Custom, Excise & Service Tax Tribunal
C.C.E. Indore vs M/S. Grasim Industries Ltd on 12 February, 2014
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI COURT NO. I Date of hearing/Decision: 12.02.14 Appeal No. E/1040/2005-EX[DB] C.C.E. Indore Appellant Vs. M/s. Grasim Industries Ltd. Respondent
[Arising out of Order-In-Appeal No. 414-CE/IND/APPL-II/2003 dt. 20.12.2004, passed by Commissioner(Appeals-II) Customs & Central Excise, Indore.] For approval and signature:
Honble Mr. Justice G.Raghuram, President Honble Rakesh Kumar, Member (Technical) 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?3
Whether Their Lordships wish to see the fair copy of the Order?4
Whether Order is to be circulated to the Departmental authorities?
Present:
Ms. Shweta Bector, DR - for the appellant Ms. Surbhi Sinha, Advocate- for the Respondent Coram:
Honble Mr. Justice G.Raghuram, President Rakesh Kumar Member (Technical) FINAL ORDER NO. 50770 /2014 Per Rakesh Kumar:-
The facts giving rise to this appeal by the Revenue are in brief as under:-
1.1 The respondent are manufacturers of Caustic Soda, Liquid Chlorine, S.B.P etc. chargeable to Central Excise duty under various Headings of Chapter 28 of the Central Excise Tariff. The liquid Chlorine manufactured by the respondent is sold by them to their customers in their own cylinders called Tonners, and also in the cylinders/Tonners brought by the customers. As per the facts narrated in para 14 of the Order-in-Original dt. 09.09.04, some quantity of liquid chlorine is also supplied through pipeline. The Tonners are required to undergo periodical Hydraulic testing as per the provision of Gas Cylinder Rules, 1981. The audit officers in course of examination of the respondents records for the period from 2000-2001 to 20001-2002, pointed out that while the respondent are collecting the charges from their customers for testing of Tonners, they are not including these charges in the assessable value of Chlorine being sold by them. Accordingly two Show Cause Notices were issued for demand of Central Excise duty of Rs. 94,264/- and 67,792/- for the period from 01.07.2000 to 29.02.2004. The Show Cause Notices were adjudicated by the Assistant Commissioner by a common Order-in-Original dt. 09.09.04 by which the duty demands, as mentioned above, were confirmed along with interest and penalty of equal amount was imposed on the Respondent under Rule 25(1) of the Central Excise Rules. In course of proceedings before the Assistant Commissioner, respondent pleaded that the testing charges are being charged only in those cases where the Chlorine is supplied to the customers in the Tonners brought by them and request is made by the customers for Hydraulic testing, as the Tonners have to undergo Hydraulic testing as per the law and that for this reason, the testing charges for Tonners being charged by the Respondents from certain customers are not the amounts charged for the reason of or in connection with sale of the Chlorine and, hence, are not includible in the transaction value of the Chlorine sold. But this plea was not accepted. On appeal being filed to Commissioner (Appeals) against this order of the Assistant Commissioner, the Commissioner (Appeals) vide Order-in-Appeal dt. 20.12.04 set aside the Assistant Commissioners order and allowed the appeal. The Commissioner (Appeals) in his order relied upon the judgment of the Tribunal in case of CCE, Ludhiana Vs. Punjab Alkalis & Chemicals Ltd., reported in 2004(168) ELT-82 (Tri.Del.) wherein it was held that Hydraulic testing charges for the Tonners in which Caustic Soda is sold are not includible in the assessable value of the caustic soda. Against this order of the Commissioner (Appeals), this appeal has been filed by the Revenue.
