Customs, Excise and Gold Tribunal - Tamil Nadu
Castrol India Ltd. vs Commissioner Of Central Excise on 17 June, 2002
Equivalent citations: 2002ECR655(TRI.-CHENNAI), 2003(159)ELT575(TRI-CHENNAI)
ORDER Jeet Ram Kait, Member (T)
1. This appeal has been filed by M/s. Castrol India Ltd., the appellants herein challenging the Order-in-Appeal No. 29/2001 (M-I), dated 14-3-2001 passed by the Commissioner (Appeals), by which he has upheld the order-in-original No. 60/2000, dated 30-8-2000 passed by the Assistant Commissioner confirming the differential duty demand of Rs. 55,96,547/- under Section 11A of the C.E. Act, 1944 (the Act for short) besides imposing a penalty of Rs. 5,000/- on the appellants under Rule 173Q of the C.E. Rules, 1944.
2. The brief facts of the case are that the appellants herein are manufacturers of Lubricating oils falling under Chapter 2710.90 and lubricating preparations falling under chapter sub-heading 3403.00 of CET. The appellant company since August, 1999 has been clearing the lubricating oil in bulk i.e. in tankers on payment of duty on the value as determined under Section 4 of the C.E. Act, 1944 to M/s. Lubs & Greases Guindy for re-packing in smaller containers, packings and then clear it to their depots for further sale to customers. As this was not acceptable to the department and duty should have been paid under Section 4A value at depot, a show cause notice dated 29-2-2000 was issued by the range officer to demand differential duty of Rs. 55,96,547/- for the period from 1-8-99 to 31-1-2000 and to impose penalty and the show cause notice culminated in the original authority passing the order-in-original whereby the original authority has demanded a duty of Rs. 55,96,547/- under Section HA of the C.E. Act, 1944 besides imposing a penalty of Rs. 5000/- under Rule 173Q of the C.E. Rules, 1944. Against that order, the appellants filed appeal before the Commissioner (Appeals) who by the impugned order upheld the order of the original authority. Aggrieved by the impugned order, the appellants have come in appeal on the following grounds :
(a) The appellants manufacture and clear the products to depots in bulk (lorry tankers) applying wholesale price of 205 ltrs. where they are re-packed at the depots and sold thereafter at the price applicable to small packs. The whole sale price of 205 ltrs. barrel is uniform whether sold ex-factory/ex-depot.
(b) The period involved in this case is 1-8-99 to 31-1-2000, when repacking did not amount to manufacture.
(c) Show cause notice was issued under Section 4A of the Act while the order-in-original was passed under Section 4. However, the lower appellate authority has upheld the order applying Section 4A of the Act. Therefore, the impugned order-in-original has traversed beyond the show cause notice and the order-in; original. Further, inasmuch as there is no appeal filed by the department against the order of the lower appellate authority against his finding under Section 4A, as against the order-in-original under Section 4, the impugned order is liable to be set aside.
(d) During the disputed period, the assessments were provisional and hence the show cause notice and the subsequent orders are premature.
(e) In the absence of chapter note that re-packing amount to manufacture, duty was required to be paid based on Section 4 of the Act. In support of their plea the appellants rely on the decision of the Tribunal in their own case reported in 2000 (118) E.L.T. 35 and Savitha Chemicals reported in 2000 (119) E.L.T. 394.
(f) Rule 9 of the Rules envisages payment of duty at the time and place of removal (which is factory/place of manufacture). Therefore, it is the form in which it is removed from the factory is relevant to determine whether it will be valued under Section 4 or 4A of the Act.
(g) As per the Board's instructions, the department has no authority to charge duty on the value addition outside the factory of clearance when such value addition is on account of any process not amounting to manufacture.
(h) Section 4A will apply to specified commodity in respect of which declaration of Retail Sale price under Standards of Weights & Measures Act read with Rule 6 of Packaged Commodity Rules is required to be made and there is no requirement for declaring MRP in respect of wholesale package.
