Customs, Excise and Gold Tribunal - Delhi
Sree Srinivasan Foundry And Ors. vs Collector Of Central Excises on 15 April, 1987
Equivalent citations: 1987(11)ECR817(TRI.-DELHI), 1987(29)ELT644(TRI-DEL)
ORDER K.L. Rekhi, Member (T)
1. The appellants manufactured and cleared mono-bloc pump-sets. The common point of dispute in these 20 appeals is whether the central excise duty on the electric motor portion of the pump-set, which was realised by the appellants from their customers through .a separate entry in the sale invoice for the pump-set, should be added to the assessable value of the pump-set for charge of central excise duty thereon. The period involved generally is from 1-10-75 to 30-9-76.
2. We have heard both the parties, perused the record and given the matter our earnest consideration. In the case of T.R. Industries, we have particularly examined their written submissions in view of their letter dated 27-3-1987 requesting us to decide their appeal without their personal presence.
3. It is now the settled position in law that the full intrinsic value of an article must include the cost of all its raw materials and components, vide the Supreme Court judgment in the case of Empire Industries Limited, 1986(20) E.L.T. 179(S.C.), paragraph 47]. The taxes paid on the raw materials and components are certainly a part of their cost. Under Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944, the assessees are entitled to ask for exclusion of the taxes paid on the finished goods ("such goods"), which are the subject of assessment, but not of the taxes paid on the raw materials and components which go into the manufacture of the finished goods, vide order No. 700/86-A dated 28-8-1986 : 1986(26) ELT 250 (Tribunal) passed by this Tribunal in Appeal No. E-2884/84-A of M/s. Khaitan Fans (P) Ltd. This order of the Tribunal received confirmation of the Hon'ble Supreme Court when the appeal filed by the assessee (Civil Appeal Nos. 106-107/87) was dismissed by a Full Bench of the Supreme Court on 10-2-1987. Further, with the amendment of Section 4(4)(d)(ii) in 1982 (insertion of the Explanation) which had retrospective effect from 1-10-1975, it is also now settled that only that much duty can be deducted from the cum-duty sale price of the article which is actually paid by the assessee on the article ("such goods") to the Government. It is in the light of these principles of valuation that we have to decide this batch of appeals.
4. Basically, two arguments were pressed before us on behalf of the appellants. The first was that in the course of manufacture of mono-bloc pump-sets, an electric motor as such did not come into existence in an identifiable manner; only rotors and stators came into existence and as such there was no question of payment of duty on electric motors at the intermediate stage. Even if factually correct, this argument suffers from two flaws. First, assuming that an electric motor as such does not come into existence, rotors and stators would, in any case, have to pay duty as components of electric motors under item 30(4) of the tariff. For the purpose of the costing of the final product, it is immaterial whether duty on its raw materials and components was paid under this item or that of the tariff. The material point is that if the duty was paid, it has to enter into the value of the finished goods. Secondly, even assuming that no duty, whether on the motors or on rotors and stators, was payable, still, if the appellants collected some amount from their customers by way of such duty but did not pay it to the Government, it would yet become a portion of their price realisation for the finished article and, consequently, it would have to be included in the assessable value of the finished article. This argument of the appellants has, therefore, no substance.
5. The second argument of the appellants was that during the material period exemption notification No. 84/72-CE, dated 17-3-1972 was in force and that this notification provided for a set off being given for duty paid on electric motors or rotors or stators of the pump-sets. This, in effect, meant that the appellants paid duty on the motors/rotors/stators with one hand and took it back, by way of set off, with the other at the time of paying duty on the pump-set. Ultimately, thus, the motor/rotor/stator portion of the pump-set paid no duty. The point made forcefully by the appellants is that in view of this position created by the exemption notification, there was no question of their including the motor/rotor/stator duty into the costing of the pump-set. The appellants asserted before us that they have realised from their customers at the pump stage nothing more than what they paid by way of duty to the Government at two stages - motor/rotor/stator stage and pump stage. In other words, they denied that they have retained any portion of the duty with themselves.
6. If the aforesaid position as given out by the appellants if factually correct, there is force in their second argument. Since the set off provision exempted the motor/rotor/stator part of the duty, the lower authorities are not justified in insisting that such duty should be included in the assess able value of the pump. Further, if the appellants have not realised any excise duty from their customers and retained it with themselves, there is no question of treating the retained duty as a part of their price realisation and adding it to the assessable value. In the light of this conclusion reached by us, we remand all the twenty appeals to the Assistant Collector. The Assistant Collector should verify whether the assertion of the appellants that they have not retained any duty with themselves is correct. If the verification reveals that the position is as stated by the appellants, the Assistant Collector should withdraw the demand for duty. If the position is otherwise, the Assistant Collector would be entitled to re-calculate and enforce the demand only to the extent of the duty retained by the respective appellant, subject to the time limit of Rule 10 read with Rule 1733 of the Central Excise Rules, 1944. Since the appellants had removed their goods on gate passes after payment of duty and the classification lists, price lists and RT-12 returns filed by them had been duly approved and assessed, Rule 9(2) has no application to the facts of the case.
7. All the twenty appeals are allowed by way of remand in the above terms.