Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs National Radio And Electronics Company ... on 26 August, 1992
Equivalent citations: 1993(44)ECR300(TRI.-DELHI)
ORDER P.C. Jain, Member (T)
1. Brief facts of the case are as follows:
1.1 The respondents herein are manufacturers of wireless receiving sets falling under the erstwhile Tariff Item 33A(2) of the CET i.e. radios (including transistor sets). During the relevant period an exemption notification No. 46/74-CE dated 1.3.1974 was in existence which specified effective rates of duties on radios/transistor sets depending upon the sale price of the sets at the point of sale to the consumer which are as follows:
Description Amt. of duty
Set, the price of which at the point of sale (Rupees per set)
to the consumer--
(i) docs not exceed Rs. 165 ... Twelve
(ii) exceeds Rs. 165 but-does not ex Twenty four
ceed Rs. 225 ...
(iii) to (viii)....
1.2 The department is now contending that the price of the set at the point of sale to the consumer exceeded the particular slab and therefore, attracted the next higher rate of duty than the ones declared by the respondent in respect of various models of radio/transistor sets. This increase in price at the point of sale to the consumer is contended by the department on account of (i) non-inclusion of the price of the plastic strap in the sale price of the radio/transistor sets sold along with the set (ii) non-inclusion of handling charges recovered by the respondents from their dealers and (iii) higher deduction to-wards sales lax from the sale price of the radio/transistor set than the actual paid by thc respondents.
1.3 On the basis of the above allegations, seven show cause notices for different periods and for different amounts as shown below were issued by the department:
Show Causc-cum-Dcmand Notices issued to M/s. National Radio & Elcctronics Company Limited, Andheri (East), Bombay-400 093 by the Superintendent, Central Excise concerned as under:
S.No. No. and Date of SCN (Amount) Period
(in Rupees)
1. C.Ex.ASCN/76/4151 dated 10,74,072.00 April 1975 to August
24.9.1976 1976
5. C.Ex./Casc/61/77/4538, dated 1,62,760.00 1.10.1976 to 17.6.1977
21.9.1977
6. C.Ex./Casc/86/77/5963, dated 1,61,028.00 February & March
9.12.1977 1977
7. C.Ex./Casc/3/78/227, dated 8,74,272.00 16.4.1974 to March
10.1.1978 1975.
1.4 On adjudication, the aforesaid amounts of duty in respect of the 7 show cause notices were confirmed by the Assistant Collector, Central Excise, Bombay, Division-K. 1.5 On appeal by the respondents herein to the lower appellate authority, namely, the Collector of Central Excise (Appeals), Bombay, the respondents herein succeeded.
1.6 Hence this appeal by the department.
2.0 In order to appreciate the subsequent contentions made on both sides, we also give below the calculations as to how the department has arrived at the sale price of the wireless receiving sets at the point of sale to the consumers, as given in the appeal memo:
(a) The respondents had declared the price of Model TAPI 324 at Rs. 138/- per set exclusive of Central Excise duly and sales tax but inclusive of price of PVC strap supplied with it when introduced initially in February 1974 and they got that price approved from the department. It is alleged that from 15.4.1974 the respondents actually revised the price to Rs. 168/- instead of Rs. 138/- including the cost of PVC strap but had declared only Rs. 165/- per set to the department, thus deliberately suppressing the fact that Rs. 3/- per set was recovered on account of the cost of PVC strap. It was also noticed by the department that from 15.4.1974 the respondents had started showing extra price of PVC straps in their invoices also. At this time, the respondents are alleged to have issued a confidential circular to their dealers informing them to the effect that it was compulsory to buy the strap which would be supplied along with each W.R. set in question. While the basic price of the W.R. set remained unchanged at the rate of Rs. 165/- per set, ? the price of the strap was enhanced from Rs. 3/- to Rs. 5/- w.e.f. 26.9.1974 and further to Rs. 7/- from 26.6.1976. It is, therefore, alleged by the department that the respondents deliberately suppressed the price of the wireless receiving set to evade duty in order to avail the benefit of lowest slab of duty under the said notification No. 46/74. The department has also alleged that there was no change in the basic cost price of Rs. 1.91 per strap purchased by the respondents although the sale price was inflated from lime to time while retaining of sale price of wireless receiving sets at Rs. 165/-.
