Customs, Excise and Gold Tribunal - Delhi
Auto Control (P) Ltd. vs Collector Of Central Excise on 10 August, 1992
Equivalent citations: 1993(63)ELT156(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. Since common issues are involved, a common order is being passed.
1.1 The appellant herein filed a Price List No. 472/P/86-87 w.e.f. 26-3-1987 claiming certain deductions in the price list. The Assistant Collector issued a show cause notice in respect of the various items of deductions claimed proposing to disallow them and also setting forth the reasons as to why these were not permissible. Deductions claimed are as follows :
(i) Payment of Central Excise duty @ 10% ad valorem claiming deduction of duty @ 20% from the prices at which the goods have been sold to the buyers.
(ii) Wooden packing charges.
(iii) Deductions on account of certain accessories, such as Daizy Wheel, Carbon Ribbon and Correction Tape.
(iv) Installation and training charges.
(v) Freight on ah average basis.
1.2 The Assistant Collector after due adjudication in his order-in-original No. 12/AC/VAL/CH/87, dated 2-11-1987 has held as follows in respect of the various deductions as mentioned above :-
(I) Deduction at the rate of 10% of duty actually paid or payable to the department is only permissible. Deduction at the, rate of 20% is not permissible.
(II) It has been held that Wooden packing for electronic typewriter manufactured by the appellant is essential for making them marketable and the assessee had not produced any evidence that the said wooden packing was actually returnable as per the sale agreement. It has also been held that typewriters are normally being sold in wooden packing. Hence deduction not permissible.
(III) Daizy Wheel, Carbon Ribbon and Correction Tape are essential components of an electronic typewriter. It has also been held that these articles are being supplied with the electronic typewriters. Hence the deduction is not permissible.
(IV) Installation Charges This deduction is also held impermissible inasmuch as the price is for delivery at the factory gate or at the Branch Office and no installation expenses are incurred by the assessee at that point or place. Further, electronic typewriters (ETW) do not require any specific installation. These charges are in the nature of 'after sale services' incurred to promote the marketability of the goods and therefore, deduction is not permissible in view of Supreme Court's judgment in the case of Bombay Tyres International Ltd. - 1983 (14) E.L.T. 1896 (SC). In other words, he has upheld the allegations in the show cause notice in this respect.
(V) Freight on average basis The Assistant Collector has allowed deduction subject to production of evidence in this regard and subject to its verification by the Range Superintendent in view of the well settled position in the case of Bombay Tyres International Ltd.
1.3 The appellant thereafter, in so far as the approval of price list is concerned, went in appeal to the Collector of Central Excise (Appeals), New Delhi against the aforesaid order but he did not succeed. The Order-in-Appeal No. 839/CE/CHG/91, dated 30-5-1991 passed by the Collector of Central Excise (Appeals), Chandigarh has been challenged now before the Tribunal.
1.4 In the meantime, a show cause notice dt. 12-7-1989 was issued by the Additional Collector of Central Excise, Chandigarh alleging short payment of duty for the period 1-5-1986 to 31-12-1986 to the tune of Rs. 69,006.71 on account of the aforesaid deductions unilaterally claimed and given effect by the appellant herein. Break-up of the amount of Rs. 69,006.71 is as follows :-
(1) Rs. 59,738.76 is on account of deduction claimed @ 20% (Tariff rate of duty) instead of 10% actually paid or payable to the department in terms of the exemption notification.
(2) Rs. 1,483.09 is on account of collection of additional freight charges by the 'appellant from its buyers in respect of sales from its Delhi Office to the destination without any evidence of incurring such additional freight.
(3) Rs. 1,205.91 is on account of additional packing and installation charges.
(4) Rs. 4,801.57 on extra discounts passed on to the buyers without mentioning their nature in some of the invoices and without paying duty on such elements of discount.
(5) Similarly Rs. 409.10 is the alleged amount of duty on parts of ETW whose value has not been included in the value of the typewriter.
(6) Rs. 1,368.28 on account of extending dealers' discount in respect of goods which were sold directly to the buyers/consumers and not through the dealers. Thus, there has been a loss of duty to the extent of Rs. 1,368.28 on this account.
1.5 The Additional Collector on due adjudication vide his order dated 31-1-1991 has confirmed the demand of Rs. 69,066.71. Reasoning of the Additional Collector in the said Order, which is now impugned before the Tribunal, is more or less the same as that of the Assistant Collector, as set out above, in respect of the latter's order on the price list.