(i) Value as per Section 4(4)(d) will include packing charges only when they are removed in packed condition at the time of removal from the factory, as held in their own case as well as in the Savitha Chemicals case (supra).
3. Shri N. Venkataraman, learned Counsel for the appellants argued the matter on the above lines and submitted that the decision of the Tribunal in their own case reported in 2000 (118) E.L.T. 35 and that of the Savitha Chemicals (supra) squarely applies to the facts of the present case and he submitted that the impugned order is not sustainable and is required to be set aside.
4. Shri G.S. Menon, appearing for the department referred to the comments received from the Commissionerate vide C. No. V/27/2/89/2001-C, dated 30-10-2001, a copy of which has been placed in the file. He submitted that in this case the show cause notice was issued under Section 4A of the Act and the order-in-original also was confirmed under the same provisions. Further the arguments that the assessments were provisional was neither advanced before the adjudicating authority nor before the lower appellate authority. He has further submitted that the plea of the appellants that Section 4A will apply for the goods notified under Standards of Weights & Measures Act is not correct inasmuch as the goods presented for assessment is only the goods at the point of sale i.e. depot where the same was in retail pack and the goods are notified goods under Section 4A(1) of the Act. He therefore, sought or upholding the impugned order and dismissal of the appeal.
5. We have carefully considered the rival submissions and the case records including the comments received from the Commissionerate as noted above. The short issue that arises for consideration in this appeal is whether the appellants are liable to pay duty on the goods, sold after re-packing, from the depot under Section 4A(1) of the Act. We find that in this case the period of dispute is 1-8-99 to 31-1-2000. We also find that Section 4A came into being with effect from 14-5-1997 and the disputed period in the present case is after this date. We further find that the Commissioner (Appeals) has held as under in Paras 10 and 11 of his order :
"10. It is an accepted fact in the present case that the impugned goods are not sold at the factory gate and it is only stock transferred. Since no sale is taking place at the factory gate duty cannot be determined under Section 4(1)(a). At this point of time, I refer to the findings of the lower authority in Para 7 of the impugned order and I fully agree with his view point. The impugned goods are sold at depots where it is in the packaged form. Since the impugned goods are notified goods under Section 4A(1) with effect from 14-5-97 the levy of duty under Section 4 is ruled out. Further, Section 4A(2) clearly says that in respect of impugned goods mentioned under Section 4A(1), the value will be "notwithstanding anything contained in Section 4" and such value as mentioned in the notification. In the light of the above exclusion clause, I have a considered opinion that in the present case, the duty has to be collected under Section 4A of the impugned goods cleared in packaged form from the depot.
11. The appellant company has relied upon the decision of the Honourable Tribunal in their own case in respect of a different unit and reported in 2000 (118) E.L.T. 35 (Tri.). I have perused the said case law. Though the facts mentioned in the said case law are identical to the case in hand, the said case law is clearly distinguishable from the present one in view of the fact that disputed period involved in the said case was from 1-10-96 to 31-3-97 during which period Section 4(A) was not in vogue. The point of consideration before the Honourable Tribunal in that case was valuation under Section 4 only. The Honourable Tribunal presumably did not consider the applicability of Section 4A as it was not in vogue. The said section came into effect from 14-5-97 only and the disputed period in the present case is after this date only. I take similar view in respect of the case law reported in the matter of Savitha Chemicals."
6. It will be seen from the above findings of the Commissioner (Appeals) that he has very thoroughly analysed the provisions of law under Section 4(1)(a) as also under Section 4A(1) of the Act. He has correctly come to a conclusion that the period of dispute in the present case was after Section 4A(1) came into effect. He has also distinguished the case law in the appellant's own case reported in 2000 (118) E.L.T. 35 (Tribunal) and also that of the Savitha Chemicals [2000 (119) E.L.T. 394] and his conclusion that though the facts in the present case are also identical the said case laws are not applicable in view of the fact that the disputed period involved in the appellant's own case was from 10-96 to 31-3-97 whereas in the present case the disputed period is after coming to effect of Section 4A of the Act. We are therefore, in agreement with the conclusion arrived at by the learned Commissioner (Appeals).
