Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Century Spg. And Mfg. Co. Ltd. on 7 March, 1986
Equivalent citations: 1986(26)ELT265(TRI-DEL)
ORDER M. Santhanam, Member (J)
1. As common questions of facts and law are involved both these appeals have been taken up together. The respondents manufacture liquid Chlorine falling under T.I. 14H and have been supplying them in durable and returnable tonners and cylinders of their own to the customers. They have declared that the cost of packing need not be included in the assessable value with effect from 7-2-83 onwards to the tune of Rs. 100 and Rs. 150, respectively. On enquiry it was found that the cost of packing claimed by the party was nothing but expenses said to have been incurred by them on account of maintenance of cylinders/ tonners, service charges, etc. which were recovered from the customers. Two show cause notices were issued - the first on 2-10-83 and the second on 23-1-84. The first show cause notice was in respect of price list effective from 4-12-82, 7-2-83, and 30-6-83. It was alleged that the respondents have been claiming said amount on account of maintenance and service charges. The second show cause notice relates to the price list dated 9-9-83, 1-1-0-83, 2-9-83, 23-11-83, 2-9-83 and 24-8-83. It was alleged in that show cause notice that rental charges have been recovered from the parties as shown in the contract copies and they should be included in the assessable value. In reply to the show cause notice the respondents contended that the containers were durable and returnable having a life-span of approximately ten years. The respondents were charging packing charges in respect of the durable and returnable packings. They emphatically denied that any amount was collected towards maintenance and service charges. In reply to the second show cause notice they stated that the rental charges were collected only in respect of parties who did not return the cylinders within the stipulated time. According to them the cost of packing could not be included in the assessable value because the packing was durable and returnable.
2. On 27-6-84 the Asstt. Collector, Kalyan, passed orders holding that the maintenance and service charges as well as the rental charges were nothing but charges for other services after delivery to the buyer. Since these charges have been clarified by the Supreme Court in the case of Bombay Tyre International they are includible in the assessable value. The respondents preferred an appeal to the Collector (Appeals) who under the impugned order held that the containers were durable and returnable, that the dispute was about the expenses incurred by the respondents towards the replacement of tonners valves, plugs, etc. and as per Section 4(4)(d) of the Central Excises and Salt Act, 1944, any amount of expenditure incurred towards the cost of durable and returnable packing should be excluded. He allowed the appeals.
3. The Department has filed the present appeals on the ground that there was no provision to allow any further deduction for any expenditure on the cost of packing as claimed by the assessee because the amounts represented the expenses for maintenance of the cylinders. It was also alleged that compared to the life-span of the packings the respondents would be recovering far in excess of the cost of such packing.
4. Shri B.R. Tripathi, SDR, urged that the respondents cannot claim that the packings were durable and returnable and at the same time urge that there was equalised recovery of the cost of packing. This would amount to a consumable packing. He therefore urged that the respondents cannot claim exclusion of this amount.
5. The learned counsel, Shri C.S. Lodha, for the respondents, argued that the cost of cylinders was about Rs. 15,000/- while the cost of tonner was approximately Rs. 18,000. The respondents could not recover the full cost of packing from the customers. They were fully justified in effecting equalised recovery of the cost, as in the case of equalised freight. There was no allegation or proof that the mode of recovery was a facade or camaflouge to evade duty. He relied' on the decision of the Government of India reported in 1982 ELT 475 (Inre: Hindustan Lever Ltd.) where a similar instance pro rata recovery of the cost of drum was recovered and the Government held that the particular sum would be eligible for deduction. On the question of rental he relied on the ruling reported in 1985 (22) ELT 61 (Collector of Central Excise, Indore v. Premier Oxygen and Acetylene Co. (P) Ltd., Gwalior) wherein the Tribunal has held that the retention charges accrued to the manufacturer after the delivery of the goods and can not be relatable to the cost of manufacture. He argued that the validity of the order should be judged on the basis of the show cause notice and cited the ruling reported in 1984 (15) ELT 379 (Bakul Cashew Co. v. Union of India) wherein the Hon'ble Madras High Court has held that the Court cannot take notice of any fact which did not appear on the, face of the order. The same principle is found in Mahender Singh v. Chief Election Commissioner (AIR 1978 SC 851)
6. We have carefully considered the contentions raised by both the parties. It is not disputed that the respondents supplied Chlorine in durable and returnable cylinders/tonners. The price list filed by them show that they have declared the nature of the packing as returnable and durable packing. They have also claimed Rs. 100 or Rs. 150 (as the case may be) as deductions from the price under Section 4(4)(d). As the packing is admittedly durable and returnable under Section 4(4)(d)(i) the inclusion of cost of packing could be claimed. The respondents have stated in their reply to the show cause notice that the amounts represent the packing charges in respect of durable and returnable packing. Shri C.S. Lodha agued that instead of recovering the full cost of packing the respondents have spread-over the recovery commensurate with the life-span of the containers. In other words according to him the amounts were equalised recovery of the cost of packing. Since the respondents are entitled to recovery the cost packing and in the absence of any proof that such a mode was merely a camouglage, the deduction is permissible under Section 4(4)(d)(i). We are not giving any finding whether the plea of phased recovery of the cost is tenable.
7. In the show cause notice it is said that the amount represented the service and maintenance charges. The classification list do not indicate that the amounts were recovered either as service charges or as maintenance charges. At the risk of repetition we must say that the deduction was claimed under Section 4(4)(d)(i). Since containers are of a durable and returnable nature the respondents are entitled to this deduction.
8. Regarding the rental charges the respondents have explained that as per contract they were recovering retention charges from the customers who unnecessarily delayed the return of the containers. Such charges have nothing to do with the manufacture and we follow the decision of the Tribunal in the case of Premier Oxygene (supra). The Asstt. Collector has erred in treating the packing charges as maintenance and service charges as also the rental charges. The decision reported in Bombay Tyre International has no application to the present case. The Appellate Collector has observed that the expenses were incurred towards replacement of parts, plugs, etc. This observation is not supported by any evidence. Even otherwise the claim for packing charges under Section 4(4)(d)(i) (as set out in the classification list) could be excluded in the absence of any evidence to the countrary. The apprehension of the Department that the respondents would be collecting amounts far in excess of the value of the containers is also not borne out by evidence. Shri C.S. Lodha submitted that the respondents were maintaining regular data in respect of the cylinders and tonners -and those accounts would give the Department an idea of the exact amount recovered in respect of each item at any particular period. There is no case in the show cause notice that there was collection of amount exceeding the actual cost of the items. In the absence of such an allegation or proof, this contention cannot be upheld.
9. In view of the above discussion we hold that the Department has not proved that the appellants are making further deduction for any expenditure on the cost of packing apart from the decuction on the cost of packing under Section 4(4)(d)(i) on the cost of containers. It is also not established that they would be recovering much more than the cost of the expenses incurred towards the maintenance of the packing containers. There are no grounds to interfere with the orders of the Collector of Central Excise (Appeals). In the result the appeals are dismissed.