Customs, Excise and Gold Tribunal - Bangalore
Ici India Ltd. vs Commissioner Of Central Excise on 11 October, 2002
Equivalent citations: 2003(85)ECC432, 2003(151)ELT629(TRI-BANG)
ORDER S.S. Sekhon, Member (T)
1. These three appeals are taken out by this common order since the issue involved is the same.
2. The appellant is a manufacturer of paints. They clear paints in containers of varying capacity from 500 ml to 200 litre. These 200 litre packs stock transferred to depots or directly, is cleared to the premises of two job workers to repack the same into various smaller packs of sizes 50ml, 100ml, 120ml, 200ml and 500ml which are then sent to the depots from where they are sold. There is no sale of paints in 200 litre container on the basis of the prices for paint of 20 ltrs container (i.e. 20 x 10) at any place.
3. These 200 litre bulk packs (unbranded) sent to the re-packers under stock transfer invoices and their eventual repacking into different sized packs were declared to the Department and this activity was considered to be not amounting to manufacture. For the ultimate pack sizes for the repacked goods, which were sold at the respective depots, sale value was declared. They were issued with Show Cause Notices on the ground that paint in 200 litre container was not sold at the factory gate, but was sold only after repacking, from the depots and duty was demanded on the enhanced value adopted for the sale of such repacked goods, as such repacking and branding had made the goods marketable to the retailed consumer and when such goods were sold through the regional sale depots/sale office. As Value of such goods could not be determined at the time and place of removal, then valuation was to be resorted to on the basis of Section 4(1)(b) of the Central Excise Act, 1944. The value of repacked goods cleared as per the delivery challans worked out to a price per litre equal to that of which the appellants had cleared the goods to the repacking godown. The cost of repacking charges and cost of packing materials was not added to the value of the repacked goods. It was held that the appellants have arranged the misdeclaring of these packages and the repacked value was higher than that declared to the Department. The assessees were alleged to have had prior information about repacks i.e. before removal of such 200 litres pack of paints. They were also alleged to have prior information about shortage/ availability of the pack sizes at the depots as they had to arrange tin containers for smaller packs manufactured and supplied to the re-packers. In this view it was viewed that every time a 200 litre of paint left the factory, it was already known how many smaller packs of that were going to be made and the as-sessee knew the price per litre at which the goods were finally to be sold at the depot, prior to the removal from the factory.
4. The lower authority confirmed the demands and found that the case law in Century Pulp & Paper v. CCE, Meerut [2002 (150) E.L.T. 913 (T) = 2000 (36) RLT 246] and Savita Chemicals Ltd. v. CCE, Mumbai [2000 (119) E.L.T. 394] were not applicable in the facts of this case since the sale price of 200 litres container at the factory gate was not available and after that he came to the finding as follows : -
"In the instant appeal the appellants arrived at the assessable value on the basis of the assessable value of 20 litre container which is being sold from the depot and multiplied it by 10 which does not have the sanction of Law. The question is why only the value of the 20 litre container is to be taken for the purpose of assessment of the impugned goods? Why the actual price of smaller containers, which is available, should not be taken for the purpose of assessment, which is more appropriate? If the comparison is inevitable, the same is to be made with the comparable goods and not with the goods, which are not comparable. Hence, the sale values available for the smaller packs have to be adopted for the purpose of assessment and payment of duty.
The appellants had cleared paint in bulk viz. 200 litres containers without any brand. While clearing the paint, they took the price of 20 litre pack as basis and determined the assessable value accordingly. While the fact remains that the price of containers of paints of 50ml, 100ml, 120ml, 250ml and 500ml per se are very much ascertainable as they were being sold from the depots and, therefore, the action of the Department to assess the goods in factual terms as the actual size of the containers to be repacked by the appellants before they reach the depot which is the time and place of removal for the purpose of subject transactions, is correct. I have perused the declaration and the intima tion letters filed by the appellants. I concur with the observations of the Addi tional Commissioner that the declaration and intimation letters referred to and relied upon by the appellants are deceptive and aimed at misleading the Department. They had only intimated to convey that 200 litres packs cleared are in turn repacked into 20 litres and then sold inter alia, giving a general im pression that repacking from 200 litres to 20 litres alone is carried out by them in between removal of paints from the factory and sale of the same to the cus tomers in the ordinary course of business. However, they had wilfully sup pressed the fact that the 200 litres pack cleared from the factory are subse quently repacked to various sizes including but not exclusively 20 litres pack.