7. We observe that the appellants have taken a plea that the show cause notice was issued under Section 4A while the order-in-original was passed under Section 4 of the Act. We are not able to agree with this plea of the appellants inasmuch as we find that in the order-in-original, under heading - Subject : it is clearly mentioned that "Clearance of goods in bulk to re-packers on payment of duty without arriving at a proper assessable value according to Section 4A of the CE Act....". The original authority has then proceeded to pass the order under Section 4A only and he has not traversed beyond the scope of the show cause notice. As regards the plea of the appellants that the goods have to be notified under Section 4A of the Act, we find that the goods have been declared as notified goods under Section 4A of the Act from 14-5-1997 and the impugned order has dealt with this plea of the appellants and the finding arrived at by the Commissioner (Appeals) is legal and proper since the disputed period in the present case is after 14-5-97 only. As regards the plea of provisional assessment, we find that this plea was taken for the first time before us and was neither raised before the original authority nor before the lower appellate authority. We, therefore, find no merit in this plea raised by the appellants. As already discussed above, the issue before us is not whether manufacture is involved or not. The issue is whether duty is liable to be paid on the goods in the form in which it is cleared from the depot after re-packing. In the present case, the sale was effected from the appellants' depot only in packed condition and duty is liable to be paid on the goods in the packed form in which it is cleared from their depot, in terms of Section 4A of the Act and we answer this question in favour of the Revenue. In view of the above discussion, we do not find any infirmity in the order-in-appeal and we uphold the same and reject the appeal.
Sd/-
(Jeet Ram Kait) Member (T) S.L. Peeran, Member (J)
8. With due respect to my learned brother, I am unable to agree with the findings recorded by learned brother in his order. Hence, I am recording a separate order.
9. The case was argued by Shri Rajesh Chandra Kumar, ld. Advocate and not by Shri N. Venkatraman, Advocate as noted in the cause title and in the order recorded by my brother.
10. The facts and the grounds of appeal has already been noted by learned brother and hence the same are not repeated here.
11. The main contention of the ld. Counsel was that Section 4A is not attracted to the facts of the case. Although M/s. Castrol India Ltd. is notified under Section 4A but the said provision of law will not apply till the goods are in packed form. He pointed out that provision of process of packing amounting to manufacture was introduced in the chapter by Finance Act on 1-3-2000. He further argued that Section 4A is not applicable to the facts of the case as is clear from the language of the said section. It is his contention that Section 4A would apply only if the products are covered under the Standards of Weights and Measures Act, 1976 and the rate of price is fixed on the retail sales but it is his contention that there is no clearance of goods in package form and therefore the Section 4A is not applicable. He also argued that re-packing is done by the job worker and they are not attracted under the the Central Excise Act as such a process will bring out a process of manufacture. He also argued that question of confiscation did not arise as they were not cleared in package form and mandatorily as per the Standards of Weights and Measures Act 1976. He also referred to Rule 6 of the Packaging Rules which provides the same provision as laid down under Section 4A. As the said provision under Section 4A has been made, therefore, its applicability is not justified. The Commissioner has already ruled out the applicability of Section 4A of the Act and said clearances were from the factory on wholesale price is required to be accepted in the light of their own judgment reported in 2000 (118) E.L.T. 35 which has been confirmed by the Apex Court as reported in 2000 (119) E.L.T. 394.