The department further noticed that retail price fixed by the respondents in respect of Maharashtra Slate was loaded from lime to lime with handling charges at the rate of 1% and with sales tax in excess of actual incidence. According to the department, the following calculations indicate the ex-Central Excise duty and ex-sales tax price at the point of sale to the consumers for different periods:
_________________________________________________________________________________________________________________________ Period Suggested re Less C.Ex. Price at the tail price duty & S.T. point of sale to included in consumer in price at Col. (2) elusive of C.Ex. duty & S.T. __________________________________________________________________________________________________________________________ | (1) | (2) | (3) | | (4) __________________________________________________________________________________________________________________________ Rs. C.Ex. duty S.T. Rs. Rs. Rs.
1. 26.9.1974 to 196.39 12/- 19.03 165.36 31.10.1975 5.61 strap 0.61 5.00 19.64 170.36
2. 1.11.1975 to 197.99 12/- 19.03 166.96 25.6.1976 5.66 strap 0.61 5.05 19.64 172.01
3. 26.7.1976 on 197.99 12/- 19.03 166.96 wards 7.91 strap 0.84 7.07 19.87 174.03 On the basis of the above calculation the department alleges that the sale price was in excess of Rs. 165/-, as declared by the respondents and therefore, duty at the rate of Rs. 24/- per set was leviable as against Rs. 12/- per set paid by the respondents.
(b) The respondents have two types of dealers namely A and B. Price charged to 'A' dealers inclusive of Central Excise duty was Rs. 157/- and that to 'B' dealers was Rs. 160/-. Sales tax was being paid at first point of sale on the price actually charged by the respondents to dealers at the rate of 12%. Actual incidence of sales tax in case of 'A&B' dealers, therefore, according to the department, works out as under:
'A' Dealer ... 157.00
+ 1% (Handling charges) 1.57
---------
158.57 @ 12% Rs. 19.03
--------
'B' Dealer ... 160.00
+ 1%(H.C.) 1.60
--------
161.60 @ Rs. 19.39
--------
Since the transactions with 'A' type dealers constitutes the bulk of the sales and would, therefore, form the standard pattern of sale, thus the deduction of sales tax has to be limited to Rs. 19.03p to arrive at the price of the wireless receiving set at the point of sale to the consumer rather than Rs. 19.39p claimed by the respondents.
3. The respondents learned advocate, Shri. D.B. Shroff apart form contending against the inclusion of price of the PVC strap in the price of the wireless receiving set as also against inclusion of the price of handling charges and deduction of lower amount of sales lax has made one common point. That point is based on the Explanation to Notification No. 46/74. He submits that from the cum-Central Excise duly price the element of excise duty, as demanded by the department, has to be excluded and not merely the amount of Central Excise duly as paid by the respondents. For example in the calculation of Model TAPI 324, the department has arrived at the sale price at Rs. 170.36 p (for the period 26.9.1974 to 31.10.1975), at Rs. 172.01p (for the period 1.11.1975 to 25.6.1976) and at Rs. 174.03 (for the period 26.7.1976 onwards). These prices have been arrived, he submits, on deduction of Rs. 12/- paid as duty by the rcspondents. The learned advocate submits that since the department is now demanding duty at the rate of Rs. 24/- per set, the aforesaid price should be further reduced by another Rs. 12/-. If this be done then the sale price exclusive of sales tax and the Central Excise duty demanded by the department would be far less tan Rs. 165/- (it will vary from Rs. 158.36 to Rs. 162.03p). This contention of the respondents was accepted by the lower appellate authority on the ground that the respondents herein could not collect duty at the rate of Rs. 24/- per set. Therefore, whatever be the retail price the dealers actually collected duty at the rate of Rs. 12/- per set. Since the notification envisaged that if the retail price was including the excise duty, it was required to be abated, the lower appellate authority has held that the appellants before him (the respondents herein) shall certainly be entitled to deduction at the rate of Rs. 24/- per set in case they are now asked to pay duty at that rate. This argument of the respondents, if accepted, the other three points i.e. inclusion of the price of PVC strap, inclusion of the handling charges and deduction of higher sales tax than the actual incidence, would not be material for the purpose of determining the slab of duly applicable to the goods.