The evidence on record clearly shows that the appellants are aware of the fact of repacking into the impugned size of containers before the paints reach the depots. It has been rightly observed by the Additional Commissioner that the plea of the appellants that they had kept the Department informed about re-
packing activity is not sufficient to impute knowledge to the Department that the Department is aware of repacking of 200 litres into small packs viz 50ml, 100ml, 120ml, 250ml and 500ml with brand name 'Dulux'. In the facts and circumstances of the case, the longer period in terms of proviso to Section 11A(1) of the Central Excise Act, 1944 is correctly invokable for demanding duty of Rs. 32,70,323/-. I uphold the Additional Commissioner's order demanding duty of Rs. 32,70,323/-. The appellants have also rendered themselves liable to penal action and interest. Although no penalty is imposable under Section 11AC for the clearances effected prior to 28-9-96 in terms of the CEGAT decision in the case of Marcandy Prasad Radhakrishna Prasad Pvt Ltd., cited supra, as Section 11AC came into force w.e.f. 28-9-96, yet I find that in the instant case, the provisions both of Rule 173Q and Section 11AC have been invoked in the Show Cause Notices for imposing penalty on the appellants. The appellants have contravened the provisions of Rule 9(1), 173B, 173C and 173F of the Central Excise Rules, 1944 with intention to evade payment of duty. Hence, in respect of the clearances effected prior to 28-9-96, the penalty is imposable on the appellants under Rule 173Q and for the clearances effected after 28-9-96, the penalty is imposable on them under Rule 173Q read with Section 11AC Hence, I uphold the penalty of Rs. 32,70,323/-imposed on the appellants under Rule 173Q for the clearances effected prior to 28-9-96 and under Rule 173Q read with Section 11AC for the clearances effected after 28-9-96.
As regards the demand of interest under Section 11AB, the same is payable by the appellants in respect of the clearances effected on or after 28-9-96 and is not payable in respect of the clearances effected prior to 28-9-96 in view of the well settled legal position."
and disposed of the appeal. Hence, the present appeal.
5. We have heard both sides and considered the matter and find: -
(a) It is well settled law that goods should be assessed in the form in which they are cleared from the factory and not the form or container, in which they are sold from the depot, after the repacking is done by the job workers when such repacking does not amount to manufacture.
(b) No mention of the relevant chapter notes has been shown to us to constitute repacking as manufacture in the case of paints. Admittedly, the goods are paints when being removed from the factory gate and will have to be assessed as such. The allegation made that they become marketable or ready for sale only when repacked in smaller containers would imply that a 200 litre container of paint is not marketable and thus it would not be exigible. The exigibility of the 200 litre pack is not in question before us. Therefore this reasoning does not enthuse us to alter the view held that goods have to be assessed as cleared.
(c) Considering that the lower authorities have treated the depot as the place of removal and this has been included in the definition of 'place of removal' only with effect from 28-9-96, therefore for the period prior to this date, depot cannot be treated as a place of removal. Therefore 200 litre pack cannot be assessed on the basis of price at which the paints in smaller pack was sold. Even for the period after 28-9-96, depots cannot be treated as place of removal for the paint cleared in 200 litre packs, since no sale price of such packs cither at the factory gate or at the depot was existing. This would he the mandate of the follow ing cases :-
(i) Savita Chemicals Ltd. v. CCE, Mumbai [2000 (119) E.L.T. 394 = 1999 (34) RLT 573] (affirmed by the, Supreme Court as reported in 2001 (130) E.L.T. A262 (S.C)]
(ii) Castrol India Ltd. v. CCE, New Delhi 2000 (118) E.L.T. 35 [affirmed by Supreme Court as reported in 2000 (121) E.L.T. A224]
(iii) This Bench in the case of Andhra Pradesh Paper Mills Ltd. by its Final Order No. F/1105/02 [2002 (149) E.L.T. 1000 (T)] had held similar view. We would follow these cases, as we find no contra decision cited before us.
(d) The amendment to Section 4 w.e.f. 28-9-96 or even earlier will not cause an interpretation to be held that the 'repacking of the paints' and value addition thereby will be added to the exigible product, relying on the Supreme Court decision in Siddharth Tubes [2000 (115) E.L.T. 32] or C.B.E. & C F. No. 138/08/2000-CX 4, dtd. 3-1-2001 since in the present case the 'value additions' are being conducted not in the factory premises or precincts thereto, but outside the premises and the valuation of 200 litre pack is under consideration and not the smaller sized packs being delivered from the depots.
(e) We find no cause to support the impugned order.
6. We would in this view of the matter set aside the order and allow the appeals.