Customs, Excise and Gold Tribunal - Delhi
Escorts Tractors Ltd. vs Cce on 15 May, 1998
Equivalent citations: 1998(78)ECR342(TRI.-DELHI)
ORDER
U.L. Bhat, J. (President)
1. Order-in-Original dated 23.3.1989 was passed by the Director General of Anti-Evasion confirming the demand made in respect of the period from 1.1.1981 to 31.7.1985 and imposing penalty of Rs. 1,00,000/-. Plant and machinery have been confiscated and allowed to be redeemed on payment of fine of Rs. 1,00,000/-.
2. Appellants engaged in the manufacture of Tractors, was selling the bulk of Tractors to M/s. Escorts Limited (E.L, for short) and rest to other Wholesale Dealers. Appellant was filing price lists from time to time indicating the Ex-factory wholesale price and discount allowed to wholesale dealers and seeking reduction of the same. On approval of the price lists, the tractors were being cleared on payment of duty based on the approved price. In 1984 the premises of the appellant and those connected with the appellant were searched and incriminating documents were seized. These documents showed that the cost of services like, four free services during the warrant period, inspection on delivery, training to the ultimate buyers and labour involved in replacing the defective parts during the warranty period, was being met by the dealers from out of dealer's margin allowed by the manufacturer. Taking the view that above activities were within the domain of the manufacturer and the cost thereof should be part of the assessable value and these aspects were suppressed from the knowledge of the department with intent to evade payment of duty, a show cause notice dated 8.1.1986 was issued by the Deputy Director (AE) proposing the demand of differential duty, proposing penalty and confiscating plant and machinery. In view of the dispute about the jurisdiction of Deputy Collector to issue the notice, the Director General (AE) issued a fresh show cause notice dated 27.1.1987 on the same lines. Though the appellant resisted the notice on merits and on the ground of limitation, the Director General (AE) (in the rank of Commissioner) passed on order confirming the demand, imposing penalty and confiscating the plant and machinery.
3. The costs of four elements namely P.D.I., four free service during the warranty period, training to consumers and labour involved in replacing the defective parts during the warranty period have been added to the assessable value by the Lower Authority. The cost of three of these elements (other than labour charges for replacing defective parts during the warrant period) cannot be included in the assessable value. This is clear from the decision in Mahindra and Mahindra 1988 (25) ELT 547 (TBL) : 1998 (76) ECR 290 (T) and PSI Data Systems Limited 1998 (89) ELT 3(SC) : 1997 (68) ECR 377 (SC). We, therefore, hold that cost of these three elements cannot be included in the assessable value.
4. There is no dispute that cost of defected parts replaced by the manufacturer during the warranty period has to be included in the assessable value. Labour charges involved in replacing the defective part would be includible in the assessable value as seen in DEL Star Private Limited 1997 (20) RLT 374 (T). Confirmation of demand, to this extent, would be valid. Subject to our finding on the question of limitation, the matter should go back to the Adjudicating Authority for working out the demand on this element.
5. Show cause notice alleged that appellant did not determine the duty liability correctly, did not declare the correct assessable value, did not furnish complete information along with price list and contravened the provision of rules indicated therein and suppressed material facts though required to be furnished. The details of the documents and aspect of suppression are seen mentioned in paragraph 18 of the show cause notice. Documents include debit notes issued to the dealers for rendering service during the warranty period and confidential circulars issued to the dealers giving breakup of the dealer's margin and indicating that cost of various elements referred to was being paid to the dealers by way of advance and would be collected back if the dealers fail to render the services. The circulars specifically stated that if free services were not rendered, the manufacturer would collect back Rs. 75/- per service along with the element of excise duty on such amount. It is obvious that statutory price lists filed by the appellants merely indicated the dealer's margin without furnishing the breakup or without indicating that any part of the margin was to be adjusted towards the cost of labour in replacing the defective parts during the warranty period. According to the learned Counsel for the appellant, copy of the agreement between (he manufacturer and the E.L. was being submitted along with the price list. A copy of the agreement is before us. Learned Counsel is not able to show with reference to the copy of the agreement that the agreement disclosed that a part of the dealer's margin would be adjusted towards the cost of above services. Reference is made to the decision of the High Court of Delhi in the case of the appellant . The case relates to cost of free services during 1975. The judgment of the High Court refers to a particular clause in the agreement on the aspect of free service. This judgment cannot be of any assistance to the appellant in showing that breakup of the dealer's margin had been disclosed and the fact that part of dealer's margin was to be adjusted towards the cost of the above service had been disclosed to the department. It is the case of the Revenue that the department was not aware of the circulars on this aspect. In these circumstances, we hold that the averments in the show cause notice on the basis of which the proviso to Section 11A of CESA, 1944 was invoked have been proved and are sufficient to support the case of the department. Therefore, we hold that show cause notice is not barred by time.
6. The impugned order is set aside to the extent it relates to inclusion in the assessable value cost of PDI, free services and training to the customers. The order stands in regard to the inclusion in the assessable value of the cost of labour involved in replacing defective part during the period of warranty. The demand has to be quantified afresh and for this purpose, the case is remanded. Since the appellant has mainly succeeded in appeal, we set aside the confiscation and penalty imposed.
7. For the reasons indicated above, the case is remanded to the jurisdictional Adjudicating authority for passing a fresh order in the light of the above findings and observations and restricting the demand to the period contemplated in the proviso to Section 11A of the Act prior to the date of service of the second show cause notice.
(Dictated and pronounced in the open Court).