2. Learned Consultant, Shri A.S. Sunder Rajan, has submitted the arguments in respect of various deductions now claimed by the appellant :-
2.1 In the first instance he has not pressed for deduction of 20% rate of duty from the prices on the basis of Tariff rate as against the permissible rate of 10% which is actually paid or payable by the appellant. In other words, he has dropped this point as not pressed before the Tribunal. The finding of the lower authorities on this aspect is, therefore, confirmed. Even on the face of it such a plea was not tenable in view of the specific explanation added to Section 4(4)(d)(ii) by the Finance Act, 1982 with retrospective effect from 1-10-1975. Thus, an amount of Rs. 59,738.76 would stand as confirmed. The plea of limitation on the ground that the show cause notice does not allege suppression of facts, is not tenable in view of the allegations set out in the show cause notice. We reproduce the relevant extracts from the show cause notice in this respect :-
"...Being a small scale unit the assessee is permitted to pay Central Excise duty on their invoice value. However, the assessee did not enclose the copies of invoices alongwith G.P.I attached with their R.T.12 returns. Therefore, vide Range Office letter...,dated 18-11-1986, the assessee was asked to produce the copies of their invoices for scrutiny. Meanwhile, it came to the notice of Central Excise Department that the assessee is charging higher amount in their invoices than the value on which they are paying duty. Therefore, the assessee was again directed to produce the copy of invoices....In response to the same...the assessee asked for some more time for production of the invoices and also requested, for permission to clear the goods provisionally which was accorded to them...."
2.2 It is, therefore, apparent that allegations of facts have been clearly made which has led to the allegation of evasion of duty. Apart from this, it is also clear from the emphasised portion above, that the goods were assessed provisionally on assessee's own request. Further, the objection has been taken by the department right at the inception while approving the price list now submitted by the appellant. It is, therefore, clear that the goods have been cleared by the appellant without getting the prior approval of the price list. Collection of duty on such clearances would be in the nature of provisional collection, as held by the Apex Court in the case of Samrat International [1992 (58) E.L.T. 561 (SC)]. Hence we do not find any substance in the plea of limitation put forward by the learned consultant.
3. Now we shall discuss the admissibility or otherwise of the various other deductions involved herein :-
(I) Packing charges:
It has been found by the lower authorities that the electronic typewriters are packed in thermocoal and then in wooden crates. It has also been held that wooden packing is an essential packing and goods cannot be transported without the same and as such the cost of such packing is includible. We have heard the learned consultant as also the learned JDR. We are of the view that the factual position on this point is not quite clear. It has been held to be essential packing because the transportation of the goods is not possible without it. This is not a correct approach as held by the Supreme Court in the case of Collector of Central Excise v. Ponds India 1989 (44) E.L.T. 185. What has to be seen is whether wooden packing in the instant case is necessary for putting the goods (electronic typewriters) in the wholesale market at the factory gate. In the absence of such an examination it is difficult for us to give any categorical finding on this issue either way. Hence, we remand the matter to the adjudicating authority so far as the question of inclusion of wooden packing in the value of excisable goods i.e. ETW is concerned.
(II) Installation charges:
Charges towards these have been disallowed on account of the finding that the goods are sold at the factory gate; installaion is not done in each and every case and further the ETW does not require special installation. These charges are essentially in the nature of expenses incurred by the appellant to promote the marketability of the goods.
We have heard both sides. We observe that the finding of the Additional Collector that installation is not done in each and every case is indicative of the fact that installation charges are collected by the appellant as optional charges.
These are not compulsorily collected by the appellant from each and every of his customer. The finding, therefore, that these charges would be included in the value of the excisable goods (ETW) would not be correct. This is clearly a post-removal charge and does not have any nexus with the marketability of the product. Deduction of installation charges is, however, subject to production of evidence of the actual expenses incurred by the appellant on its staff employed towards the installation. This follows from Tribunal's observations in paras 3 and 4 of its judgment in the case of CCE, Bangalore v. Sunray Computers (P) Ltd. [1988 (33) E.L.T. 787 relied upon by the learned consultant. We reproduce para 4 from the said Report :-
"Since however, excise is basically a tax on goods and not on services, the cost of any services having no nexus with the manufacturing or marketability of the goods would not be includible. But if there is a single contract for supply of the goods as well as services, care may have to be taken to see that there is no attempt at diverting a part of the true price of the goods to service charges."
We respectfully follow the same.
(III) Service charges and Training charges Similar observations, as have been made in respect of installation charges above, would apply mutatis mutandis to service charges and training charges.
