Customs, Excise and Gold Tribunal - Delhi
Delhi Bottling Company vs Cce on 6 May, 1999
Equivalent citations: 2000(88)ECR884(TRI.-DELHI), 1999(105)ELT42(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. These are 2 appeals against confirmation of demand of duty and imposition of penalty.
2. The facts of the case briefly stated are that the appellants manufacture aerated waters and flavoured syrup. They are also availing the facility of modvat scheme. They filed modvat declaration under Rule 57G wherein the plastics shells, glass bottles and crown corks had been declared as packaging materials. The department observed that under Sub-clause (iii) of exclusion clause under Explanation to Rule 57A, modvat credit is not permissible in respect of those packing materials, cost of which is not included or had not been included in the preceding financial year in the assessable value of the final product. It was further observed that consequent upon a change from the specific rate to Ad valorem rate of duty, the appellants have filed a PL in Part I w.e.f. 1.3.1994 in respect of aerated waters wherein the nature of packing is shown of durable and returnable as per trade practice. Column 6 of the PL wherein the cost of packing is required to be given if included in column 3 price, has been left blank. The department therefore alleged that the cost of packing is not included in the assessable value of aerated waters and hence modvat credit of duty paid on packing materials is inadmissible on the clearance of aerated waters in view of the aforesaid exclusion sub-clause of the Explanation to Rule 57A. Two SCNs were issued to the appellants asking them to explain as to why wrongly availed/utilised modvat credit should not (be) demanded and recovered from them and why a penalty should not be imposed on them.
3. In reply to the SCNs, the appellants submitted that according to the relevant provisions for availment of modvat credit on the inputs covered by modvat scheme, it is sufficient if the inputs are used in relation to the manufacture of output also covered by the modvat scheme. On the question that the cost of these inputs does not enter into the cost of inputs namely, aerated waters and hence denial of modvat credit in respect of these inputs, the appellants submitted that these items in spite of their repeated use have a limited life time and therefore necessarily to be replaced at some stage or the other particularly on account of breakages of glass bottles. It was contended that having regard to the fact that it is the one time value and the duty paid therein which alone is taken into consideration for the purpose of availing of modvat benefit, it could not be concluded that the element of cost of these inputs does not enter into the cost of output; that the fact is that the cost of inputs is spread over a period of time into the cost of the output cleared during that period till the inputs outlive its life and has to be replaced. The appellants submitted that several instructions have been issued by the CBEC; that after careful consideration, the Board concluded that the benefit of modvat on glass bottles used as inputs in relation to the manufacture of the excisable output namely, aerated waters should not be denied. In support of their contention they referred to the instructions contained in para 3 of the Board's letter F. No. 267/30/88-CE dated 28.6.1988; that these instructions were issued at a time when the output was subjected to specific rate of duty, it should equally held good even when the output is chargeable ad valorem duty as at present inasmuch as the relevant rules cited in this behalf in the SCN do not make any distinction on the point of chargeability of the output to specific rate of duty or ad valorem rate of duty. It was submitted by the appellants that Rule 57A which is relevant for the purpose of determining eligibility of output for the benefit of modvat credit, has to satisfy 3 broad tests as held by the CEGAT in the case of Standard Alkali ; that the first pertinent question is whether the item claimed as inputs is used in relation to the manufacture of final product; that if the answer is yes, the next question is whether the item claimed as input and the final product in relation to which these products claimed to be used are notified under the modvat scheme; that the last test is if they are notified they become eligible for modvat credit subject to the important provision namely, whether the said input comes or does not come under the excluded category listed in the explanation under Rule 57A; that 3 conditions are satisfied in respect of the inputs referred to above and mentioned in the SCN.
4. Regarding the third test namely, whether or not, the said input comes under the excluded category or not they submitted that a perusal of the relevant rule will show that the items/materials which has been excluded for the purpose of availment of benefit of modvat credit are (1) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods for bringing about any change in any substance in relation to the manufacture of the final products, (2) packaging material in respect of which any exemption to the extent of duty of excise payable on the value of packing material is being availed of for packing the final products, (3) packaging material the cost of which is not included or had not been included during the preceding financial year in the assessable value of the final product under Section 4.
5. It was submitted that Clause (iii) refers to the packaging material the value of which is not included in the assessable value of the final products; that during the preceding financial year it was pertinent to point out that the term 'packing material' has not been defined under Rule 57A; that the term 'packing material' is different from package' or container'; that the CEGAT in the case Rasoi Limited observed that the term 'packaging' is -described in "Readers Digest Universal Dictionary" as material used for packaging. Packaging material which is the crucial expression is different from package, just as, say dress material is different from dress. Just as a dress is made from dress material, package is made from packaging material. The specific exclusion in the Explanation to Rule 57A of packaging material in respect of which any exemption to the extent of duty payable on the value of such packaging material is availed of and of packaging material the cost of which is not included in the assessable value of the final product under Section 4, however, tend to point out to the possibility of the expression packaging being used to refer to packages themselves. But we cannot go beyond the normal meaning of the said term. Thus, packaging material is different from package or container. Further, the specific exclusion of the item plywood for tea chests is also a pointer in this regard. Plywood is not package by itself but a packaging material to make tea-chests. Because of its specific exclusion it stands excluded from the scope of Modvat benefit available to packaging material. There is no such exclusion affecting tin plates. Their uses are similar. Both are used to make packages or containers for packaging excisable goods. Since tin plates/tin sheets are used for making metal container in which vegetable product is packed they are packaging materials, which 4 are eligible inputs which are used in relation to the manufacture of vegetable products." It was contended that the similar view was taken by this Tribunal in the case of FDC Limited .
