Customs, Excise and Gold Tribunal - Delhi
Jabalpur Oxygen Company vs Collector Of Central Excise on 26 October, 1990
Equivalent citations: 1991(52)ELT455(TRI-DEL)
ORDER D.C.Mandal, Member (J)
1. The facts of the case as stated in the impugned order-in-original are as follows:-
"1.1. M/s. Jabalpur Oxygen Co., Jabalpur (herein after called the party) are the manufacturer of Oxygen Gas falling under T.I. 14-H of Central Excise Tariff.
1.2 They had executed into a contract with M/s. Eastern Air Products, Bhopal under contract No. JOC/AGR/8 dated 31-8-1978, effective from 1-9-1978, and the price list No. 29/JOC/78 dated 7-8-1978 effective from 1-9-1978 got approved for Rs. 2.70 per Cu. Mtr. of Oxygen Gas. This Price was inclusive of handling charges @ 0.25 per Cu. Mtr. of gas and continued up to 31-7-1979.
1.3 On 18-6-1979, the party executed another contract No. EAP/AGR/13 with the said buyer which was effective from 1-8-1979. In the terms and conditions of this contract there was no clause about handling charges and accordingly the price list No. 34/JOXY/79 dated 28-7-1979 effective from 1-8-1979 for Rs. 2.85 per Cu. Mtr. was approved without including the handling charges.
1.4 On 20-2-1981 the Assistant Collector, Central Excise Jabalpur alongwith Central Excise Officers paid a surprise visit and checked the private records like Bills invoices and ledger maintained by the party and it was noticed that the party has prepared debit notes for handling charges in favour of M/s. EAPL, Bhopal @ 0.25 per Cu. Mtr. of Oxygen Gas.
1.5 The amount of handling charges as per debit note with the other amount has been adjusted in the party wise account and general ledger maintained by the party making transfer entries towards debits and credits. The fact of claiming of handling charges neither disclosed in the contract nor shown in the price list declared by the party. Thus it has been alleged that the party have suppressed the facts with intention to evade payment of Central Excise duty and leviable on the handling charges and removed the goods without payment of proper Central Excise duty during the period from August, 1979 to January, 1981 in contravention of rule 173-C and 173-F of Central Excise Rules.
1.6 The details of Oxygen gas cleared to M/s. EAPL, Bhopal during the period from 1-8-1979 to 31-1-1981 on which the party has not included the handling charges are as under:-
Period Quantity Rate of Amount of Amount of duty Basic Spl.
sold to M/s. handling charges handling
EAPL. Cub. ges charges
Mtr.
August, 1979 189165.02 @ 0.25 Per Rs. 47,291.25 Rs. 7093.69 -
to March, Cu. Mtr. @ 15%
1980
April, 1980 to 57279.94 -do- Rs. 14,319.98 Rs. 2148.00 -
18-6-1980 @ 15%
19-6-1980 to 7245.62 -do- Rs. 1,811.40 Rs. 203.78 10.19
30-6-1980 @ 75% of
15% Adv.
1-7-1980 to 147418.55 -do- Rs. 36,854.63 Rs. 4146.15 207.31
31-1-1981 @ 75% of
15% Adv.
___________________________
Total: 13591.62 217.50
1.7 The party, in his letter dated 5-5-1981 has stated that their prices are based on ex-factory basis and are exclusive of any post-manufacturing expenses which have no bearing on the manufacturing cost and which are incurred only by them for the convenience of the customers. Cylinder handling charges come in this category. These charges represent, the unloading charges of the cylinders from the vehicle in which they are brought in the factory, stacking charges and also loading charges of the cylinders in the vehicle in which they have to go out of the factory. Since this service does not have any bearing on the manufacturing cost and, is clearly a post-manufacturing expenses, and charged separately, no excise duty is payable on it.
1.8 It was alleged that the handling of cylinders is taken place within the factory premises whatever the manufacturing process of gas is completed only after its filling in cylinders. Thus without handling of cylinders the manufacture of gas does not and cannot take place. As much the handling charges of the cylinders cannot be treated as post-manufacturing charges."