12. Ld. SDR's argument has already been noted by learned brother and hence same is not repeated.
13. On a careful consideration of the submissions, there is lot of force in the submissions made by the appellants that process of re-packing in smaller packages would not amount to process a manufacture and same should be covered by the provision of Rule 6 of Packaging Rules and the Standards of Weights and Measures Act, 1976 with regard to fixation of prices on the smaller packages for attracting provisions by Section 4A of the Act. The process of packing was not considered as a process of manufacture till the same was introduced in the chapter note by Finance Act, 2000 on 1-3-2000. Therefore, the contention of the appellants that proviso to Section 4A is not applicable is required to be upheld. In the appellant's own case, the matter was adjudicated and the relief was given to them. The findings recorded by the Hon'ble President in the said order in paragraphs 2 to 9 are reproduced herein below :-
"2. Learned counsel representing the appellant submitted before us that while assessing the oils to duty, where the same are sold in 205 litre barrels, the bulk oil in tankers should be assessed at the same price of 205 litre barrels minus the cost of barrels and where the blended oils are not sold in 205 litre barrels but sold in smaller packings, the bulk clearances in tankers should be assessed at the price of the largest of the small packings like 20 litres minus the cost of packing and the cost of transportation from the factory gate to the depot.
3. Appellants clear blended lubricating oils from their factory to packing stations in tankers. Excise duty on bulk clearance in tankers was being paid on the basis of the list price of 205 litre barrels. At the packing stations, oil is packed in barrels of 205 litres as also in retail packings of 20 litres, 10 litres, 5 litres and 0.5 litres. Department took the view that assessable item is oil in the smaller packings which are sold to wholesale buyers. Accordingly, they want Central Excise duty to be levied on the price at which the oil was sold from the depot in the smaller packings. This is sought to be done on the premises that depot is the place from where oil is removed and the price of the oil at the place of removal should be the normal price. This stand of the department is presumably on the basis of the amendment which came into force on 28-9-1996 whereby Clause (4)(b)(iii) was added to Section 4 of the Act. By this amendment, depot from where the excisable goods are sold after clearance from the factory became "a place of removal". As per Section 4(1)(a), normal price should be the price at which goods are ordinarily sold in the course of wholesale trade for delivery at the time and place of removal. It appears that the department thinks that when goods are sold from a depot which by the definition became place of removal price at the depot is the normal price. Is this approach made by the department correct?
4. Wherever duty of excise is chargeable for any goods with reference to value, such value shall be the normal 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 where buyer is not a related person and price is the sole consideration for the sale. Thus, the normal price should be that at the time and place of removal of the goods. If the goods are removed from the factory gate, price at the time of removal at the factory gate should be the basis for assessment. Place of removal after the amendment of 1996 can be the depot as well. If the place of removal is the depot, should the time of removal also be the time of removal of the goods from the depot. If the time and place of removal in the case of removal from the depot happens to be the time at which the goods are removed from the depot, then the value of the goods when it was removed from the depot should be the basis for assessment.
5. "Time of removal" has also been defined with reference to the place of removal, namely, depot by Sub-clause (ba) to Clause (iv) of Section 4. That definition reads :
"time of removal" in respect of goods removed from the place of removal referred to in Sub-clause (iii) of Clause (b), shall be deemed to be the time at which such goods are cleared from the factory."
So, in the case of removal of goods from depot the time of removal should be the time at which such goods were cleared from the factory. In other words, time and place of removal provided by Section 4(1)(a), in relation to goods removed from the depot will be the factory gate and depot, respectively. Whenever goods are removed from depot, such goods are to be valued with reference to the time when it was removed from the factory.
6. Clause (4)(d) of Section 4 defines "value" in relation to any excisable goods where the goods are delivered at the time of removal in a packed condition, value includes the cost of such packing. So, the condition of the goods at the time of removal is to be the basis for finding the value. If the goods were not packed in smaller containers at the time of removal from the factory, its condition at the time of removal from the depot cannot be of any relevance. In this view of the matter, we are clear in our mind that the nature of packing of the oil at the depot when it was removed is irrelevant in finding out the assessable value for the purpose of charging it with duty of excise.
