Customs, Excise and Gold Tribunal - Delhi
M/S. Malwa Cotton Spg. Mills vs Cce, Chandigarh on 12 July, 2001
Equivalent citations: 2001ECR6(TRI.-DELHI), 2001(132)ELT671(TRI-DEL)
ORDER
P.S. BAJAJ
1.This appeal has been preferred by the appellants M/s. Malwa Cotton Spg. Mills Ltd. against the impugned order dated 30.1.2001 passed by the Commissioner(Appeals) vide which he had confirmed the order in original dated 28.9.99 of the Deputy Commissioner and disallowed deductions on account of dyeing charges, trade discount and cash discount from the assessable value of their final product i.e. cotton yarn, manufactured by them.
2. The facts leading to the filing of the present appeal may briefly be stated as under:
3. The appellants are engaged in the manufacture of the cotton yarn falling under Chapter 52 of the CETA. They opted for provisional assessment as they were transferring the stock of the cotton yarn to their sale depots located at various places. They had been paying Central Excise duty on the said yarn on the tentative value at the factory gate. At the time of the final assessment for the period 1.10.96 to 31.3.97, they were disallowed deductions in all of Rs. 2611009/- from the assessable value of the goods (cotton yarn) on account of octroi charges, dyeing charges, trade discount and cash discount. The Deputy Commissioner through order in original rejected their claim for refund of the amount. They then challenged that order of the Deputy Commissioner in appeal before the Commissioner (Appeals) who modified the same by allowing deductions on account of octroi charges, but disallowed the deductions on account of dyeing charges, trade discount and cash discount, through the impugned order.
4. The appellants have come up in appeal before the Tribunal.
5. We have heard both the sides and gone through the file.
6. So far as entitlement of the appellants to the deduction son account of trade discount and cash discount from the assessable value of the goods (cotton yarn) is concerned, the same have not been contested before us. It has not been disputed by the learned SDR that these deductions are permissible under the law to them. Even the learned Commissioner (Appeals) in the impugned order has not been disputed that these deductions, are not available under the law, to an assessee. In Union of India & Others Vs. Bombay Tyre International Pvt. Ltd. 1984 (17) ELT 329 (SC) the Apex Court has also ruled out that "discounts allowed in the Trade (by whatever name such discount is described) should be allowed to be deducted from the sale price and such trade discounts shall not be disallowed simply because they are not payable at the time of each invoice or deducted from the invoice price".
7. The perusal of the impugned order of the Commissioner(Appeals) shows that he had disallowed deductions on account of trade discounts and cash discount to the appellants, by observing that there was no evidence regarding passing/allowing of these discounts to the buyers. But his these observations cannot be said to be well founded at all. The appellants have placed on record all the invoices and other documents from which it is quite evident that they had passed on trade discount and cash discount to the buyers and these discounts were also known at or prior to the removal of the goods. They have clearly indicated about these discounts in their invoices and other statutory record. Moreover, there is nothing on record to suggest if statement of any customer/buyer was recorded by the Revenue regarding the non-receipt of trade discount or cash discount from the appellants at the time of purchase of the goods or later on. Therefore, the appellants are entitled to the deductions on account of trade discount and cash discount, from the assessable value of the goods, of the amount, as claimed by them.
8. Similarly, the deductions on account of dyeing charges keeping in view the facts of the case, are allowable to the appellants. The appellants are admittedly manufacturer of only grey cotton yarn and not dyed yarn. During the period in question i.e. 1.10.96 to 31.3.97 for which dying charges deductions have been disallowed to the, they had been removing the yarn from their factory premises as grey yarn that is, in the same very condition in which they manufactured. The dyeing process of the yarn had never been carried out by them. Rather, admittedly, such a process was undertaken by the job workers. It has not been disputed by the SDR that the process of dyeing amounts to manufacture, in terms of note 3 of Chapter 52 of the CETA. Therefore, duty on dyeing if any was payable by the job workers and not by the appellants, ad as such the Revenue could only recover the duty only from them. That being so, the dyeing charges could not be legally loaded to the cost of grey yarn manufactured by the appellants when job workers who did the process of dyeing, are to be taken as independent manufacturers, under the law. In this context reference may be made to an identical case of K.D.R. Spg. & Wvg. Mills Ltd. 1999 (111) ELT 423 (Trib.). In that case also the assessees were manufacturer of only grey yarn and the dyeing of the yarn was got done by them from job workers. The Revenue wanted to include the cost of dyeing in the assessable value of the yarn for charging the duty but the Tribunal ruled as under:
"Since the assessee was not undertaking dyeing operation at all and as such there was no justification to hold that he was manufacturer of dyed yarn. The dyeing operation was carried out by another manufacturer and if at all duty was payable on dyeing, it was to be paid by the manufacturer who carried out the dyeing operation as it is settled law that job workers are also separate manufacturers."