On the basis of above facts, a show cause notice was issued to the appellants on 22-8-1981 alleging contraventions of Rules 173C & 173F of the Central Excise Rules, 1944, and asking them to show cause as to why penalty should not be imposed on them under Rule 173Q of Central Excise Rules and why Central Excise duty amounting to Rs. 13,809-12 should not be recovered under Section 11-A of the Central Excises and Salt Act, 1944. After considering the reply of the appellants and completing the adjudication proceedings, the Additional Collector of Central Excise, Indore imposed a penalty of Rs. 15,000/-on the appellants under Rule 173Q of the Central Excise Rules. He also held that duty was payable and the same should be paid by the appellants. The present appeal is against the said order of the Additional Collector.
2. During the hearing before us Shri Kohli for the appellants relied upon the following decisions in support of his contention that the handling charges of "Gas cylinders were hot includible in the assessable value of gas".
(i) 1987 (30) ELT 304 (Tri.) The Collector of Central Excise, M.P., Indore v. M/s. Jabalpur Oxygen Company, Jabalpur (M.P.)
(ii) 1986 (23) ELT 394 (Bom.) Govind Pay Oxygen Ltd. v. Assistant Collector Central Excise, Panaji & Ors.
(iii) 1988 (36) E.L.T. 723 (S.C.) Indian Oxygen Ltd. v. Collector of Central Excise
3. Shri Kohli has argued that the show cause notice was issued on 22-8-1981 for the period 1st August, 1979 to January, 1981. He has argued that the entire demand is time-barred as there was no suppression of facts by the appellants. In support of this argument he has drawn our attention to the agreement dated 18-6-1979 between the appellants and M/s. Eastern Air Products (P) Ltd., Bhopal, a copy of which has been enclosed to the Cross-Objection filed by the Revenue against this appeal. He has argued that a copy of the said agreement was submitted by the appellants alongwith the price list. According to him, the fact that handling charges would be recovered by the appellants was known to the Central Excise Officer. The officer could have known the details of the handling charges. He has, therefore, contended that the longer time limit should not have been invoked in issuing the show cause notice and hence the entire demand is time-barred. In support of his argument, Shri Kohli has relied on the Tribunal's decision reported in 1986 (8) ECR 353 (Cegat), in the case of M/s. Secals Limited, Tamilnadu v. Collector of Central Excise, Madras - 1986 (24) ELT 64 (Tri).
4. Arguing for the Revenue Smt. Baliga has stated that on merits, the handling charges are includible in the assessable value. In support of her argument she has relied on the Supreme Court judgment reported in 1988 (36) E.L.T. 723 (S.C.) in the case of Indian Oxygen Ltd. v. Collector of Central Excise. On the point of limitation she has argued that the appellants did not disclose that the price declared in the price list did not include the handling charges.