7. In the instant case, blended lubricating oils of various grades were removed from the appellant's factory in bulk in tankers as also in barrels of 205 litre capacity. Bulk removal was also assessed and tax paid on the basis of the list price of 205 litre barrels. Some grades of lubricating oil are not sold in barrels of 205 litre capacity. They are sold in smaller packing of 20 litres, 10 lires etc. The price of such grade should, therefore, be on the basis of the price of the largest of the small packings. Under no circumstance can value of oil in smaller packings be the basis for assessment. Then the question that arises is whether the value of the packing can be included in the assessable value? As stated earlier, the price at the time and place of removal is the basis for assessment. Time of removal of those goods which are removed from depot is the time of removal from the factory. At the time of the removal from the factory the oil was not in packed condition. It was removed in tanker. Value of the tankers cannot have any relevance in finding out the assessable value of the oil, because they are durable and returnable. So, the cost of the packing done at the depot or packing place cannot be reckoned in finding out the assessable value. Therefore, where blended oils are sold in barrels of 205 litre capacity duty must be assessed at the price of 205 litre barrels minus the cost of barrels. Where blended oils are not sold in 205 litre barrels but sold in smaller packing of 20 litres and below. Assessment should be made on the basis of the larges of the small packings minus the cost of packings of transportation from the factory to the depot is not eligible for deduction as ex-depot price constituted assessable value (and this value includes the cost of transportation from factory to depot) in respect of goods sold from depot in view of the amendment to the Section 4 of Central Excise Act with effect from 28-9-1996.
8. Almost an identical issue came up before the West Zonal Bench of this Tribunal in Savita Chemicals Ltd. v. Commissioner of Central Excise, Mumbai-VI, 2000 (119) E.L.T. 394 (Tribunal) = 1999 (34) RLT 573. In that case, an attempt was made by the Department to fix the value of bulk lubricating oil on the basis of the price at which the oil was packed and sold in smaller containers from the depot. This attempt and the consequent claim for differential duty was turned down by the Tribunal. We also come to the same conclusion but for different reason.
9. In view of what has been stated above, we dispose of the appeal directing the adjudicating authority to make the assessment in the light of the observations made earlier in this order.
14. As noted from the above judgment, the Hon'ble President has followed the ratio of Savitha Chemicals Ltd. v. CCE, Mumbai, 2000 (119) E.L.T. 394 which also held the same view. In the case of Savitha Chemicals, in Paras 12 to 35 the WRB held as follows :-
"12. Thus where the price at which the sale is made to an independent buyer is available, that price becomes the basis of sale to other similar consumers and also for stock transfers to depots. Thus, if the sale price from the depot is higher than the price at which the stock transfer is made, the department cannot demand differential duty.
13. Nowhere in the proceedings had the department claimed that the price at which the sale of lubricating oil in bulk made to independent buyers as contrived or fake. Therefore, those prices would form the basis for valuation of the goods cleared for repacking.
14. In this situation, it is not material, whether the goods are sold or not. In the case of Collector of Central Excise v. Ashok Leyland Ltd. [1987 (29) E.L.T. 530] the Tribunal was examining the valuation of stock transferred to regional sale offices. Such stock transfer could not be called as "sale". However, the Tribunal ruled that such stock transfer should also be assessed at price at which such goods were sold to wholesale dealers. Therefore, not much can be made of the fact that the transfers of lubricating oil in tankers sent to M/s. Unique Packers were not sale.
15. In fact the scheme of Section 4 does not require that each clearance or removal should be a sale. In fact Section 4(1)(b) advises recourse to the Valuation Rules where the goods are not sold and therefore, the normal price is not available. The provisions of Section 176C also brings out this very clearly. This Rule requires valuation to be made in terms of Section 4 and prescribes a particular declaration where the goods are removed in a manner which does not involve sale. Thus the valuation under Section 4 is not limited to situation only where there is a sale but do extend to the situation as it exists in the present case.
16. Therefore, if the bulk oils were transferred in tankers from the factory premises at the same price at which such bulk oils were sold to the independent buyers, then that price cannot be questioned.
17. The law narrated in the preceding paragraphs held sway before the amendment made to Section 4 vide the provisions of the Finance (No. 2) Act, 1996. We shall discuss at a later stage as to the situations in which the law would still hold good.