2. Heard both the sides.
3. Ms. Shweta Bector, the learned DR, assailed the impugned order by reiterating the grounds of appeal in the Revenues appeal and cited the judgment of Tribunal in case of Kota Oxygen (P)Ltd. Vs. CCE, Jaipur, reported in 2000(121) ELT-369 (Tribunal) wherein it was held that when acetylene gas was being sold by the Appellant at the same price irrespective of whether the gas was supplied in their own cylinders or in the cylinders brought by the customers, deduction from sale price of, Acetylene, the cylinder maintenance charges and fixed rental charges were not permissible. She also cited the judgment of Apex Court in case of CCE, Indore Vs. Grasim Industries Ltd., reported in 2009 (241) ELT-321(S.C.) wherein with regard to the provisions of section 4 during period w.e.f. 01.07.2000, Apex Court referred to Larger Bench the question as to whether the concept of transaction value in the new section 4 of the Central Excise Act, 1944, introduced w.e.f. 01.07.2000, makes any material departure from deemed normal price concept of erstwhile section 4(1)(a) of the Act and also whether in section 4 of the Central Excise Act., w.e.f. 01.07.2000, the definition of Transaction Value as given in Section 4(3)(d) of Central Excise Act, 1944 is subject to section 3 of the Act. She, therefore, pleaded that the findings of Commissioner (Appeals) is the impugned order that testing charges of Tonners are not the charges for the reason of or in connection with sale of the Chlorine, and not includible in the assessable value of the Chlorine, are not correct .
4. Ms. Surbhi Sinha, Advocate, the learned counsel for the Respondent, defended the impugned order by reiterating the findings of Commissioner (Appeals) and emphasized that from the very beginning, the stand of the respondent has been the hydraulic testing charges are charged only when liquid chlorine is supplied by them in the Tonners brought by the customers, and testing of the customers tonners is done on their request, that the testing of the Tonners belonging to customers on their request is an activity which has no link to the sale of Chlorine to them and hence testing charges in such cases charged from the customers, cannot be said to be for the reason of or in connection with sale of the Chlorine, that in any case, the issue involved in the present case stands decided by the Tribunal in the Respondents favour in case of CCE Ludhiana Vs. Punjab Alkalis & Chemicals Ltd. , reported in 2004(168) ELT-82(Tri.-Del.), that the same view has been taken by the Tribunal in case of Harshita Handling Vs. CCE, Bhopal, reported in 2010(19) STR-596 (Tri.-Del.), and that in view of the above, there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the records. The respondent in their reply dt. 16.02.04 to the Show Cause Notice have clarified that they supply Chlorine in their own tonners as well as in the tonners brought by their customers and in latter cases, sometimes on the customers request, hydraulic testing of their tonners is done if the same is due as per Gas Cylinder Rules, 1981, and only in such cases, the charges for such testing are charged from the customers. This plea of the respondent has been taken note of by the Original Adjudicating Authority in para 14 of his order and this fact is not disputed. In fact this para also mentions that some quantity of liquid chlorine is supplied through pipelines. The Assistant Commissioner, however, has held that irrespective of whether chlorine is sold by the Respondent in their own tonners or in the tonners brought by their customers, the testing charges of the tonners have to be treated as for the reason of or in connection with sale of Chlorine and same would be part of the transaction value of Chlorine, as periodical testing of the tonners is a mandatory requirement under Gas Cylinder Rules, 1981, and when periodical testing of the Cylinders/tonners is mandatory in connection with sale of Chlorine, the testing charges would have to be treated as charges for the reason of or in connection with sale of Chlorine. While the Commissioner (Appeals) has set aside this order of the Assistant Commissioner relying upon the Tribunals Judgment in the case of Punjab Alkalis & Chemicals Ltd.(Supra), the Revenue has filed appeal against the order of the Commissioner (Appeals) by mainly reiterating the reasoning of the Assistant Commissioner and emphasizing that testing of tonners, in which chlorine is supplied, is a mandatory requirement and therefore the charges for testing of the tonners, even if the testing is done on the request of the customers, have to be treated as the charges collected from the customers for the reason of or in connection with sale of Chlorine and would be includible in the assessable value of the Chlorine sold in such tonners. The point of dispute is as to whether the testing charges for the customers tonners which according to the Respondent are optioned, are part of the transaction value of the goods.
5. During the period w.e.f. 01.07.2000, under Section 4(1)(a), the assessable value of the goods, on each removal, shall, in a case where the goods are sold by the assessee, for delivery at the time and place of removal to unrelated buyers and price is the sole consideration for sale, is the Transaction value. The term transaction value is defined in Section 4(3)(d) as under:-
the price actually paid or payable for the goods, when sold and include in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of the assessee, by the reason of, or in connection with sale, whether payable at the time of sale or at any other time, including, but not limited to any amount charged or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or other matters, but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid.