5. We have considered the arguments and have gone through the records of the case. The appellants realised cylinder handling charges @ 0.25 P for Cub. Mtr. of their supply. The recovery of these charges were made through debit notes. In paragraph 1.7 of the impugned order the Additional Collector has stated that the cylinder handling charges represents "unloading charges of the cylinders from the vehicle in which they are brought in the factory, stacking charges and also leading charges of the cylinders in the vehicle in which they have to go out of the factory". In Paragraph 5 of the judgment reported in 1988 (36) E.L.T. 723 (SC), the Hon'ble Supreme Court held that loading charges incurred for loading the goods within the factory are to be included in the assessable value irrespective of who has paid for the same. According to the ratio of saiad paragraph, delivery and collection charges for delivery of the filled cylinders and collection of the empty cylinders have to be excluded from the assessable value as such charges have nothing to do with the manufacture. In the present case, we observe from Paragraph 1.7 of the impugned order that the disputed charges are unloading charges of the cylinders from the vehicle in which they are brought in the factory, stacking charges and also loading charges of the cylinders in the vehicle in which they have to go out of the factory. As already stated above Supreme Court's judgment reported in 1988 (36) E.L.T. 723 has clearly held that such loading charges are includible in the assessable value. Unloading charges of the cylinders from the vehicle in which they are brought in the factory and also stacking charges should form part of the assessable value as they are charges incurred by the assessee before the gas is packed in the cylinders. These two elements of charges are not for delivery of the filled cylinders. Therefore, these two elements of the handling charges are not excludible in terms of paragraph-5 of the Supreme Court judgment. Shri Kohli for the appellants has relied on another Supreme Court judgment reported in 1988 (36) E.L.T. 730 (SC) in the case of Collr. of Central Excise v. Indian Oxygen Ltd. This judgment is not quite relevant to the point in dispute in the present case as the issues decided in that judgment are different from the issue in dispute in the present case. He has relied on a decision of the Tribunal. In the said decision the Tribunal held that the delivery and collection charges cannot be included in the assessable value as they are charges in lieu of the expenses incurred after removal of the goods from the factory gate and do not relate to the manufacturing process. The charges included in the present case do not represent the expenses incurred after removal of the goods from the appellants' factory. These are the charges incurred by the appellants before the removal of the goods from the factory gate. Hence this decision of the Tribunal does not help the case of the appellants. Shri Kohli has relied on a decision of Bombay High Court reported in 1989 (20) ECR 404 (Bombay) in the case of Govind Pay Oxygen Ltd. v. Assistant Collector of Central Excise, Panaji and Ors. This judgment has not dealt with the present issue in dispute. It was decided in that case that the cost of cylinders supplied by the customers was not includible in the assessable value and that only the value of the gas which is sold to the buyer was includible in the assessable value. We, therefore, hold that on merits the appellants do not have a case and the disputed handling charges are correctly includible in the assessable value.
6. So far as the limitation is concerned, we observe from the copy of the price list filed on 28-7-1979, effective from 1-8-1979 that the price declared therein was Rs. 2.85 per Cub. Mtr. It was not stated in the price list that this declared price included 0.25 per Cub. Mtr. on account of handling charges. From the remarks given in the price list we, however, observe that a copy of the Appellants' agreement with M/s. Eastern Air Products Private Limited was enclosed. Their letter No. EAP/AGR/13 dated 18-6-1979 is mentioned in those remarks. Clauses 1 and 2 of the said agreement dated 18-6-1979 reads as follows:-
"1. Rate Oxygen gas: Rs. 2.85 (Rupees two and paisa eighty-five per cubic meter) The above price is on an ex-factory basis and exclusive of Excise duty, sales tax, octroi and any other levy that the Government may impose from time to time which will be on an actual basis.
2. Delivery & Collection of cylinders You will arrange for collection of full cylinders from our factory and also shall return the empties to our factory. In case we are required to arrange transportation, then the actual cost incurred by us will be recovered from you."
In this agreement it is not stated that the rate of Rs. 2.85 per cubic meter includes handling charges of the cylinders in their factory. Clause 2 of the agreement says that in case the appellants are required to arrange transportation of cylinders then the actual cost incurred by the appellants on transportation will be recovered from the buyer. It is, therefore, clear from the agreement that the handling charges of 0.25 P per cubic meter is not mentioned in the agreement dated 18-6-1979. This information was suppressed in the price list. The Department came to know about this recovery of handling charges by debit notes only during the time of scrutiny of the private records of the appellants. Shri Kohli's argument that the Central Excise Officer could have known the fact of recovery of handling charges from the customer is not acceptable. The decision of the Tribunal reported in 1986 (8) ECR 353 (Cegat), relied on by Shri Kohli, is not relevant to the facts of the present case and hence the same does not help the appellants. We, therefore, hold that the Department was justified in invoking the five years' limitation in issuing the show cause notice.
7. In the light of foregoing discussions, we uphold the impugned order and dismiss the appeal. The Cross-Objection filed by the Revenue also gets disposed of in the light of our above conclusions.