18. The ld. Commissioner in seeking to establish this allegation in the show cause notice has gone beyond the scope of the show cause notice. He has questioned the very marketability of the oils in bulk form. It is his case that such oils cannot become marketable unless they are packed. He held that packing of such bulk oils into tins amounts to process of manufacture and therefore, duty was payable by the present appellants on the value of the lubricating oils packed in tins as sold from the depots. This belief of the Commissioner will have to be examined.
19. The Commissioner had relied upon two judgments in establishing that lubricating oils could not be marketable unless packed. In Hindustan Polymers v. C.C.E. [1989 (43) E.L.T 165 (S.C.)], the Supreme Court was discussing the provisions of Section 4(4)(d)(i) of the Act and was determining as to which packing was includible in the assessable value. In the second case of Ahmedabad Mfg. & Calico Packing Co. Ltd. v. U.O.I. - 1982 (10) E.L.T. 821 (Guj.), the Gujarat High Court had undertaken a similar exercise. The ratio of these two judgments is not even remotely applicable to the belief of the Commissioner that after packing only, the lubricating oils became marketable. Before the Commissioner, three orders were cited to show that packing did not amount to manufacture. In the case of Indian Oil Corporation Ltd. v. C.C.E. [1987 (27) E.L.T. 482], the Tribunal had held that where the goods were cleared in bulk from the refinery and where they were later repacked and sold in packing, the valuation should be made in the form in which it was removed from the factory and that its subsequent repacking in containers was not a material aspect. The assessees had cited two other judgments also viz. in the case of EID Parry Ltd. v. U.O.I. [1978 (2) E.L.T. (J18)] and Prabhat Packaging Corporation [1990 (47) E.L.T. 102]. The ld. Commissioner overcame this hurdle by holding in Para 44 as under :
"Therefore, what was done by the job worker was packing and not repacking".
20. In specific circumstances by virtue of Section notes and Chapter notes, packing is equated to the activity of repacking where the goods in bulk form would pay duty and thereafter would be liable to duty when later packed. As the ld. Advocate stated, there are no such provisions in Chapter 27. Therefore, the activity of packing or repacking of bulk lubricating oil cannot be held to amount to manufacture.
21. Shri Lakshmikumaran points out an anomaly in the Commissioner's order. If it is held that the bulk oil cleared by the appellants was not manufactured, then it would appear that the department had wrongly charged the duty from them and if it is held that the Packers viz. M/s. Unique Packers were the manufacturers, then applying the ratio of the Ujagar Prints judgment, the show cause notice issued to the present appellants is without basis. We find that this submission of the ld. Advocate is correct. It would appear that the Commissioner was so determined to establish the case made out in the show cause notice that he did not pay heed to this pitfall. But since we have held that the goods in bulk were marketable and that repacking or packing would not amount to a process of manufacture, this argument of the ld. Advocate need not engage our attention for long.
22. We would now come back to the main allegation in the show cause notice on which charge of short levy of duty is based. The relevant portion is reproduced below :
"The clearance from M/s. Savita Chemicals Ltd. to M/s. Unique Packers are merely a transfer of goods to the said packer for repackaging into smaller pack, transfer to various depots consignment agents etc. of M/s. Savita Chemicals for further sale by M/s. Savita Chemicals. Section 4(1)(a) of Central Excise Act, 1944 provides that duty of excise is chargeable on the excisable goods at normal price which is the price at which the goods are ordinarily sold by the assessee to buyer in the course of wholesale trade for delivery at the time and place of removal where buyers are not related persons and price is the sole consideration for the sale. Since the goods in bulk are first cleared to M/s. Unique Packers for repacking into smaller packs and are thereafter transferred to depots and consignment agents and then these are actually sold from those depots and consignment agents, the price charged at the place of removal, i.e. depots and consignment agent should form the basis for normal price for charging of duty under the existing circumstances. This is so as definition of place of removal as provided under Section 4(4)(b) of Central Excise Act has been amended on 28-9-1996 and inter alia which defines place of removal to include depots, premises of the consignment agents or any other place or premises from where the goods are sold. Removal of the goods from the premises of M/s. Savita Chemicals to the premises of packers cannot be treated as goods sold in the course of wholesale trade and further in view of the fact that higher price have been charged by M/s. Savita Chemicals for these goods from the depots after getting these repacked from M/s. Unique Packers.