3.1 Against this finding of the lower appellate authority the appellant-Collector has urged in the grounds of appeal that the nett price would still be higher than the declared price of Rs. 165/-, as given below:
From 26.9.1974 From 1.11.1975 From 26.7.1976
to 31.10.1975 to 25.6.1974 onwards.
Rs. Rs.
(1) Suggested retail price with 208.39 (WRS) 209.99 (WRS) 209.99
additional price of P.V.C. 5.61 (STrap) 5.66 (Strap) 7.91
Strap. 214.00 215.65 217.90
(2) Abatement on account of 19.03(WRS) 19.03 19.03
S.T. on WRS and Straps .61 (Strap) .61 .84
19.64 19.64 19.87
(3) Price excluding S.T. 194.36 196.01 198.03
(4) Amt. of excise duty charge 24/- per set 24/- per set 24/- per set
able.
(5) Net price excluding S.T. & 170.36p 172.01 174.03
Excise duty.
(6) Duly payable as per Notfn. 24/- per set. 24/- per set. 24/- per set.
No. 46/74, dt. 1.3.1974, as
amended.
4. We have considered the pleas advanced on this aspect from both sides. We find from the appellant-Collector's ground of appeals, as set out above, that the department has assumed 'suggested retail price' at Rs. 214/-, at Rs. 215.65 p and Rs. 217.90 p. This is not based on any evidence that the respondents herein had any lime suggested such a retail price. The department is merely assuming that they (Respondents) would have suggested a higher retail price at Rs. 2141-, at Rs. 215.65 p and atRs. 2 7.90 p. We cannot go on mere assumptions. 'There is no dispute that the actual suggested retail price is Rs. 202/-, Rs. 203.65 p andRs. 205.19 p. Now the department on the basis of its calculation is demanding Central Excise duty at Rs. 24/-. As the aforesaid suggested retail price has to be reduced by the incidence of sales tax as well as the actual amount of Central Excise duty demanded by the department, from that angle the price of the set would come down below Rs. 165/-, as mentioned above, varying from Rs. 158.36p to Rs. 162.03p. Explanation to the Notification 46/74 is very clear and we agree with the findings of the lower appellate authority. On this ground alone, therefore, the entire amount of duly demanded by the department would collapse.
4.1 In view of our finding on the aforesaid issue our finding on other individual issues would merely be of academic interest. Nevertheless, we would like to record our findings thereon as well:
(i) Whether the cost of PVC Strap is to be included in the value of the WRP:___________________________________________ Department's main contention as an appellant in this respect is that PVC straps have always been supplied along with the W.R. set while the value of PVC Strap has continued to rise from Rs. 3/- to Rs. 7/- over the relevant period, the price of the WR set has remained constant. The department is also relying on a confidential circular of 5.4.1974 on the aspect of compulsory purchase of strap by the dealers from the respondents and consequently by the consumers from the dealers. The respondents, on the other hand, contend that the aforesaid confidential circular was withdrawn immediately as soon as it came to knowledge of the senior management. Wireless receiving set was complete even without the PVC strap which was merely an accessory to the former, therefore, the price of the strap cannot be included in the price of the wireless receiving set. They have also drawn attention that there is evidence of sale of the wireless receiving set by the dealers without straps. For example, they have drawn attention to pages 165-167 of the Paper Book. PVC strap, according to them, was a trading activity. They further submit that the so-called confidential circular of 5.4.1974 was at best in operation for a period of 10 days because the next price list dated 16.4.1974 came into operation and it did not show anywhere that the purchase of PVC strap was compulsory. In any case they submit that the price list dated 15.10.1976 is categorical that PVC strap is merely an operational item.
