Customs, Excise and Gold Tribunal - Delhi
Tata Chemicals Ltd. vs Collector Of Central Excise on 6 September, 2000
Equivalent citations: 2000(121)ELT36(TRI-DEL)
ORDER
K. Sreedharan, President
1. Issues raised in these appeals are virtually same. They relate to the deductions that can be claimed by the manufacturer from the sale price in arriving at the assessable value. Heads under which deductions were claimed by the manufacturer, namely, appellants were -
(1) Cost of packing material;
(2) Handling charges;
(3) Distributors discount and commission to Consignee Distributors;
(4) Stock liquidation discount; and (5) Uniform Discount.
Therefore, we consider it advantageous to dispose of these appeals by a common order.
2. Transactions which have given rise to these appeals are of the period from 1981 to 1985. Appeal E/1088/90-A covers discount on all the abovementioned counts. Therefore, that appeal is taken as the main appeal and is dealt with hereunder.
3. Learned Counsel representing the appellants advanced an argument that gunny bags in which soda ash was sent to dealers were durable and returnable containers. Manufacturer, appellants herein, had issued circulars requiring the dealers to return the gunny bags for re-use. Pursuant to those circulars dealers were returning the gunny bags which could be used in despatching subsequent consignments. Since there was such an arrangement between the manufacturer and the dealers, the cost of gunny bags utilised should not have been included in the assessable value. Letters issued by the manufacturer on 15-12-1970, 1-2-1971 and 2-4-1971 along with credit notes dated 12-3-1988 and 31-3-1988.issued by the Company to the customers who returned the gunny bags, according to the Learned Counsel, bring out the arrangements between the manufacturer and the dealers regarding return of the durable packings. In support of this contention reliance was also placed on the decision of the Supreme Court in the case of Mahalakshmi Glass Works (P) Ltd. v. CCE reported in 1988 (36) E.L.T. 727. In that decision Their Lordships stated that the actual return or extent of return is not relevant. Therefore, it was argued before us that if there was an arrangement for return of the packing, the cost of that packing should be deducted for finding out the assessable value.
4. In Mahalakshmi Glass Works case, this Tribunal on facts came to the conclusion that buyers therein paid for the containers, namely, cartons and gunny bags and property in those goods passed to the buyers. Such buyers could be asked to return them to the manufacturer only under a term of sale and on payment of the agreed amount and not free. Since no such contract or agreement was forthcoming on facts the Tribunal was of the view that the cartons and gunny bags were not returnable in their accepted sense of the term used in the section. This finding of the Tribunal was confirmed by the Supreme Court and the appeal was dismissed. Therefore, we consider it necessary to find the factual position in the case on hand.
5. Reliance was placed by the Learned Counsel representing the appellant on letters dated 15th December, 1970,1st February, 1971 and 2nd April, 1971 to bring out the arrangement for the return of the durable packing, namely, gunny bags. These letters were not in evidence before the adjudicating authority or the appellate authority. They were made available to the Collector only on 1st June, 1990, subsequent to the appellate order issued by him. So, the Collector had no opportunity to pronounce on these documents. Learned Counsel wants this Tribunal to vary the order passed by the Collector on the basis of the documents now made available to us. Letter dated 15th December, 1970 is written as a confidential one. It is not seen addressed to anyone much less any dealer. In paragraph 6 it was written -
"Until the bulk movement of Soda Ash becomes more widely possible and acceptable, we would strongly urge our customers to reclaim the used bags and return the sound ones back to our Works at Mithapur for reuse. Such cyclic uses of bags, in the interim, would once again result in substantial benefit to the consumer as there will be no cost of packing material involved. Our distributors throughout the country will offer assistance, at nominal charge, for organising this operation as a customer service."
In Paragrapah 10 of that letter customers were required to specify whether they want Soda Ash to be despatched in bulk; whether they want the material to be packed in their own bags; or they want to authorise Tata Chemicals to use bags from their own stock, on their accounts at actual cost at the point of packing. These options were available to the customers when they placed orders. The letter did not make mention of any option being given to the customers to return the packing used by the manufacturer and to get back the price of the packing material. Letter dated 1st February, 1971 is stated to have been issued clarifying the earlier letter of 15th December, 1970. For a proper understanding of that letter, we read the operative portion of the same "We invite your attention to Circular No. CON/G-50/70 dated 15th December, 1970, wherein we had agreed that customers could send their own packing materials jute, cloth, plastic etc. to our Works at Mithapur for use in packing the bulk Soda Ash. While we would be pleased to receive such packing materials from our customers, to avoid problems with the Excise and the Railway authorities and to facilitate the filing of the product at our Works at Mithapur, we shall be glad if the customers send unbranded bags only of the following specifications".
This letter requires the customers to send their own bags for packing the Soda Ash. This letter does not make mention of the return of the gunny bags which were utilised by the manufacturer on the earlier occasion. In the letter dated 2nd April, 1971 return of used Soda Ash bags is referred to. It was stated therein that cyclic use of jute bags would result in considerable saving to the customers. These letters have not gone to establish any arrangement between the manufacturer and the buyer for the return of durable packing. Further, these letters were of December, 1970 and February and April of 1971. The period with which we are concerned in this appeal is between 1981 and 1985.