As the assessable value of the said goods i.e. Lube oil as per amended provisions of Section 4 of Central Excise Act, 1944, should be the invoice price charged at depot for the retail packs. Therefore, for the purpose of determining Central Excise duty under Rule 173F read with Rule 9(i) depot should be considered as a place of removal and duty should be determined accordingly as such they have contravened the provisions of Rule 9(i) read with Rule 173F by not determining the duty correctly at the factory gate."
23. To determine the merit in the charge, it is necessary to see the relevant provisions which are reproduced below :
"Section 4(1)(a) : Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be -
the normal price thereof, that is to say, 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, where the buyer is not a related person and price is the sole consideration for the sale :
(2) Where, in relation to any excisable goods the price thereof for delivery at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of delivery shall be excluded from such price.
Section 4(4): For the purposes of this section -
(a) "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent;
(b) "place of removal" means -
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;
(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory and from where such goods are removed.
24. What the show cause notice seeks is to determine the price at which the packed goods are sold from the depot as the basis of valuation of the oil sold in bulk. No other construction can be put on the phrases used in the show cause notice.
25. Before the amendment made on 28-9-1996 whereby Clause (iii) was inserted in Section 4(4)(b), the factory gate was the place of removal for the determination of normal price. Where the goods were bonded, the warehouse gate was the place of removal. Where the goods were not at all sold at the factory gate but only at the depot gate, the depot gate price was adopted as the factory gate price after deducting cost of transportation from the factory gate to the depot gate.
26. The effect of the amendment was brought out in the C.B.E. & C Circular No. 251/86/96-CX., dated 14-10-1996, as reproduced in 1996 (87) E.L.T. 48 (T). The extract read as under :
"In the Finance Act of 1996, definition of 'place of removal' has been amended to include depot, consignment agents or any other place or premises from where the goods are sold by or on behalf of the assessee within its scope. However, time of removal for these other places of removal added in Section 4 shall be deemed to be the time at which such goods are cleared from the factory.
The significance of these changes is that sale price at any of these "places of removal" will be the normal price for levy of excise duty and there can be different assessable values for the same excisable goods depending upon the place of removal. It also means that duty will be required to be paid at the time of clearance of goods from the factory for those goods which are sold by the manufacturer at depot, consignment agents or any other place etc. at a sale price of the place of removal i.e. depot, consignment agents etc. Where the goods are sold at the factory gate, there would be no problem."
27. This amendment has taken away the basis of the judgments which dictated that where the factory gate price was available that price would apply to all clearances, including those made from the depots. The effect of the amendment would be that at the factory gate itself the same goods would be valued differently, depending upon their final place of removal. The findings of the Collector reproduced in Para 22 above would seem to suggest that the goods which are destined to be sold from the depots would be leviable to the duty at price charged at such depots when assessed at the factory gate. Where the goods so moved from the factory gate are the same which were sold at the depot gate, this judgment cannot be faulted. But in the present case what was removed from the factory gate was oil in bulk in tankers and what was sold at the depots was oil packed in tins.
28. Section 4(1)(a) extracted above in Paragraph 23 speaks of "such goods". What is the interpretation of "such"? The New Shorter Oxford Dictionary defines this word as "Of the same kind or degree as something previously specified or implied contextually". The Law Lexicon by T.P. Mukherjee (Vol. 2) cites a number of judgments. The extract from the Rajasthan High Court in the case of Union of India v. Wajir Singh holds :
"Generally, the word 'such' refers only to previously indicated, characterised or specified. 'Such' is an adjective meaning the one previously indicated or refers only to something which has been said before."
