Customs, Excise and Gold Tribunal - Mumbai
Gobind Glass Industries Ltd., Shri R. ... vs Commissioner Of Central Excise (Adj.) on 22 December, 2003
Equivalent citations: 2004(92)ECC569
ORDER Jyoti Balasundaram, Member (J)
1. The brief facts of the case are that the appellant company is manufactured sheet glass and figured glass of different thicknesses falling under Chapter Heading No. 70 of the Schedule to the Central Excise Tariff Act, 1985, attracting Central Excise duty @ 20% adv. from 1.3.1994. (prior to that date, the products were chargeable to specific rate of duty based upon thickness and area of the sheets). They were selling their products at their factory gate as well as through their branch offices and consignment agents. The entire production was cleared from the factory on payment of duty by adopting price charged for the goods sold at the factory gate as the assessable value for all the clearances. Deductions at the rate of Rs. 3.50 per MM/Sq.mtrs. for equalised freight and Rs. 2.5 per MM/Sq.mtrs. for special packing charges were claimed in some cases; while in some other cases, the freight equalisation was claimed as Rs. 5/- per sq. mtrs./mm and special packing charges was claimed as Rs. 1/- per sq.mtrs./mm. The total deductions claimed was thus Rs. 6/- per sq.mtrs./mm on these two counts. The total deduction claimed during the period April 1994 to March 1995 was Rs. 5,66,40,226/-, while the balance sheet for the year 1994-95 showed that the actual expenditure on account of freight and special packing charges was only Rs. 2,69,70,980/- (expenditure on freight was Rs. 1,75,71,918/- and expenditure on packing charges was Rs. 93,98,562/-). Thus, the actual expenditure on account of freight and packing charges was much less than the deductions claimed by the appellant company. Statements of officers of the company were recorded from which it emerged that the company did not account for production of sheets of certain thickness in the statutory records and that the company removed certain quantity of goods clandestinely without accounting for them and without payment of duty. Based upon the difference in figures between the claim amount and the actual expenditure incurred by the company on account of freight and special packing charges, the department alleged that the assessable value of the goods should have been Rs. 14,05,06,651/-instead of Rs. 10,13,71,536/- on which actual duty was paid and thus a sum of Rs. 3,91,35,115/- was not charged to duty. The details are as found herein below:-
During the period from April 94 to March,95 During March, 1 994
(i) Sale amount of goods 17,80,28,466/-
1,74,38,119/-
(ii) Value of stock in balance as on 31.3.95 with consignment agents (-) opening balance at the beginning of financial year 45,16,793/-
88,08,194/-
(iii) Central Excise duty 1,79,05,687/-
23,62,930/-
(iv) Actual expenditure on account of freight 1,95,91,838/-
26,29,601/-
(v) Actual expenditure on acee-ont of octroi 9,06,666/-
Figure
(vi) Actual expenditure on account of insurance 5,51,981/-
Not furnished
(vii) Actual expenditure on account of packing charges 93,98,562/-
(viii) Sales tax 80,79,916/-
10,75,656/-
(ix) Export 54,25,344/-
3,56,740/-
(A)
(i) + (ii) 18,25,45,259/-
2,62,46,313/-
(B)
(iii)+............(ix) 6,18,59,994/-
64,24,927/-
(C) A - B 12,06,85,265/-
1,98,21,386/-
(D) Assessable value declared as per RT1 2s 8,95,56,856/-
1,18,14,680/-
(E) Value on which duty is not paid 3,11,28,409/-
80,06,706/-
(F) 20% duty payable 62,25,682/-
16,01,341/-
TOTALS:
A) 20,87,91,5727- B) 6,82,84,9217- C) 14,05,06,6517- D) 10,13,71,5367- E) 3,91,35,1157- F) 78,27,0237-
The amount of duty payable was, therefore, calculated as Rs. 78,27,023/-. Demand of Rs. 3,97,900/- was also raised on account of clandestine removal. Show cause notice dt. 17.5.1996 therefore raised a total demand of Rs. 82,24,923/- and also proposed penalty on the company and its officers (for their active participation in adding and abetting the evasion of duty); the notice was adjudicated by the Commissioner of Central Excise, Mumbai who dropped the charge of clandestine removal, but confirmed the demand of Rs. 78,27,023/- by holding that the company was entitled to deductions only on account of actual freight and actual special (SIC) charges, holding that the plea of the appellants that the deductions claimed were higher than the actual expenses incurred on freight and special packing charges for the reason that hidden elements of expenses including the margin of profit have to be taken into account was not acceptable, because, as per the provisions of Section 4 of the Central Excise Act, such deductions have to be based only on actuals. He imposed a penalty of Rs. 50.00 lakhs upon the company and penalties of the following amounts on the officers mentioned herein below; under Rule 209A of the Central Excise Rules 1944:-
{1} Shri R. Kumar, Company Chairman Rs. 5,00,000/- {2} Shri C.A. Taktawala, Company Advisor Rs. 1,00,000/- {3} Shri A.A. Dholkia, Sales Manager (Finance) Rs. 50,000/- {4} Shri G.S. Pathan, Excise in-charge Rs. 25,000/-
