Customs, Excise and Gold Tribunal - Delhi
Sail vs Collector Of C. Ex. on 9 June, 2000
Equivalent citations: 2000(70)ECC785, 2000(119)ELT249(TRI-DEL)
ORDER
K. Sreedharan, J. (President)
1. These appeals have been posted before a Larger Bench of three Members on account of the conflicting decisions rendered by Benches of two Members in cases filed by same party, namely, the Steel Authority of India Ltd. In the first case reported in 1997 (90) E.L.T. 502, this Tribunal took the view that Steel Development Fund (SDF), Engineering Goods Export Assistance Fund (EGEAF) and Joint Plant Committee Cess/charges (JPC) cannot be included in the assessable value of different categories of iron and steel manufactured by various manufacturers of steel in India. When the same issue came up again, Eastern Bench Calcutta of this Tribunal as per the decision reported in 1998 (24) RLT 394 took a contrary view and held that the above mentioned charges are part and parcel of assessable value of the produce and the department was entitled to levy excise duty on that. These conflicting decisions of coordinate Benches necessitated reference of these appeals to the Larger Bench.
2. Before proceeding further in the matter, we express our disapproval of the manner in which the Eastern Bench of two Members took a view contrary to that expressed by a coordinate Bench in 1997 (90) E.L.T. 502. The Eastern Bench ignored the need for continuity, certainty and predictability of the decisions of this Tribunal. Judicial inconsistency will go to shake public confidence in the administration of justice. This does not mean that a Bench of coordinate jurisdiction is not having the freedom to doubt the correctness of an earlier decision. When subsequent events bring to light the error that might have been committed in delivering the earlier decision, the matter should be placed before the President for constituting a Larger Bench for resolving the points in conflict. Instead of resorting to such a course, a Bench of coordinate jurisdiction is not to render its decision contrary to the view expressed in the earlier decision. Judicial propriety also requires a Bench not to take a contrary view on an identical question arising between the same party. The Eastern Bench, to say the least, was not acting in a proper manner while taking a view contrary to that taken in the earlier decision even when request was made to it for referring the matter to a Larger Bench.
3. As per Section 3 of the Essential Commodities Act, 1955, Central Government is entitled to issue orders providing for regulating production, supply and distribution of any essential commodity for their equitable distribution and availability at fair prices. In exercise of this power, Central Govt. issued Iron and Steel (Control) Order, 1956. Clause 15 of that order authorised the Controller to fix maximum prices at which any iron or steel may be sold. Clause 17B empowered the Central Govt. to set up committees for the purpose of giving effect to the provisions of the Iron and Steel (Control) Order. The Committee so constituted was to carry out the functions specified in the notification issued by the Central Govt. in that behalf. Invoking the provisions contained in Clause 17B of the Iron and Steel (Control) Order, notification dated 7-4-1971 was issued setting up Joint Plant Committee and Steel Priority Committee. Functions of the committee were enumerated in that notification. This notification was amended by notification dated 27th December, 1978. Clause 9A was added to the earlier notification dated 7-4-1971. As per, that the committees were empowered to add an element to the ex-works price determined under Sub-clause (8) for constituting a fund for modernisation, research and development with the object of ensuring the production of iron and steel in the desired categories and grades by the main steel plants. This newly added clause was introduced to collect certain amounts from the customers who purchase iron or steel for constituting a separate fund. This amount to be collected was to be added to the ex-works price determined under Sub-clause (8) of the earlier notification dated 7-4-1971. A combined reading of these notifications shows that the committee is to determine the ex-works prices of iron and steel in terms of Sub-clause (8) of notification dated 7-4-1971 and an additional amount is to be realised by the manufacturers from the customers towards the newly constituted fund to be handed over to the committee. The second notification provided that members of steel plants will add the elements listed thereunder to their ex-works price of different categories of iron and steel and remit the same to the Joint Plant Committee. The manufacturers are to collect Steel Development Fund (SDF), Engineering Goods Export Assistance Fund (EGEAF) and JPC Cess. The rates at which these funds are to be collected are mentioned in the annexure to the said notification. Pursuant to these notifications, manufacturers of iron and steel included these elements of SDF, EGEAF and JPC Cess in their invoices over and above the ex-works prices determined under Sub-clause (8) of notification dated 7-4-1971.
4. The question that arises for consideration in these appeals is whether SDF, EGEAF and JPC Cess form part of the assessable value of iron and steel sold by the manufacturers.
5. To understand the nature of amounts collected as SDF, JPC Cess and EGEAF, reference has to be made to the notification dated 27th December, 1978. Clauses 9A and 9B were added by that notification. They are in the following terms :-
"(9A) The Committee may add an element to the ex-works price determined under Sub-clause (8) for constituting a fund for modernization, research and development with the object of ensuring the production of iron and steel in the desired categories and grades by the main steel plants. In the matter of operation of this fund, the Committee shall perform its functions in accordance with and subject to such regulations or directions as may be issued by the Central Government from time to time."
"(9B) The Committee may also add any other element to the ex-works prices determined under Sub-clause (8) to enable it to discharge its functions and to implement specific schemes entrusted to it by the Central Government."
These clauses empower the committee, namely, JPC to add an element to the ex-works prices. The additions contemplated by the above clauses are to exworks prices. In other words, these additions do not go to enhance the ex-works prices, but it is something added to it. The element so added cannot be treated as the price of iron and steel. The element so added is to be collected by the members of the steel plant from the customers and to remit the same to the Joint Plant Committee (JPC). Steel Development Fund (SDR) is an amount to be collected at rates per tonne as indicated in Annexure II to the minutes of the meeting of JPC held on 6-1-1992. EGEAF levy is to be at Rs. 113.00 per tonne on pig iron and Rs. 300.00 per tonne on steel materials. JPC Cess on steel is Rs. 3.00 per tonne as indicated in Annexure II to the minutes. These additional elements forming SDR, EGEAF and JPC Cess are independent of the ex-works prices of the material manufactured.