29. Shri Laxmikumaran cited departmental clarifications cited vide File No. 312/1/75/CX. 10, dated 8-8-1975, when Section 4 was substituted in 1973 vide Section 22 of the Central Excise and Salt (Amendment) Act, 1973. The phrase "such goods" has continued to remain in the Section therefrom. In describing the expression "such goods", the Ministry gave the following clarification :
"(a) Such goods : The expression 'such goods' has been used in the generic sense and means not only the goods under assessment but also other goods of the same class. In other words, the same goods manufactured by an assessee will be considered, as 'such goods'. The same goods manufactured by the assessee may be cleared at different times in different lots and different consignments and the goods of each lot or consignment will be 'such goods'. To illustrate, a company manufactures refrigerators of a particular brand and capacity: each of these refrigerators will fall in the category of 'such goods' (emphasis supplied).
Similar goods, for example, goods of different brands manufactured by another assessee are also not 'such goods'. Similar goods manufactured by another assessee are also not 'such goods': that may fall in the category of 'comparable goods'. Even homogeneous goods e.g., sugar or cloth manufactured by different manufacturers would only be comparable goods and would not constitute 'such goods'."
30. Thus the grouping of the goods was to be as per brands or capacities. Goods falling in a particular group would become "such goods" as far as the other goods in the same category or group are concerned. When these goods are placed in juxtaposition with the goods from another group they would not remain 'such goods' but would become comparable goods.
31. Following these guidelines, oil packed in containers of different sizes also would not become 'such goods' in relation to each other but would become comparable goods. Continuing this logic further, the goods which are cleared in bulk cannot be even comparable goods, let alone by entitled to the term "such goods".
32. Therefore, in the present case the attempt of the Commissioner to apply the price at which containerized goods are sold from the depot gate to the bulk oil sold at the factory gate has no basis in law.
33. Where the oil is sold in bulk only at the factory gate and not at the depot gate, there shall be a single price that is prevelant at the factory gate. That price being available has to be adopted.
34. In view of this clear findings in law, we do not find it necessary to dwell on the other submissions of Shri Laxmikumaran.
35. In the result the appeals succeed and are allowed with consequential relief."
15. The above two judgments clearly has clarified the issue and have held in favour of the appellants. There is no reason to take a different view and to hold that the appellants are covered by Section 4A of the Act as the said provision is clearly not applicable to them. In that view of the matter, the demands raised in the show cause notice dated 29-2-2000 is required to be quashed and the impugned order is required to be set aside. I order accordingly.
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(S. L. Peeran) Member (J) POINTS OF DIFFERENCE
16. In view of difference of opinion between the Members, the following question arises for determination by Third Member :-
"Whether the appeal is required to be rejected as held by learned Member (Technical) Shri Jeet Ram Kait."
OR "the appeal is required to be allowed in terms of the findings and in the light of ratio of the judgments noted by learned Member (Judicial) Shri S.L. Peeran."
Sd/- Sd/- (Jeet Ram Kait) (S.L. Peeran) Member (T) Member (J) C.N.B. Nair, Member (T)
17. The issue for consideration is whether the consignments of Lubricating oils cleared by the appellants were liable to be valued under Section 4A of the Central Excise Act. There is no dispute that the consignments were cleared in bulk i.e. in lorry tankers. Such goods are not covered by the provisions relating to affixing of MRP under the Weights and Measures Act. It is a pre-condition for invoking the provision under Section 4A that the goods in question attract the provisions of Weights and Measures Act and Rules thereunder. Since the bulk clearance of Lubricating oils were not covered by provisions of Weights and Measures Act, Section 4A of the Central Excise Act was not attracted for the valuation and assessment.
18. It is also seen that the original assessment of the goods was in conformity with the view taken by this Tribunal in the appellants' own case [2000 (118) E.L.T. 35].
19. In the above facts and circumstances, I agree with the view taken by ld. Member (J) that the appeal is required to be allowed.
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(C.N.B. Nair) Member (T) MAJORITY ORDER
20. In terms of majority order, the impugned order is set aside and appeal is allowed.
Sd/- Sd/- (Jeet Ram Kait) (S.L. Peeran) Member (T) Member (J)