5.1 In our view, the words any amount that the buyer is liable to pay to or on behalf of assessee for the reason of or in connection with sale would cover the amount paid or payable by the buyer for the goods, only for the expenses which contributed to the value of the goods or are necessary to make the goods marketable and this expression would not include the amounts paid by the buyers for something which has no nexus with the emergence of marketable goods or does not contribute to the value of the goods up to the point of sale from the place of removal. Thus if some goods become marketable and can be sold only when packed in certain type of containers and testing of those containers is mandated by law, the testing charges of those containers would be includible in the value along with the cost of such containers if the containers are of durable and returnable nature, the amortized cost of the container including testing charges during the period of use would be includible in the assessable value. Apex Court in the case of M/s. Hindustan Polymers Vs Collector of Central Excise, reported in 1989(43) ELT-165(SC) while interpreting the provision of Section 4(4)(d) of the Section 4 of Central Excise Act, 1944, as it stood during period prior to 01.07.2000, has, relying upon its judgment in case of Bombay Tyre International, reported in 1983 (14) ELT-1896(SC), UOI Vs, Godfrey Philip India, reported in 1985(22) ELT-306(SC) and CCE Vs. Indian Oxygen Ltd., reported in 1986(36) ELT-370 (SC) held that:
(a) Cost of packing is not includible in the value of excisable goods if the goods are marketable without being packed or contained in drums or containers and packing is not necessary for completion of manufacture of excisable goods; and
(b) Where packing material is supplied by the customers/buyers The above judgment has been followed by the Apex Court in the cases of Jauss Polymers Ltd., reported in 2003(157) ELT- 623(SC) and CCE Vs. Superior Products, reported in 2008(230) ELT-3(SC). Though these judgments are in respect of the provision of Section 4 of Central Excise Act, 1944, as it stood during the period prior to 01.07.2000 and in which clause d(ii) of Section 4(4) was about packing charges, while Section 4 w.e.f. 01.07.2000 and the definition of Transaction Value in it, is totally silent about the packing charges, in our view the principle laid down by the Apex Court in cases of Hindustan Polymers (Supra), Jauss Polymers Ltd.(Supra)and CCE Vs Superior Products (Supra) is also applicable to Section 4, as it stands w.e.f. 01.04.2000, as the Apex Court in para 51 of its judgment in case of Bombay Tyre International (Supra) has held that the statutory provision regarding inclusion of packing charges calls for strict construction, as levy is sought to be extended beyond the manufactured article itself and accordingly the cost of only that packing would be includible in the assessable value which is necessary to make the goods marketable and this principle would be applicable while interpreting the provision of Section 4, as it stands w.e.f. 01.07.2000, as the nature of the levy of Central Excise duty has not changed. Therefore, if some goods are marketable without being put into the containers, the cost of containers including their testing charged would not be includible in the assessable value.
6. In this case, the fact that liquid Chlorine manufactured by the Respondent is being sold by them either in their own tonners or in the customers tonners or even through pipeline, shows that Chlorine is marketable as such. It is also not disputed that testing is optional and the testing charges have been charged only in those cases where the liquid chlorine was supplied in the tonners brought by the customers and the customers had requested for testing of their Cylinder/tonners. In these circumstances neither the cost of tonners nor their testing charges would be includible in the assessable value of liquid chlorine. In fact, in this case, the testing of the tonners belonging to the customers on their request is an activity different from the sale of Chlorine which is marketable as such and, hence the charges for such testing cannot be said to be for the reason of or in connection with sale of Chlorine, as the customers could have got the testing of their tonners done from other persons also.
7. The judgment of the Tribunal in case of Kota Oxygen (p) Ltd. Vs. CCE Jaipur, reported in 2000(121) ELT-369 (Trib.) cited by the learned DR is not applicable to the facts of this case, as in case of Kota Oxygen (p) Ltd., the assessee was charging amounts towards fixed cylinder rental and Cylinder maintenance charges even from the customers who lifted Oxygen gas manufactured by the assessee in their own cylinders and the amounts charged as cylinder rental and cylinder maintenance were several times higher than the actual costs incurred and on this basis the Revenue had alleged that part of the value of the Oxygen Gas was being collected as cylinder rental and maintenance charges and this allegation of the Revenue had been upheld by the Tribunal In this case, there is no such allegation.
8. In view of the above discussion, we hold that the cylinder testing charges are not includible in the assessable value of the liquid chlorine and there is no infirmity in the impugned order. The Revenues appeal is therefore dismissed.
(Justice G. Raghuram) President (Rakesh Kumar) Member (Technical) S.Kaur 2