6. To support the argument that there was an arrangement for the return of durable packing, Credit Notes dated 12-3-1988 and 31-3-1988 were relied on. Credit Note dated 12-3-1988 states that the amount mentioned therein are in respect of jute bags returned by M/s. Nirma Detergents for packing 2083.650 tonnes of Soda Ash Light during the month of February, 1988. This shows that jute bags for packing 2083.650 tonnes of soda ash light were paid at the rate of Rs.148.75 per tonne by Tata Chemicals. Gujarat Sales Tax and Additional Sales Tax on the sale of above quantity of soda ash is also mentioned therein. That credit note can never go to help the appellant to establish their case that used jute bags got returned. The entry relating to sales tax will show that the sale can be of new jute bags only. Similarly, credit note dated 31-3-1988 makes mention of jute bags returned by M/s. Patel Detergents for packing 4457.250 tonnes of Soda Ash Light. This credit Note does not help the appellant since it relates to supply of March 1988, while the period covered by the present dispute is from 1981 to 1985, Documents produced by the appellant as additional documents are seen at pages 19 to 26 to show that customers were requiring the manufacturer to use customers own bags for packing soda ash. In case, bags sent by them were found insufficient to pack the quantity, they requested the manufacturer to despatch the materials in bags duly packed and to charge packing charges. In the letter sent by M/s. Ultramarine & Pigments Ltd. seen at page 24, customers made it clear that it is very difficult to send the sound bags for reuse by the manufacturers factory. From these materials it is beyond doubt that there was no arrangement between the manufacturer, appellants herein, and their customers to return the durable packings, namely, gunny bags. Therefore, the claim put forth by the appellants that the value of gunny bags used for packing soda ash manufactured by them should be excluded in finding out the assessable value cannot be sustained.
7. The second count of deduction claimed by the appellant was Handling Charges. Handling charges claimed by them consists of (1) haulage of goods and wagons from the Bonded Store Room to the Railway station; (2) wages of railway staff stationed at the railway siding which has to be reimbursed by the appellants' to the Railway Authorities; and (3) wages of appellants' staff who were concerned only with haulage of goods to Mithapur Railway Station. The claim on this count was rejected by the authorities below. According to the Learned Counsel, this action of the authorities is clearly in violation of the decision of the Supreme Court in the appellants' own case. Appellant moved Bombay High Court, inter alia, praying for restraining the Central Excise authorities and Government of India from recovering additional excise duty on handling charges at the rate of Rs. 2 per tonne and to forbear them from including handling charges in the price of soda ash and Sodium Bicarbonate for the purpose of determination of their value under Section 4 of the Central Excise Act. That prayer in the petition was allowed on 8-2-1980 by a Learned Single Judge. Union of India challenged the said order before Division Bench. On 7-7-1980 Division Bench dismissed the appeal. Unio.i of India took up the matter to the Supreme Court filing Special Leave Petition (Civil No. 9789/80). On 2-5-1984, Supreme Court rejected the Special Leave Petition stating that "The Special Leave Petition is rejected having regard to the peculiar facts and circumstances of the present case". Subsequently Civil Miscellaenous Petition No. 19994/86 was filed and the order dated 2-5-1984 was corrected to be Civil Appeal No. 1217/82 which was filed against the order of the Bombay High Court dated 7-7-1980. Affidavit filed on behalf of the manufacturer in SLP No. 9789/80 is in evidence in this case. It was specifically mentioned therein that handling charges claimed were -
(1) Haulage of goods from bonded store room to Railway wagon;
(2) Haulage of wagons from bonded store room site to Railway Station;
(3) Establishment cost incurred by the respondent company (appellants herein) for maintaining Railway clerks at the factory site; and (4) Wages of factory staff connected with the supervision of loading operations.
These were the heads of handling charges which were sought to be excluded from the value of assessable goods as per the petition filed before the High Court. High Court allowed this deduction. Appeal preferred by the Government of India against the said decision of Bombay High Court did not succeed. Therefore, as between the parties, namely, Department and the appellants herein, handling charges on the above counts are not to be included in the assessable value. Authorities below did not advert to this aspect of the case. So we hold that the decision on this point arrived at by the departmental authorities has to be vacated. We do so.
8. Third claim of deduction is Distributors Commission, Uniform Discount and Stock Liquidation Discount. The law governing these counts of deductions is well-settled. In CCE, Rajkot v. Tata Chemicals Ltd., 1998 (101) E.L.T. 308, a Bench of this Tribunal took the view that Distributors cannot be regarded as consignment agents and that discount paid to distributors would be admissible deduction. In Final Order No. 948/97-A dated 23-5-1997 this Tribunal stated that once the price in respect of distributor was accepted, the same should be the basis with reference to the others as it was held by the Supreme Court in the case of Indian Oxygen Private Ltd., 1988 (36) E.L.T. 723. In the case on hand, Collector (Appeals) in his order stated that trade discount allowed to distributors are not to be included in the assessable value. When such commission is excluded, we arrive at the assessable value. That assessable value should be the basis for the assessment of the goods removed from the factory. This legal position cannot now be disputed. So we hold that the entire removal should be assessed on the basis of the value after deducting the commission extended to Distributors.
9. For computation of the actual amount of duty payable by the appellant, the matter is remitted back to the adjudicating authority. Adjudicating authority will recompute the tax liability of the appellant in the light of the findings and observations made by us hereinabove. This must be done as possible, at any rate, within four months from the date of receipt of a copy of this order.
10. Appeals are disposed of in the above terms.