4.2 In support of the aforesaid submissions, both sides have relied on Case law. The learned JDR has relied upon the following judgements:
(1) Tribunal's Order No. 221/1986 dated 30.4.1986 in the case of Eicher Goodeath Ltd. v. CCEN. Delhi.
(2) Bombay v. Lawkim Pvt. Ltd.
(3) 1970 (26) ETC 428--CSV v. Free India Cycle Inds.
(4) 1982 ELT 378 (AP) : 1982 ECR 603D (AP)--Jay Engg. Works Ltd. v. UOI (5) 1985 (26) ELT 250 (Tribunal)--Khaitan Fans (P) Ltd. v. CCE, Calcutta.
(6) --Bajaj Auto Ltd. v. CCE 4.3 Learned advocate for the respondents, on the other hand, relics on--
(1) 1977 ELT J 133 : 1977 Ccn-Cus 3ID (Bombay)--International Tractors Co. of (Bomb.) India Ltd. v. UOI (2) 1979 ELT 546 : 1980 Ccn-Cus 232D--Jyoti Ltd., Baroda v. UOI (3) --T.I. Miller Ltd. v. UOI (4) 1987 (32) ELT 443 : 1987 (13) ECR 1135 (Cegat SB-A)--Webel Telecommunications (P) Ltd. v. C.C.E., Calcutta.
(5) --Universal Luggage Co. Ltd. v. CCE.
(6) --Mccnicll & Magor Ltd. v. CCR, Calcutta.
(7) 1979 ELT J 145--Arnkar Engineering Works v. Supdt. of Central Excise.
He has also submitted that Richer Goodearth's Judgment relied by the learned JDR cannot be made applicable here because the PVC strap docs not add to the marketability of the wireless receiving set as sell' starter was held to be so in the case of tractors manufactured by Richer Goodcarth Ltd. On the same reasoning Tribunal's Judgment in Lawkim's case is also relevant. Andhra Pradesh High Court's Judgment in the case of Khaitan Fans relating to inclusion of the value of regulators in the value of electric fans is not relevant because the value of regulator was taken into account in view of the description of the Tariff Entry relating to electric fans which included regulators. He submitted that on the other hand when electric fans did not include the regulators within the scope of the Tariff description Delhi High Court in the case of Jay Rngg. reported in 1981 ELT 284 (Del) held otherwise and excluded the value of the regulators from the value of electric fans for the purposes of assessment of duly.
4.4. We have considered this plea from both sides and we are of the view that by now it is well settled that value of the accessories should not be taken into account for the purposes of assessment of duty of the excisable goods so long as such an accessory is not essential to the marketing of the excisable goods. The respondents have brought on record evidence to the effect that wireless receiving sets were marketed without PVC straps. We are, therefore, of the view that the price of the PVC straps is not to be included in the price of wireless receiving set for the purposes of Notification 46/74.
(ii) Whether the handling charges @ 1% recovered by the respondents from the dealers is to be included in the sale price of the transistor sets:
Here the case of the department/appellant is that since the manufacturer is charging from all dealers 1% handling charges, these would from part of the sale price of the transistor sets. The respondents, on the other hand, contend that handling charges were being collected by them from their dealers at 1% of the net price. It did not effect the ultimate retail price to the consumers. The consumer prices of wireless receiving sets manufactured by the respondents were circulated to all their dealers on 15th October, 1976 which prices are the same as declared in their various classification lists filed and approved by the Central Excise authorities as of that date. It is also their stand that such handling charges were not recoverable at all by their dealers from latter's customers, as indicated in their All India and Consumers Price Lists dated 15th February, 1977. In other words, handling charges recovered by the respondents from their dealers was a reduction in dealers' margin and the same was not to be collected from the customers. It has also been contended that handling charges are in any case post manufacturing expenses and therefore, in the light of Supreme Court's Judgment in the case of Voltas Ltd. and Atic Industries Ltd., are not to be included in the sale price of the transistor sets.
