Customs, Excise and Gold Tribunal - Tamil Nadu
Sree Rayalaseema Alkalies And Allied ... vs C.C.E. on 26 June, 1998
Equivalent citations: 1999(63)ECC348, 1998(104)ELT573(TRI-CHENNAI)
ORDER V.K. Ashtana, Member (T)
1. These are two appeals against following :-
Sl. No. Appeal No. Appellant Against Order-in-Original 1. E/V/217/98 SRACL 5/97 dt. 24-10-1997 of CCE 2. E/V/218/98 HSHL 4/97 dt. 24-10-1997 of CCE
2. The issues being similar, they were heard together and are being considered by this Common order.
3. In Appeal No. E/V/217/98 there are 3 issues involved viz;
(a) Inclusion of return freight charges of empty tankers/lorry with empty cylinders in Assessable value of the Chemicals manufactured and transported to buyer's door through contracted transporter;
(b) Demand for duty on tankers fabricated on own account within the factory and mounted therein on duty paid truck chassis belonging to the contractors; and
(c) Demand of differential duty of Rs. 5 lakhs (by adding to Assessable Values) collected as freight charges which is in excess of that paid to contractor.
4. In Appeal No. E/V/218/98 there are only two issues involved viz. at (a) and (b) above.
5. Briefly, the facts are that appellants manufacture Caustic Soda Lye, Hydrochloric Acid & Bleach liquor which are transported to buyers premises in bulk tankers. They also manufacture Liquid Chlorine which is transported in Cylinder loaded on trucks.
6. Most buyers prefer transport to their premises of these hazardous chemicals to be arranged by the manufacturers on payment. Appellants have sub-contracted this to transport operators on following lines :-
(i) The M.V. Chassis is owned by Contractor.
(ii) The steel tanker is fabricated in appellants factory and mounted thereon. The tanks are leased to chassis owner on rental basis as the tanks are owned by the appellants.
(iii) They finance the M.V. Chassis owners and may also fill diesel etc.
(iv) According to their contract with the transport operators, a certain sum is calculated on specified objective basis (as per use of the MV) and paid to them.
(v) In turn, appellants have a schedule of charges for freight to be recovered from the buyers. It is not disputed that this freight element is:
(a) recovered from buyers by issuing notes separately.
(b) including the cost of return of empty tankers/empty cylinders on truck from buyer's premises to appellants factory.
(c) is recovered as a lumpsum for both outward and inward trips taken together, though separate costing is available,
(vi) When tankers return empty, they are periodically cleaned from inside, and sent on their next vovaee. None of these facts are disputed and are on record.
7. Revenue contends that while cost of outwards trip (with excisable goods loaded) is deductible from Assessable value, cost of return trip is to be included.
8. Heard ld. Sr. Advocate Shri M. Chandrashekaran and ld. Consultant Shri S.R. Narayanan for appellants and Shri R. Victor Thiagaraj, ld. SDR for Revenue.
9. Ld. Sr. Advocate argued that both outward & inward (return) freight costs are deductible from Assessable Value on following grounds :-
(a) freight charges recovered from buyers is as a whole for both trips taken together, but cost adjustment for return empty is built therein;
(b) these are not general cargo M.V. but specialised and hazardous cargo carriers, hence they have to return to appellants factory to prepare (including cleaning) for next trip;
(c) the entire charges are transparent and reflect in their Balance Sheets, being recovered through legally issued debit notes and also mentioned in invoices.
(d) the sums obtained towards freight are not kept by the appellants, but periodically paid to the contractors;
(e) that as the transport charges are dependant on many market factors which change suddenly, they recover fixed amounts from buyer, but often end up paying more to the contractors.
(f) During the period in question while Rs. 5 lakhs were recovered in excess to what was paid to contractors (few cases), over Rs. 92 lakhs was paid to contractors in excess of what was recovered from buyers. While the former constitutes about 0.5% of total turnover on this account of Rs. 30 crores (approximately), the latter constitutes about 3.5% thereof. Thus, arranging transport is a net loss to them and not a source of profit.
(g) That their plant is designed for a certain on minimal storage capacity, but that the aforesaid transport system is necessary to maintain production levels constant, hence they absorb the loss;
(h) However, since no profit was earned, there is no additional consideration involved, and therefore the demand for duty is illegal.
