Customs, Excise and Gold Tribunal - Delhi
Usha Martin Industries Ltd. vs Collector Of Central Excise on 28 October, 1986
Equivalent citations: 1987(10)ECR360(TRI.-DELHI), 1987(27)ELT728(TRI-DEL)
ORDER K.L. Rekhi, Member (T)
1. The issues involved in these two appeals are inter-connected and they relate to the same appellants. We, therefore, make this combined order to dispose of both of them.
2. The facts, which are not in dispute, in brief are as follows :-
The appellants manufacture wire ropes. Central Excise duty on this item was introduced w.e.f. 1.3.1973 on ad valorem basis. The appellants did not have a regular price list as such of their goods. They sold their wire ropes on contract basis. They had 3 types of sales:-
(i) Sale to D.G.S. & D./Government departments on rate contract basis;
(ii) Sale to industrial buyers/dealers on individual contract basis. Each contract was filed as a price list for approval of the central excise authorities; and
(iii) Stock transfer to other depots located at various places in India. From these depots, the goods were sold to general buyers on contract basis.
The dispute is on the last category to sales only in both the appeals. About 60% of the goods were sold ex-factory; the remaining 40% were removed to the depots for eventual sale therefrom.
3. After actual sale of the goods from their depots, the appellants submitted re-conciliation statements to the authorities. Wherever the authorities found that the actual sale prices were higher than the DGS&D rate contract prices initially adopted, they issued demands for differential duty in form DD-2. In this manner, 21 demands were issued, beginning on 10.4.1974. The last demand was issued on 31.6.77. In all, the 21 demands totalled Rs. 7,63,775.14. The demands covered the period from March 1973 to March, 1976. The appellants paid these demands without demur. According to the understanding they had, they felt that they were also entitled to refund wherever the actual sale prices ex-depots were lower than the rate contract prices initially adopted. So, they lodged 35 refund claims, beginning on 24.3.1976 and ending on 27.9.1977. These refund claims cover the period from April 1973 to June 1977 and totalled Rs. 2,28,012.21. The Assistant Collector held that the assessments made in the appellants' factory were final and not provisional, and since the refund claims had been made after the expiry of the time limit laid down in Rule 11, he rejected them as time barred. In appeal, the Appellate Collector rejected the refund claims on merits holding that when the sale price at the factory gate was ascertainable, ex-depot sale prices were irrelevant. The appellants found themselves in a peculiar position in which they had paid the differential duties amounting to Rs. 7.63 lakhs in the case of ex-depot sales at higher prices but in which their refund claims for Rs. 2.28 lakhs stood rejected in the case of ex-depot sales at lower prices. They then asked for refund on 24.10.78 of the differential duties of Rs. 7,63,775.14 which they had earlier paid. The Assistant Collector rejected this claim holding that the appellants had accepted the price approval, that the price approval was not provisional and that the refund claim was time barred under Rule 11. The Appellate Collector up-held the rejection on the ground this time that stock transfer from the factory did not involve any sale and the ex-depot sale price was the correct assessable value. The appellants are now in appeal before us against the two sets of lower orders. Their prayer in the first appeal as pressed before us is that the assessments were provisional- and not final and hence their 35 refund claims amounting to Rs. 2,28,012.21 were not time barred. In the second appeal, their plea as pressed before us is that all the 21 DD-2 demands for differential duties amounting to Rs. 7,63,775.14 were time barred and had been issued straightaway without a show cause notice or adjudication and hence were void ab initio, notwithstanding the fact that the appellants had paid them. They plead that these demands could be sustained only in terms of finalisation of provisional assessments under Rule 9B, that the appellants had understood them so and in good faith paid them in the conviction that they would similarly have the right of refund.
4. We have heard both sides and have carefully considered their submissions and the record. We observe that no evidence is available as to what was happening in regard to valuation of the appellants' goods during the period from March 1973 to August, 1973. However, correspondence beginning with their letter dated 22.8.1973 has been laid before us by the appellants which shows that an arrangement was arrived at between the appellants and the authorities to the effect that stock transfers to depots would be initially assessed on the D.G.S. & D. rate contract price and subsequently the assessment would be revised if the actual sale prices ex-depots happened to be higher. The Superintendent's price approval endorsement dated 1.11.1974, but with retrospective effect from 1.3.1973, spells out this arrangement. This understanding between the appellants and the department was formalised into provisional assessment procedure under rule 9B of the Central Excise Rules, 1944 when the appellants executed the B13 bond prescribed in the said rule on 19.8.1974. It is only with effect from this date that initial assessments of stock transfer goods from the appellants' factory could be said to be provisional in the statutory sense of Rule 9B. Whatever understanding existed between the appellants and the department prior to this date could not amount to provisional assessment in terms of this statute.
"One might call an assessment 'Provisional' in the larger or dictionary sense, but that will not make it a provisional assessment under Rule 9B."