The lower appellate authority on the aforesaid submissions has held the point in favour of the respondents. The said authority has also referred to case of Ballu Lorry and Radio Service, Madurai, decided by the Appellate Collector of Central Excise, Madras wherein it has been held that a manufacturer could not be held responsible for a dealer's action in charging higher price other than that prescribed. The Appellate authority, however, has found that if the respondents herein can satisfy the proper jurisdictional Assistant Collector to the effect that collection of handling charges did not effect the consumer price, it need not be included.
We are of the view on this point that it is essentially a question of fact to be determined with reference to the records whether the handling charges collected by the respondents herein have been passed on to the customers of the transistor/radio sets. No fault can be found with the finding of the said lower appellate authority; essentially the mailer has been remanded by him on this limited aspect of satisfaction of the Assistant Collector on the basis of the records on this point.
(iii) Whether the sales lax actually charged has to be deducted from the sale price or whether the sales tax payable has to be deducted.
Department's case has already been set out in para 2.0(b). In one category of dealers the sales tax payable is Rs. 19.03p in respect of one type of Model and for another category of dealers it is Rs. 19.39p. The sales to the first category of dealers constitute the bulk of sales, as alleged by the department, it is contended by the department that only Rs. 19.03p is deductible as sales tax from the consumers price inclusive of sales tax and not Rs. 19.39p as has actually been done by the respondents.
The respondents, on the other, explained that in Maharashtra they had two types of dealers 'A' and 'B'. The former were those who were purchasing in larger lots and the latter in smaller lots. In the case of former the price charged by the respondents form the dealers was Rs. 157/- per set and that from the latter Rs. 160/-. Accordingly, the sales tax (in Maharashtra) was Rs. 19.03p for the former dealers and Rs. 19.39p for the latter. The original authority has deducted sales lax only to the extent of Rs. 19.03 and held that the difference of 36 paisc between the sales lax recovered from the Iwo categories of dealers was part of the price and hence should have been included in the sale price. Respondents contend thai this argument is unsound for the simple reason that ultimately the rclail price of the set was the same irrespective of whether sold by a bigger dealer or a small dealer. They also contend that this reasoning in any case cannot be applied to sets sold outside the State of Maharashtra.
We are of the view that sales tax is deductible on actual basis payable by the respondents to the Sales Tax Department. If they have paid Rs. 19.03p as sales lax in respect of some consignments, deduction should also be to the extent of Rs. 19.03p. If they have paid Rs. 19.39p as sales lax in respect of some other consignments same would be the deduction for the purposes of Notification No. 46174.
4.5 There is yet another point regarding the limitation. The appellant-Collector in his memorandum of appeal has stated lhal since the lower appellate authority has not considered il necessary to examine the respondents' contentions regarding limitation of time of the demands issued and confirmed, hence the limitation of lime is not the subject matter of this appeal. The respondents, however, have contended that allegation of suppression is only in the last show cause notice dt. 10.1.1978 for the period 16.4.1974 to March 1975. There is no allegation of suppression in the other six show cause notices. They have submitted that it cannot be considered lo be suppression because they were under the bonafide belief that value of straps is not includiblc. The learned advocate for the respondents, therefore, submits thai the allegation of suppression even in the last show cause notice docs not stand. So far as the other show cause notices are concerned, he submits that they are partly time barred and partly within time.
4.6 It would not be appropriate for us to give any finding of fact as to which of the show cause notices are barred by lime and to what cxicnl in the absence of any finding to that effect by the lower appellate authority. We, therefore, leave the matter as it is.
4.7 However, as stated by us earlier our finding in respect of the common point regarding deduction of Rs. 24/- by way of example in the case of TAPI Model, the findings on other points are merely of academic nature without effecting the result of the appeals.
5. In the light of the aforesaid discussion, the appeal is rejected.