Customs, Excise and Gold Tribunal - Tamil Nadu
M.M. Rubber Co. Ltd. vs Commissioner Of C. Ex. on 30 December, 2005
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against OIA No. 76/2003 dt. 28-6-2004, passed by Commissioner of CE (Appeals), Chennai.
2. The facts of the case are as follows :-
The appellant M/s. MM. Rubber Co. Ltd. Chennai, manufacture cellular rubber products such as foam mattresses, pillows and cushions which are excisable. They normally clear their products through various depots/consignment agents situated throughout India. In respect of the cloth cover stitched mattresses they pay duty on the value, which includes the value of plain mattresses and that of stitched cloth covers. When plain mattresses only are cleared, they pay duty on the value of mattresses alone. In certain cases, the plain mattresses are cleared to customers after stitching the covers at depots as per the customer's choice. However, they paid duty only on the value of the plain mattresses on the ground that they could not quantify at the time of clearance from the factory, the items which are likely to be fitted with covers and subsequently sold from their depots. Hence, they requested for provisional assessment of duty in terms of Rule 7 of the Central Excise (No. 2) Rules. 2001, in respect of such clearances of items where they would be fitted with covers made at their depots and sold with such covers. When the provisional assessment was finalized an amount of Rs. 18,34,537- being the differential duty was confirmed for the period from 1-7-2001 to 31-12-2001 vide OIO No. 16/2002 dt. 20-3-2002. The appellant approached the Commissioner Office on the ground that the adjudicating authority did not take into account the decision rendered by CCE (A), Chennai, vide OIA dt. 6-7-98, wherein this issue was decided. Hence, the Commissioner (A) vide his OIA dt. 24-4-2003, remanded the matter to the Assistant Commissioner to reexamine the entire issue in the light of the Commissioner (A)'s order dt. 6-7-98. In the de novo order, the Deputy Commissioner took the stand that the Commissioner (A)'s order dt. 6-7-98 is applicable for the period from 1-11-88 to 31-3-97 (i.e. prior to 1-7-2000) With effect from 1-7-2000 a new Section 4 substituted and according to Section 4(d) of the new Section, "transaction value means the price actually paid or payable for the goods when sold and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, buy reason of or in connection with the sale, whether payable at the time of sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing warranty, commission or any other matter, but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods." Further, the original authority relied on Board's clarification dt. 30-6-2000 on transaction value, which stated, "Whatever elements which enrich the value of the goods before their marketing and were held by Hon'ble Supreme Court to be in-cludible in "value" under the erstwhile Section 4 would continue to form part of Section 4 value even under new Section 4. It may also be noted that where the assessee charges an amount as price for his goods, the amount so charged and paid or payable for the goods will form the assessable value. If however, in addition to the amount charged as price from the buyer, the assessee also recovers any other amount by reason of sale or in connection with sale, then such amount shall also form part of the transaction value for valuation and assessment purposes." In view of the above, the original authority held that the value of the stitched covers should be included in the assessable value as the amount recovered from the buyers for the stitched covers at the depots forms part of the transaction value of the mattresses. Hence, he confirmed the differential duty of Rs. 1,83,453/- for the period from 1-7-2001 to 31-12-2002. The appellants approached the Commissioner (A), who passed the impugned order rejecting the appeal of the appellants. While rejecting the appeal, the Commissioner (A) has stated that the appellant had furnished inconsistent and vacillating submissions and therefore, the same do not support their cause. Hence, he has rejected the appeal. The appellants strongly challenged the impugned order.
3. Shri A.S. Sundararajan, the Id. Adv. appeared for the appellants and Smt. R. Bhagya Devi, Id. SDR appeared for the Revenue.
4. The Id. Advocate invited our attention to the Board's clarification on the issue in F.No. 63/4/87-CX dt. Nov. 1987, wherein this issue was clarified as under:
Representations have been received from the trade that cost of cloth covers used for covering rubber foam mattresses, pillows and cushions may not be included in the assessable value of the mattresses, pillows and cushions falling either under Chapter 40 or Chapter 94 of the C.E.T. as the Board's Circular letter - Rubber/5/68 dt. 14-8-68 clarified that the latex foam sponge should be assessed without cover, that is to say the value of the cover should not be taken into account for the purpose of assessment.
The matter has been re-examined in the Ministry in the context of the new tariff description. In view of the tariff description of Heading 94.04, according to which mattresses, cushions, pillows etc. whether or not covered, come within the purview of this heading. Thus mattresses, pillows, cushions etc., would be assessed to duty, if they are cleared without covers, as such in which case the question of adding the cost of covers in the assessable value does not arise. However, if these goods are cleared with covers, whether assemble or un-assemble, the cost of such cover is required to be included in the assessable value of the mattresses, cushions, pillows etc. Since the above clarification of the Board has not been superseded by any other clarification, the same should be adopted and there should not be any deviation from it. He further stated that the Commissioner (Appeals) in his OIA dt. 6-7-98, has elaborately dealt with the issue on the basis of the Board's clarification. He further stated that depending on the customer's specification the covers are stitched at the depots. Further, they are invoicing separately for the covers and hence, the value of the covers should not be included in the assessable value of the mattresses sold at depots. He further stated that the adjudicating authorities reliance on Board's circular dt. 30-6-2000 is misplaced.
5. The Id. SDR contended that the new Section 4 is very relevant for determining the assessable value of the mattresses sold at depots. She said that apart from factory the depot is also a place of removal therefore, if mattresses are sold at the depot with covers, their value also should be included for assessment purposes. The Id. Advocate invited our attention to certain amendments in the definition of the "place of removal" in 1996, 2000 and 2003. Hence, while deciding the issue, he said that the above position should also be taken into account. The Id. SDR further invited our attention to Rule 7 of the CE (Valuation) Rules, 2000, which deals with the method of valuation in respect of depot sales.
6. We have gone through the records of the case carefully. The Board's circular dt. Nov. '87 was issued in view of the change in tariff description of Heading 94.04, which includes mattresses with cover and without cover. What the entire circular clarifies is that when the goods are cleared with covers, the cost of such covers is required to be included in the assessable value of the mattresses and when the items are cleared without covers there no need to include their value. There is no need even now for revising this clarification. But, when the goods are directly sold from the factory without covers, the appellants pay duty only on the plain mattresses. Similarly, when they sell the mattresses with covers from the factory they pay duty on the value of the mattresses plus that of covers. On this point also there is no dispute. But, when the mattresses are cleared to depots and the covers are stitched there, the mattresses with covers emerge. It is these mattresses, which are sold to the customers. Hence, transaction value of the mattresses includes the value of the covers also. Hence, the definition of transaction value and also Board's clarification dt. 30-6-2000 are very relevant while deciding the issue. In other words, when the mattresses are sold with covers from the depots, the transaction value is definitely a value of the plain mattress plus the value of the stitched covers irrespective of the fact that the appellants invoice the (sic) covers separately. This stand of the original authority is not at all repugnant to Board's circular of Nov. 1987 and also the definition of the transaction value. We cannot appreciate the appellant's contention that when mattresses are sold with covers in the depot, their value should be excluded for assessment purpose. The contentions of the appellants have no merits. Hence, we, uphold the impugned order in appeal and reject the appeal.
(Order pronounced in open Court on 30-12-2005)