(i) They cited following case laws to show that freight charges were deductible from Assessable Values :-
Indian Oxygen - 1988 (36) E.L.T. 723 Jabalpur Exygen - 1991 (52) E.L.T. 455 Jabalpur Oxygen - 1987 (30) E.L.T. 304 Pure Drinks - 1991 (56) E.L.T. 619 Baroda Electric Meter - 1997 (94) E.L.T. 13 Vijayawada Bottling -1997 (94) E.L.T. 433
(j) Applying all these facts and case laws, to Section 4, they argued that as the Assessable Value was at the place and time of removal (i.e. their factory gate), therefore post-clearance freight was not in-cludible in it.
10. Revenue contended that the basis of calculation of freight for return was different and was computed separately. On Bench pointing to the facts above in this respect, it was conceded that a lumpsum amount was charged for freight as a whole in the debit notes and mentioned in invoice.
11. Secondly, ld. SDR argued that in some cases, freight charged was less, and did not include the return trip.
12. Thirdly, it was argued that as Rs. 5 lakhs more was recovered than paid, duty thereon was demandable.
13. Fourthly, since financing was done for contractor, including often supply of diesel, so the appellants themselves were contractor.
14. Finally, since all this was suppressed from department, therefore extended period was justified.
15. We have carefully considered these arguments on both sides regarding freight element. We find that undisputed evidence has been led by appellants regarding the payments made to the contractor out of monies recovered from buyers in a transparent manner. We also note that as during the period in question, the total excess receipts is only Rs. 5 lakhs whereas excess payments to contractor is more than Rs. 92 lakhs, therefore, no profit has accrued out of this operation. Since it is not a case that no storage facilities at all are existing in their plant, therefore we do not agree that arranging for transport for buyer has a nexus with their profits from manufacturing activities. Most continuous process chemical industries have only limited storage facilities and therefore concentrate on an efficient transport arrangement. This trade practice includes even the public sector refineries as well as other manufacturers of similar products. There is no evidence that the freight element collected constitutes as additional consideration affecting the assessable value in terms of Section 4. In view of these observations, we do not agree with the ld. Commissioner that transport (return) charges are to be added to the assessable value. That freight beyond factory gate is deductible was clearly settled by the decision in the case of Indian Oxygen (supra). Most others have cited referred to it or relied thereon and all have held so. Hence the case law on this is settled and the issue is res integra. If that be so, then, there is also no question of payment of differential duty on the Rs. 5 lakhs recovered in excess in a few stray cases, particularly as in the final tally, they ended up paying Rs. 92.5 lakhs more (in the case of Appeal No. E/V/217/98 only). Therefore, there is no flow back of any monies on account of such collections to the manufacturer in the ultimate analysis hence nothing is to be added to the assessable value on this count.
16. We also proceed to consider the last issue viz. duty demand on tanks fabricated in the factory premises, etc. Ld. SDR reads Notification No. 50/94, dated 1-3-1994 and stresses that since tanks were not captively used within the factory, exemption thereon is not available. His second objection is that the appellants do not own the chassis on which they were mounted.
17. Ld. Sr. Advocate rebuts that the Notification concerns only exemption on materials concerned in fabrication of the tanks within factory premises. The final product viz. tanks mounted on MV chassis (except for pressurised cargo) are exempted by Notification No. 50/94, dated 1-3-1994. Both are available to them as per facts above because neither talk of ownership. The irrelevance of issue of ownership is settled by Hon'ble Supreme Court's decision in the case of M/s. Ujagar Prints as duty is on manufacturer, not owner.
18. We have considered these arguments carefully. Notification No. 50/94, dated 1-3-1994 reads as follows :-
"EXEMPTION TO PARTS AND USED FOR BODY BUILDING OF VEHICLES In exercise of the powers conferred by Sub-Section (1) of section 5A of the Central Excise and Salt Act, 1944 (1 of 1944), the Central government, being satisfied that it is necessary in the public interest so to do, hereby exempts all goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), manufactured in a factory and used within the same factory for building a body or fabrication or mounting or fitting of structure or equipment on a chassis of a motor vehicle of Heading No. 87.02 or 87.04 from the whole of the duty of excise leviable thereon which is specified in the said Schedule:
Provided that appropriate duty of excise, on the said chassis, leviable thereon under the said Schedule or the additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975), as the case may be, has been paid".
19. A plain reading shows that nowhere it is provided therein that the tanker should be used only captively. It covers only materials used in fabrication and mounting, etc. to be used captively. It is nobody's case that this was not done here. The law is clearly settled that there is no room for intendment to be read as a notification. Since the notification does not even remotely mention the issue of ownership, that argument of Revenue too fails. In view of the aforesaid discussions, and as it is nobody's case that these fabricated tanks were not mounted on MV chassis, therefore the demand for duty fails on this count.
20. In view of the aforesaid discussions, we set aside the impugned two Order-in-Originals and allow the appeals with consequential relief.