal is accordingly rejected.