5. In the same way, because of the bond having been executed and followed by the peculiar wording of price approval endorsement, we do not agree with the Assistant Collector that the assessments were final throughout. If they were really final, where was the need to ask the appellants to execute a B13 bond in Rule 9B on 19.8.1974. It was after the execution of this bond that the Superintendent made his endorsement of price approval dated 1.11.1974, but effective from 1.3.1973, that differential duty would be charged wherever ex-depot prices were higher. A little later, he made his second price approval endorsement on 1.5.1975 in more explicit term saying that the approval was provisional in terms of the bond executed under rule 9B and that differential duty would be chargeable in the case of higher ex-depot sale prices. The fact of the execution of bond B13 and these price approval endorsements could lead to only one reasonable conclusion that on and from 19.8.1974 the assessments were provisional and not final. However, the duty payments till 18.8.1974 were not provisional in the statutory sense and hence final. Since the appellants kept the B13 bond alive by renewing the guarantee of the Bank till August, 1978, we can say that all initial duty payments for stock transfer were provisional from 19.8.1974 to June, 1977, the period with which we are concerned.
6. According to sub-rule (5) of rule 9B, the duty assessed provisionally has to be finalised and adjustment made by way of recovery of differential duty if the duty provisionally assessed was less or by way of refund if the duty provisionally assessed was more. No formal order finalising the assessments is on record. However, it is undisputed that 21 demands for differential duty in form DD-2 were issued on reassessment in terms of rule 9B(5). It has, therefore, to be held that provisional assessment for a particular period stood finalised when DD-2 demand for that period was issued. According to the provision of Rule 11 read with Rule 9B(5), the time limit for filing refund claims, in the case of provisional assessments, starts running from the date of finalisation of the provisional assessments In the case before us, the crucial date for start of the time limit for refund claims would be the date of issue of the relevant DD-2 demand.
7. Coming to the merits of the case, we find that the Appellate Collector was right in holding that when about 60% of the appellants' goods were sold in wholesale at the factory gate, the wholesale cash price/normal price was ascertainable at the time and place of removal itself and it was not lawful to assess the goods on the subsequent actual sale price ex-depots which was neither the price at the time of removal nor at the place of removal. In view of the wording of Section 4 of the Central Excises and Salt Act, 1944, there could hardly be two opinions about it. One could say that the rate contract price was applicable only to D.G.S. & D. and Government departments. But there were other sales also at the factory gate to industrial buyers and dealers. As such, the wholesale price, which was not confined to a particular class of buyers, was available right at the factory gate and there is no reason why the stock transfer goods should not have been assessed at such wholesale price prevalent at the time of removal from the factory.
8. It is in the light of above principles that the two cases before us have to be decided. Relying on the ruling at 1986 (25) ELT 867 (SO, the appellants contended that when the levy was ab initio illegal, right to refund was embedded in the fact of payment. Well, the right may be there but if the remedy was barred by the Act and the rules, the authorities constituted under the Act could not transgress the provision of the Act and the rules to allow the right. The departmental authorities could grant refund only in terms of Rule 11. The appellants filed their refund claims before the authorities under this rule only. They were, therefore, bound by the terms and conditions of the rule, including the limitation laid down by the rule. The rule prescribed the time limit of one year before 6.8.1977 and of six months on and from that date. The time limit ran from the date of payment of duty till 18.8.1974 when the assessments were not provisional and from the date of issue of the DD-2 demand (deemed date of finalisation of provisional assessments) for the relevant period so far as the period on and from 19.8.1974 is concerned. In the light of the above principles, so far as the first appeal No. E-1261/80-A relating to 35 refund claims is concerned, in modification of the lower orders we -
(a) uphold rejection of the claims for the period upto 18.8.1974 as they were time barred under rule 11 since according to the information supplied by the appellants themselves these claims were filed in 1976 ;
(b) allow the claims for the period 19.8.1974 to June, 1977 to the extent they were filed within the time limit of Rule 11, reckoning the time limit from the date of finalisation of assessments for the relevant period through issue of the DD-2 demand for that period; and
(c) order that refund due shall be worked out with reference to the wholesale price at the factory gate of the like variety of wire ropes removed from the factory at about the same time at which stock transfer goods were removed.
9. So far as the second appeal No. E-110/81-A relating to refund claim for the differential duty paid by the appellants under 21 DD-2 is concerned, we agree with the lower authorities that the claim was time barred under Rule 11. It may be that the demands were not preceded by a show cause notice, much less adjudication. But the appellants were under no compulsion to pay them. They had the right to represent against the demands to the Assistant Collector and appeal against them to the Appellate Collector. They did nothing of the kind. They willingly paid the demands. They did not even lodge a protest at the time of payment. From their conduct, it is clear that they accepted the demands and paid them willingly. Even after the payments, they had yet another remedy inasmuch as they could ask for its refund within the time limit of Rule 11. They did not do this either. They came up for refund long after the date of finalisation of assessments and payment of differential duty. If they let go the successive remedies available to them to enforce their right of refund, they have only themselves to blame. The authorities constituted under the Act cannot go beyond the limitation provisions of the Act and the rules [1985 E.C.R. 289 (S.C.) - Miles India Ltd.]. We, therefore, reject their second appeal.
10. The two appeals are disposed of in terms of the orders in the preceding paragraphs 8 & 9.