Customs, Excise and Gold Tribunal - Mumbai
Gujarat Alkalies And Chemicals Ltd. vs Commr. Of C. Ex. on 12 November, 2002
Equivalent citations: 2003(161)ELT202(TRI-MUMBAI)
ORDER C.N.B, Nair, Member (T)
1. The issue that arises in this appeal is the eligibility for Modvat credit of duty paid on 'Chlorine containers'. The Revenue contend that these containers being of durable nature and for repeat use, their value is not includible in the assessable value of final product 'Chlorine' and for that reason Modvat credit is not available in respect of duty paid on these containers. The objection is grounded in explanation to Rule 57A(1)(e)(III). As against this, the appellant's contention is that they sell chlorine both in the containers owned by the appellants themselves and containers supplied by the buyers of chlorine. They point out that in respect of supply in appellant's own containers, the price charged is higher by Rs. 250/- PMT on account of the cost of the containers. It is less by that amount when the buyer supplies his own containers. They also point out that they have been paying duty at the higher value in respect of chlorine sold in containers owned by the appellant. Based on this fact, the appellants contend that the value of containers is included in the price of chlorine. During the hearing of the case, learned Counsel appearing for the appellants explained that this was a case where price of durable containers was included in the price of goods sold, on the basis of amortization. The learned Counsel pointed out that in respect of high value containers amortization is the only acceptable commercial way for charging the price of container and revenue authorities are in error in refusing to accept this commercial principle and in holding that only cases where the entire value of container is added in the price of the goods sold, at time of each sale is covered. He also explained that the Revenue stood to gain in the present case inasmuch as the Modvat credit taken was on the duty paid on the purchase price of the container i.e. Rs. 44000/- while on account of inclusion of Rs. 250/- per sale of one tonne of chlorine the duty paid in respect of the containers worked out to Rs. 70000/-(a container normally was used for 300 rotation sales).
2. As against this, the learned DR pointed out that the requirement for inclusion of the cost of packing in the price of the final product envisages the inclusion of the entire price of the packing material and not a portion of it. He further pointed out that the procedure adopted by the appellant involved revenue risk inasmuch as if a container was not used for the 300 trips for some reason or other, there would be revenue loss as the entire duty paid on the container is taken as Modvat credit at the time of receipt of the container in the appellant's factory, while no reversal of credit on proportionate basis takes place in the case of failure to use of a container 300 times. The learned Counsel pointed out that this apprehension of the Revenue is not based on facts inasmuch as the assessee monitors the use of the container very carefully in view of its high value and the explosive nature of the goods it contained.
3. The prohibition relating in respect of taking credit on packing materials under Rule 57A is in respect of "packing materials the cost of which is not included in the assessable value of the final product under Section 4 of the Act". Thus, the legal requirement is that the cost of the packing material should be included in the assessable value. This is a question of fact and practice. The commercial practice in regard to durable and returnable containers is to include only a portion of total value of the container in each sale price. This has got to be so. If the entire value of durable container is charged as a part of the price of the goods sold in each sale, the sale price would be exceedingly high and trade in the goods would become impossible. It is for that reason that the method of amortization is adopted with regard to the inclusion of the price of the container in the price of the contents. This does not mean that the price of the container is not included in the price of the contents. The difference is only in the method. For that reason revenue authorities cannot reject the commercial practice. Tax law has to be interpreted and implemented, in line with the normal commercial practice and not in conflict with the same. The appellants are right in their contention that they are including the price of the containers in the price of chlorine. They, therefore are entitled to take duty paid on the chlorine container as Modvat credit.
4. In view of what is stated above, the appeal is allowed with consequential relief, if any, to the appellants.