2. Hence these appeals by the company and the officers.
3. We have heard both sides. As noted in the impugned order, the Assistant Commissioner of Central Excise, Mehsana had already issued show cause notices to the company proposing rejection of deductions claimed for the same period on account of freight equalisation and special packing charges. The notices were adjudicated and demands raised in the show cause notices were vacated as seen from the details below:-
Order-in-Original No. Date Duty Demand in Show Cause Notice (which was dropped) 37/98/AGfA) 27.02.98 29,96,911/-
39/98/AC(A) 27.02.98 25,64,423/-
38/98/AC(A) 27.02.98 38,98,378/-
41/98/AC(A) 27.02.98 16,54,515/-
42/98/AC/CA) 27.02.98 09.01,447/-
36/98/AC/CA) 27.02.98 44,32,753/-
40/98/ACCA) 27.02.98 21,65,409/-
The Revenue filed appeals against the vacating of the demand only on account of deductions claimed for special packing charges before the Commissioner of Central Excise (Appeals), as seen from his Order-in-Appeal No. COMMR (A)/158 to 164/AHD-II/2001 dt. 31.10.2001, and he upheld the contention of the Revenue and modified the Orders-in-Original to the extent detailed below, confirming the demands pertaining to special packing charges:-
Order-in-Original No Duty Confirmed (in Rs.) 37/98/AC/(A) 12,18,725/-
39/98/AC/(A) 10,68,510/- 38/98/AC/(A) 16,24,325/- 41/98/AC/(A) 06,89,3 81/- 42/98/AC/(A) 03,75,603/- 36/98/AC/(A) 18,52,028/- 40/98/AC/(A) 09,02,254/-
The assessee company preferred (appeals) bearing Nos. E/200-206/2002A to the Tribunal and by Final Order No. 268 to 274/2002-A dt.19.6.2002, the Tribunal set aside the finding of the Commissioner (Appeals) that the appellants are not entitled to claim cost of packing as deduction, and allowed the appeals of the assessee. The relevant portion of the Tribunal's order is reproduced below:-
"There cannot be any quarrel on the legal position that in order to claim deduction the packing must be of durable nature and is returnable by the buyer to the assessee. As mentioned earlier regarding the second part there is no dispute in this case. But according to the Commissioner (Appeals) the wooden crates have to be opened/dismantled for taking glass sheets out of it and thereafter the packing is not capable of being used as packing material. Even though the Commissioner (Appeals) has referred to certain decisions in his order, we find that those decisions have no relevance to the issue concerned. Merely because the crates are to be opened for taking out of the glass sheets it cannot be held that thereafter crates cannot be put to use as a packing material at all. It is not a case where the packing is inside a moulded container which had to be broken for retrieving the goods packed inside. Admittedly, the wooden crates are made of wooden planks. Even if such crates are to be opened by dismantling some wooden planks, it cannot be for a moment contended that the material cannot be further used for packing. Annexure II is a statement showing details of durable and returnable packing returned to the factory during the period 1994-95. It gives the name of the party, location, item name, quantity, truck numbers and name of the transport. From the statement it can be seen that the item is described as 'wooden box' of certain numbers. In the nature of the packing which has been used by the assessee in this case, we have no hesitation to hold that they are durable in nature. In the result, we find no merit in the view taken by the Commissioner (Appeals) that the appellant is not entitled to claim cost of packing as deduction. We, therefore, set aside the order impugned and allow the appeals.
4. In the light of the above, we accept the contention of the appellants that the issue in the present cases i.e. eligibility of the company to claim deductions on account of equalised freight and special packing charges has been already decided in their favour by the Tribunal's final order cited (Supra). Therefore the duty demand raised against the assessee in the present impugned order as well as the penalties imposed on the Company and its officers are clearly unsustainable and we set aside the same.
5. In the result; the impugned order is set aside and appeals allowed.
I have carefully gone through the order recorded by my learned Sister. The matter has got complicated because of parallel proceedings initiated by the Department. In one set of proceedings initiated by the Assist Commissioner (Audit), the demands were dropped by him but were later on revived by the Commissioner (Appeals) on Revenue's appeal and finally the case was decided by another Bench of the Tribunal holding that the appellants were entitled to deduction towards cost of packing. In a separate proceeding, the Commissioner has held that the appellants have claimed deductions in excess of the expenses incurred towards freight and packing which is under appeal to us. I am of the view that the earlier decision of the Tribunal setting aside the order of the Commissioner (Appeals) is not a bar on the Adjudicating Commissioner to demand duty from the appellants if they have claimed deduction in excess of the actual expenses on freight and packing. His action is not contrary to the decision of the Tribunal dtd. 19/06/2002 in as much as he has allowed deduction of the total expenses towards freight and packing which would be equal to the sum total of the equalized freight and packing including special packing charges in respect of individual consignments.