6. The notifications enjoin the manufacturers to collect SDF, EGEAF and JPC Cess. The amounts so collected are not to be appropriated by the manufacturers. The amounts so collected are to be remitted to the JPC. Manufacturers are constituted collection agents of these amounts. Excise department wants these amounts so collected to form part of the sale price of goods manufactured. According to Section 4(1) of the Central Excise Act, 1944, where duty of excise is chargeable on excisable goods with reference to value, such value should be on the normal price of the goods manufactured. The normal price is the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal. So, the price must be the amount which the buyer pays to the assessee. If any part of the amount paid by the buyer to the assessee is not to be appropriated by the assessee, consequently that part cannot be termed as the value of the goods. That part cannot form the assessable value either. SDF, EGEAF and JPC Cess directed to be collected by the manufacturers from the customers are not to be appropriated by the manufacturers towards the price of the goods. They are to pass it on to the JPC. Therefore, it cannot be considered as the price of the goods manufactured.
7. The customers who purchase iron and steel from the manufacturers are bound to contribute towards SDF, EGEAF and JPC Cess. On account of the customer paying that amount to the manufacturer can it form the assessable value of the goods? A similar question came up for consideration before the Supreme Court in the case of Commissioner of Income Tax (Central), New Delhi v. Bijli Cotton Mills (P) Ltd., 1979 (116) ITR 60. In that case assessee company realised certain amounts on account of Dharmada (charity) from its customers on sale of yarn and bales of cotton from its very inception. In the bills issued to the customers, amount collected towards Dharmada was shown as a separate item different from the price of the goods sold. The question was whether the said collection was an income of the assessee company. Taking the view that Dharmada amount paid by customers cannot be regarded as part of price or surcharge on price of goods purchased by customers, their Lordships observed :-
"The amount of dharmada is undoubtedly a payment which a customer is required to pay in addition to the price of the goods which he purchases from the assessee but the purchase of the goods by the customer would be the occasion and not the consideration for the dharmada amount taken from the customer. It is true that without payment of dharmada amount the customer may not be able to purchase the goods from the assessee but that would not make the payment of dharmada amount involuntary inasmuch as it is out of his own volition that he purchases yarn and cotton from the assessee. The dharmada amount is, therefore, clearly not a part of the price, but a payment for the specific purpose of being spent on charitable purposes."
As in this case the realisation of amounts from customers which are to be passed no to JPC as SDF, EGEAF and JPC cess are not part of the price but are payments for the specific purpose of being passed on to the JPC. They cannot be regarded as price of iron or steel manufactured by the companies.
8. Decisions rendered by courts interpreting the word "turnover" as defined in the Sales Tax Act were relied on by the learned CDR to contend that all amounts paid by customer should form part of the normal price and unless any part is legally deductible, that normal price must be taken as the assessable value. This approach is fallacious. Turnover of the trader has nothing to do with the duty of excise which is to depend on the value of the goods. The value is the normal price at which goods are ordinarily sold by the assessee to a buyer. If any part of the money that passes from the customer to the assessee does not form part of the normal price, that part cannot go into the value of the goods for the purpose of assessment under the Central Excise Act, 1944.
9. According to the learned CDR, out of the amounts paid by the customers those items falling under Section 4(4)(d)(ii) alone can be deducted for finding out the assessable value of the goods manufactured. Since SDR, EGEAF and JPC Cess do not fall within any of the categories mentioned in that sub-clause, it is contended that the entire amount paid by a customer should be treated as the assessable value. This argument, we are afraid, is not having any legal basis. Various remittances made mention of in that sub-clause are to be excluded in finding out the assessable value. This means that those items are to be deducted from the normal price. In the instant case, SDF, EGEAF and JPC Cess do not form part of the price of the goods manufactured, because they are directed to be collected by the manufacturers over and above the ex-works price.
10. The Eastern Bench in 1998 (24) RLT 394 wrongly assumed the SDF, EGEAF and JPC Cess as part of normal price. It was only on account of this erroneous understanding, the said Bench happened to take a view contrary to the one taken in 1997 (90) E.L.T. 502. We hold that the decision of the Eastern Bench in Steel Authority of India Ltd. v. C.C.E., Bhubaneswar, 1998 (24) RLT 394 is one not laying down the correct law. Correct legal position is the one stated by this Tribunal in the earlier decision reported in 1997 (90) E.L.T. 502.
11. In the light of the above discussion, we hold that amounts collected by manufacturers towards SDF, EGEAF and JPC Cess do not form part of the assessable value of the goods manufactured. Decisions rendered by the lower authorities taking a contrary view are set aside in the appeals filed by the manufacturers. Some of the lower authorities decided the issue relying on the earlier decision of this Tribunal in 1997 (90) E.L.T. 502. Revenue has come up in appeal questioning the decisions based on the Eastern Bench decision reported in 1998 (24) RLT 394. Those appeals filed by the Revenue fail and are dismissed.
12. In appeal E/1115/98-A a further question is also raised as to whether packing charges are includible in finding the assessable value of the goods. That issue has been decided by this Tribunal in the case of Commissioner of Central Excise, Jamshedpur v. TISCO reported in - 1998 (27) RLT 499. Relying on that decision, we hold that packing charges are not includible in the assessable value of the goods.
13. All appeals are disposed of as stated above.