6. It was submitted that it may thus be seen from the interpretation put on Clauses 4 and 6 of the explanation by the Tribunal that where the rule makers intended to exclude 'ready to use container', from the definition of inputs, the need of harmonious interpretation of statutes so often stressed by the court, it would be evident that none of the inputs eligible whereof is questioned in the SCN come within the purview of excluded category of the Explanation to Rule 57A. After careful consideration of the submissions, the authorities below held as indicated above.
7. Shri D.N. Mehta, ld. Advocate submits that their case is fully covered by the decision of this Tribunal in the case of Black Diamond Beverages Limited 1998 (91) ELT 422 and this decision was further followed in the case of Delhi Bottling Company . He submits that the cost structure of aerated waters included the element of cost of the bottle. However, when questioned to show it from the PL submitted to the department, he could not produce a copy of the relevant PL. He submits that the Tribunal has been consistently holding that in case the cost structure of aerated waters includes the element of cost of bottle in them, then modvat credit on bottles was available. He therefore prays that the appeal may be allowed.
8. Countering the arguments, Shri L.P. Asthana, ld. Advocate for the Revenue submits that Section 4(4)(d)(i) stipulates that value in relation to any excisable goods; "Where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee". He submits that the glass bottles are of durable nature and in practice are returned and, therefore the cost of packing material in the cost of aerated waters and flavoured syrup is likely to be excluded. He submits that for this purpose the Price List of aerated waters and flavoured syrup submitted by the appellant need thorough scrutiny to find out whether the cost element of glass bottles has been included in the cost of aerated waters or not. He submits that since the duty during the material period was ad valorem on aerated waters, therefore examination of PL for ascertaining whether the cost of durable and returnable glass bottles was included in the cost of aerated waters or not. He submits that the instructions relied upon by the assessee pertained to the period when the duty on aerated waters was specific and inclusion or exclusion of the cost of durable and returnable glass bottles in the assessable value of aerated waters did not alter the position. However, with the introduction of Ad Valorem duty on aerated waters, the question of inclusion or exclusion of the cost of durable and returnable glass bottles has become significant and need detailed examination before allowing modvat credit of duty paid on durable and returnable glass bottles. He submits even the reference application in the case of Black Diamond Beverages Limited has been rejected. He submits that if the reference petition has been rejected that only shows that no point of law arises if no point of law arises it did not have the value as precedent. He submits that there were decisions to the contrary and, therefore perhaps a Larger Bench was necessary. He submits that in case a remand is not considered necessary a reference to the Larger Bench becomes essential in view of the different decisions by co-ordinate Benches of this Tribunal.
9. Heard the submissions of both sides. We note that the Tribunal in its decision in the case of Delhi Bottling Company relying on the decision in the case of Black Diamond Beverages Limited in para 7.2 held that "Next question is as to what cost in respect of durable and returnable packing is to be included? Cost of the article which is repeatedly used for several times before it is exhausted has to be necessarily arrived at on pro rata basis for a single use depending upon the number of uses to which it is put generally. That is a standard costing practice and duly certified by a chartered accountant. To adopt any other method would be an impratical proposition and would lead to ridiculous results. If the cost of an input in its final use in a final product is fully reflected, the value of the final product in which an input is used for the first time would be exceptionally high, whereas the final product utilising that input on the latter's second or subsequent use would have very low value because second or subsequent use of such an input would be without any cost inasmuch as its full cost has already been exhausted on its first use. Same batch of final product would have different costs/values depending upon the first use or subsequent use of an input in a batch of final products." The Tribunal finally held that modvat credit of duty shall be admissible to the assessee wherever the cost of packing material, even on instalment basis, is included in the assessable value.
10. Since the only document which can provide evidence about inclusion of the value of glass bottles in the assessable value of aerated waters even on pro rata basis is price list and since price list is not available on records placed before us nor any specific finding rendered by the lower authorities, we consider it fit case for remand. We, therefore remand the case to the Commissioner concerned that he will examine the case law on the subject via-a-vis price list to find out whether the cost of durable and returnable of glass bottles is included in the assessable value of the aerated waters or not and then consider the question of admissibility of modvat credit and pass appropriate orders in accordance with law after providing the appellants an opportunity of being heard in person. The appeals are allowed by way of remand.
11. In reply to the question, ld. Counsel for the appellants agitated before us that the Tribunal has consistently been waiving pre-deposit whereas in their case substantial amount of duty has been directed to be deposited and which has been deposited by the appellants in pursuance to the stay order, he prayed that the amount of duty so deposited may be refunded to them as in other identical case no pre-deposit has been directed. After considering the submissions of the ld. Counsel, we direct that 25% of the amount of duty adjudged in the impugned order shall be retained by the department till final order is passed. Remaining amount deposited pertaining to the stay order is ordered to be refunded on furnishing of personal bond acceptable to the department by the appellants.
[Operative part of the order pronounced in the court].