(IV) Value of Accessories The appellant is claiming deduction of values of Daizy Wheel, Carbon Ribbon and Correction Tape on the ground that supply of these articles is optional. On the other hand, the lower authorities have held that these are essential parts of ETW and these are supplied with the same. Having regard to the functions of the aforesaid three articles, we are of the view that daizy wheel is an essential part of the ETW. We understand that alphabets are embossed on the daizy wheel which ultimately are imprinted on the paper through the carbon ribbon. We are, therefore, of the view that ETW would be of no value at all and it would have the function of a typewriter if daizy wheel is taken away. It is in our view an essential part of ETW. Value of the same would, therefore, have to be included. Carbon Ribbon and Correction Tape, on the other hand, are in the nature of consumable goods of an ETW like petrol is for a motor vehicle. These cannot be considered as parts of ETW. Accordingly, we hold that value of daizy wheel should be included in determining the value of ETW whereas the value of Carbon Ribbon and Correction Tape should not be included while determining the value of ETW. Lower authority's findings are modified accordingly on this aspect.
Learned Consultant has relied upon Tribunal's decision in 1988 (34) E.L.T. 662 [Diamond Clock Mfg. Co. Ltd.] and Bombay High Court's decision in the case of Kosan Metal Products Pvt. Ltd. [1981 (8) E.L.T. 725 (Bom.)] in support of his contention that even if the items are considered to be essential for the functioning of ETW, their values should not be included. We are afraid that the above ratio does not flow from the said decisions. Tribunal has held the value of certain items as not includible, in Diamond Clock, on the ground of non-supply of the items with the machine. They have held that in view of the incomplete machines being cleared, question of inclusion of value of certain items does not arise. Similarly, Bombay High Court in Kosan Metal did not include the value of 'regulators' in the value of 'cylinders' because cylinders could be sold in the market without regulators. In the present matter factual position is that 'daizy wheel' is cleared with the ETW.
(IVA) Cash and other Discounts These have been disallowed by the lower authority on the ground that the appellant has not given any evidence that these discounts were being given uniformly and passed on to the customers and also that it was known at the time of clearance/sale. Learned consultant, on the other hand, has urged that these are not notional discounts. These have been actually passed on to the buyers. He submits that non-uniformity in giving the discounts is not a valid ground for disallowing admissible discounts. He relies for this proposition on Madras High Court's judgment in the case of UOI v. S.S. and Bros. 1986 (24) E.L.T. 269 (Mad.). We have also heard the learned JDR. We agree with the learned consultant that cash and other discounts are permissible to the appellant.
(V) Central Sales Tax @ 10% Lower authority has held that this is not deductible inasmuch as it is not leviable at Parwanoo where the appellant's factory is located. This fact is admitted by the appellant. The learned consultant has, however, urged that exemption from sales tax is for the benefit of the manufacturer, as is clear from the Notification of the State Government of Himachal Pradesh. The concept of payability/actual payment of the sales tax, as is applicable to Central Excise duty for the purpose of its deduction from the cum-duty price, is not applicable to the sales tax. This is specifically applicable only to the Central Excise duty as per the Explanation to Section 4(4)(d)(ii) and not to the Sales Tax. Learned DR, on the other hand, relics on the finding of the adjudicating authority who has applied the same concept to it, as is applicable to the Central Excise duty. In other words, since no sales tax is admittedly payable by the appellant in view of the specific exemption given by Himachal Pradesh Government, no deduction has been allowed.
We have carefully considered the pleas advanced on both sides on this aspect. We are unable to agree with the learned consultant on this issue. Section 4(4)(d)(ii) clearly states that value in relation to any excisable goods does not include the amount of...sales tax and other taxes, if any, payable on such goods. It is, therefore, clear that payability of a tax before its deduction can be claimed in terms of Section 4(4)(d)(ii) is important. Admittedly Central Sales Tax claimed for deduction is not payable by the appellant. It is immaterial whether the non-payability has arisen on account of any exemption notification issued by State Government or otherwise. Hence its deduction is not permissible from the value of the excisable goods.
(VI) Freight Forwarding Charges There is a conflict of findings between the Additional Collector and that of the Assistant Collector on this issue. The Additional Collector has found that these charges are neither equalised nor uniform and hence these are not deductible. The Assistant Collector while dealing with the price list, on the other hand, has found that these are deductible and therefore, he has allowed deduction on account of freight subject to production of evidence in this regard and subject to its verification by the Range Superintendent. We agree with the findings of the Assistant Collector in his order dated 2-11-1987.
4. Appeals are disposed of accordingly.