2. However, I find from the submissions of the appellants that they are claiming certain extra expenses towards freight and packing etc. which have not been taken into account by the Commissioner in his order. Such claims would require detailed scrutiny at the level of the original Adjudicating authority and therefore, I am of the opinion that the impugned order needs be set aside and remanded to the Original Adjudicating authority to pass a fresh order after affording a reasonable opportunity of hearing to the appellants and keeping in view the earlier decision of the Tribunal in the appellant's own case.
The following difference of opinion is placed before the Hon'ble President for reference to Third Member:
Whether the appeals are required to be allowed, accepting the appellants' contention that the issue in dispute viz. eligibility of the appellants to claim deductions on account of equalised freight and special packing charges has already been decided in their favour vide Tribunal's final Order No. 268 to 274/2002-A dated 19.6.2002 in their own case, as proposed by Member(Judicial) OR Whether the cases are to be remanded for fresh consideration of the appellants' claim for deductions of certain extra expenses towards freight and packing, as proposed by Member(Technical).
Gowri Shankar, Member (Technical)
1. The assessee is absent and unrepresented despite notice. Counsel for the appellant has sent a fax requesting for adjournment on the ground that the group of writ petition is coming up before the Gujarat High Court. The matter was first listed on 16.10.2003 and adjourned to 20.10.2003 at the request of Mr. D.R. Kambli, the appellant's purchase officer. No one was present on 20.10.2003. The fax of the assessee requested adjournment on the ground that its advocate was not well and the matter was thereupon adjourned to 30.10.2003 and in the absence of a bench on that date, further adjourned to 21.11.2003. On this date too no one was present for the appellants. A fax by the advocate requested adjournment on the ground of short notice. The matter therefore was adjourned to today.
2. It will be seen from the above narration the matter has been adjourned three times at the request of one of the appellants for nearly two months. In case counsel for the appellant was continuously unwell or found himself unable to appear before the Tribunal because he was busy in matters elsewhere, it was open to the appellants to engage some other counsel. I do not think it appropriate to adjourn the matter solely on the ground that one particular advocate is so tied up in the other matters that he cannot appear before the Tribunal on the successive occasion. I therefore decline to adjourn matter and having heard the departmental representative proceed to dictate my order on the difference of opinion that has been referred to me.
3. The point on which the two members of the bench which heard the matter are unable to agree is whether 6the contention of the appellants that the eligibility to deduction on account of equalised freight and special packing charges has already been decided in the Tribunal's order No. 268-274/2002 A-19.6.2002 is to be accepted or whether the matter is to be remanded for fresh consideration.
4. The order of the Tribunal in question in fact did not deal with the eligibility to deduction on account of freight. The order itself sets forth the only issue arising for consideration is the includability of cost of packing. It is silent on freight. The question that arose before the Tribunal was whether the packing employed by the assessee was of a durable and returnable nature and hence its cost includable in the assessable value or not. The appeal by the assessee was against the decision of the Commissioner (Appeals) holding that the packing was not durable. The Tribunal entered a finding of fact that the packing was durable and after considering evidence in this regard found that the packing was returnable. It therefore held that the assessee was entitled to deduct the cost of such durable and returnable packing to arrive at the assessable value of the glass manufactured by it.
5. The issue before the Tribunal in the present case is not the eligibility to deduction of cost of such packing. It is whether the deductions claimed by the assessee on account of packing and on account of cost of transport were actually on account of expenditure incurred for these purposes. The notice issued to the assessee and other appellants relied upon the figures expenditure shown in the assessee's balance sheet of 1994-1995 and other details submitted by the assessee for this period and March 1994 on these two items and proposed short levy by taking into account the actual expenditure incurred on account of packing charges and cost of transport which it alleged was lower than the deduction claimed. Therefore, the fact that packing used by the assessee has been found by the assessee to be durable and returnable in the earlier order of the Tribunal itself would be no answer to the proposal in the notice, which has been confirmed by the Commissioner. This of course in addition to the fact that the freight was not an issue before the Tribunal.
6. I am therefore in agreement with the view of the Member (Technical) that the matter has to be remanded to the Commissioner for examining the eligibility to deduction on these accounts on the basis of actual figures.
7. The papers may be returned to the referring bench.
Majority Order The impugned order is set aside and the appeal is allowed by remand to the adjudicating authority for fresh consideration of me appellant's claim for deductions of certain extra expenses towards freight and packing.