9. Even earlier in appellants' own case, the deduction on account of dyeing charges from the assessable value of the grey yarn manufactured by them had been allowed by the Tribunal vide Final Order dated 4.10.99. The tribunal had taken the view that the appellants were manufacturer of grey yarn only and the cost of the dyeing incurred subsequently could not be added to its value for assessing the duty on it. When grey yarn cleared by the appellants from the factory was taken by the job workers for dyeing, the duty on dyeing, if any, was payable by the job workers, in view of the principle of law laid down by the Apex Court in Ujagar Prints' case 1988 (38) ELT 535 (SC). The view of the Commissioner (Appeals) that this judgement of the Tribunal had become non-applicable to the appellants case after the amendment in Section 4 of the Central Excise Act, regarding place of removal which came into force on 28.9.96, cannot be subscribed being erroneous. By amendment clause 4(b)(iii) was added to Section 4 of the Act under which depot from where the excisable goods are sold after clearance from the factory had also become a place of removal.
10. 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. Therefore, when the goods are removed from the factory gate, price at the time of removal at the factory gate should be 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.
11. "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 factory gate and depot, respectively. Whenever goods are removed from depot, such goods are to be valued with reference to the time when these were removed from the factory.
12. In the instant case, as observed above, the appellants are manufacturer of the grey cotton yarn and they removed the same from the factory in that very condition for supply to their depots. The dyeing process is never undertaken by them. Such a process is, undertaken by the job workers who, as observed above, under the law, have to be considered as independent manufacturers. Therefore, the dyeing charges, if any, are payable by those job workers and as such the same cannot be recovered from the appellants, by loading the cost of the dyeing charges to the cost of grey yarn manufactured by them, as held above. The yarn even when removed from the depot by them has to be valued with reference to the condition and time when it was removed from the factory. The judgment rendered in appellants own earlier case referred to above dated 4.10.99 is very much binding on the Revenue and its benefit could not be denied to them legally by the Commissioner (Appeals). They are entitled to the deduction, as held in that judgment, on account of dyeing charges.
13. Almost an identical issue relating to the place of removal after the amendment came up before the two Member Bench headed by the President of the Tribunal, in Castrol India Ltd. Vs. CCE New Delhi 2000(41) RLT 652 (CEGAT). In that case blended lubricating oil was removed from the place of manufacture in bulk in tankers to the depots/packing place from where oil was sold after repacking in smaller quantities. The cost of packing done at the depot/packing place was sought to be included in assessable value even-after amendment of Section 4, effective from 28.9.96, but the same was disallowed by the Tribunal and it was observed as under:-
"In the case of removal of goods from the depot the time of removal shall be the time at which such goods were cleared from the factory as per definition of time of removal provided by sub-clause (ba) to clause (iv) of Section 4 of the Act.
The same view had been also taken by the Western Bench of the Tribunal in Savita Chemicals Ltd. CCE, Mumbai VI, 1999(34) RLT 573 (CEGAT).
14.In the light of the discussion made above, the appellants are entitled to the deductions and refund, on account of octroi charges (as already allowed by the Commissioner (Appeals), dyeing charges, trade discount and cash discount, in all, of Rs. 26,11,089/- (Rs. 1139095/- paid excess at the time of provisional clearance + Rs. 14,71,914/- on account of the deductions referred to above) as claimed by them. Therefore, the impugned order of the Commissioner (Appeals) is accordingly set aside and the appeal of the appellants stands allowed, with consequential relief.