Customs, Excise and Gold Tribunal - Delhi
Southern Petrochemical Industries ... vs Collector Of Central Excise on 13 November, 1984
Equivalent citations: 1987(29)ELT717(TRI-DEL)
ORDER H.R. Syiem, Member (T)
1. By his order-in-appeal No. 2115/80, dated 27-11-1980, the Appellate Collector of Central Excise, Madras decided that the application by the Assistant Collector of Section 4 of the Central Excises & Salt Act, 1944, in valuing the goods was correct. He, therefore, rejected the appeal.
2. The dispute arose over the implementation of notification No. 198/76-CE, dated 16-6-1976. The Assistant Collector, Tirunelveli had worked out a base clearance of 46501.083 tonnes fertilizers in respect of M/s Southern Petrochemical Industries Corporation Ltd. As a result, refund was given to the factory for the period 5-8-1976 to 13-8-1976. However, on 8-8-1979 a notice was served on the factory asking it to pay a sum of Rs. 53,476.37 because the assessee had not passed on the benefit to the consumers. The Assistant Collector passed an order rejecting the claim of the factory and in appeal, the Appellate Collector also ruled against the appellants on the ground that the provisions of Section 4 of the Central Excises & Salt Act, 1944, could not be overruled.
3. The sanctioned sum of Rs. 5,28,825.07 as rebate under the notification was sanctioned on 3-5-1979. The differential duty demanded in the Assistant Collector's order was the result of the redetermination of the assessable value by including the rebate retained by the appellants.
4. The learned counsel for M/s Southern Petrochemical Industries Mr. Uttam Reddi said that the redetermination was not correct because the goods here were fertilizers. They were sold in accordance with a price fixed under the law by the Government of India. They sold the goods at the priced fixed by the statutory price fixing authority, and this has not been disputed by the central excise. When they found that they had become entitled to the benefit from a past date, they asked for a refund of the money;, under the exemption 198/76-CE whereby they were required to pay only 75% of the duty due on the goods cleared in excess of the base clearance. In accordance with section 4(1)(a)(ii) of the Central Excises and Salt Act, 1944, the normal price, that is, the assessable value would be deemed to be the price fixed under the law. This is how the relevant provision runs -
"Where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything Contained in clause (iii)1 of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof."
He said that their price cannot be redetermined or recalculated in order to arrive at a new assessable value because this is the only assessable price for his goods since he sold them at that fixed price. It may be true that the refund he received would go to his pocket but that is not a consideration and cannot be a reason for recalculating the value for the purpose of assessment as proposed by the central excise. The recalculation simply cannot be made because the assessment has to be made only at the price fixed for a commodity like a fertilizer, which is subject to statutory price control. He said that the decision of the Tribunal in the previous case Order No. 343/84-C, dated 29-5-1984 of the same appellants, M/s Southern Petrochemical Industries, suffers from the same defect since it endorsed reassessment of the value even though such reassessment cannot be made because of the provisions of section 4(1)(a)(ii). Furthermore, the Tribunal relied on the amendment of Section 4 by Finance Bill, 1982 (14 of 1982). He said that he had not been able to make any submissions on the applicability of retrospective amendment; he would have liked to state, had this amendment been canvassed before him, that it would not apply in view of the fact that the price at which the fertilizer was sold was a statutory price and was for that reason the assessable price according to the law, and that this price cannot be altered, subtracted from or added to in any manner.
5. The learned counsel for the department said that what has been given to the manufacturer is not accounted for by any tax that he has to pay, but is a pure profit for the factory. It should, therefore, enter into the assessable value.
6. In ordinary circumstances, the arguments of the learned counsel for M/s Southern Petrochemical Industries would be impossible to resist but there are peculiar factors here. He argued that under the law he was obliged to sell only at a given price and any sale beyond that price would be an infraction. This argument overlooks the fact that while the factory has the obligation to follow the statutory control price in its sale, the central excise are governed only by the price at which the goods are sold or the price arid money benefit derived by the manufacturer from the sale. It is to be noted that the price fixation like this one is not a price fixation in which the tariff values are fixed for goods under the central excise law under section 3(2) of the Central Excises and Salt Act, 1944. The provisions of Section 4 themselves have been excluded from goods for which a tariff value has been fixed under Section 3(2). This is the important difference because price fixed by statute or price fixed for sale of the goods to the consumers and tariff values. The tariff values under central excise Act are values that are fixed for assessment. There is no exclusion to statutory control price from the operation of Section of as there is to tariff value.
7. Section 4(1)(a)(ii) has a very important condition to its own operation. It applies only "in relation to the goods so sold". In other words, the control price fixed for the goods must be the price at which the goods are so sold. It is only then that this price fixation becomes the assessable value under Section 4. If the goods are not sold in accordance with that price, this proviso will not operate. It is argued by the learned counsel for M/s Southern Petrochemical Industries that they did sell the fertilizer at the price fixed. This statement would have remained uncontrovertible and a fact till they received the refund which added to the benefit from the transaction. It is true to say that till then the price fixed for the fertilizer was the price at which the goods were sold; it was no longer true when they received the money. It must be remembered that whatever the shape, the time or the manner in which money is received under or in respect of a transaction or by reason of the transaction, that money must figure in calculations the central excise have to make for the purpose of satisfying themselves about the correctness of the calculation. When the money was received by M/s Southern Petrochemical Industries, the money benefit they derived from the process of sale was enhanced. That money did not figure in money payable in taxes or any other statutory liabilities but was a straight and simple profit that the factory derived from the sale. It is naive to ignore the impact of this money on the factory's benefit and to say that since it originated in the sale of the goods at a fixed price, that alone should determine and finalise all calculations irrespective of whether further money is derived by the seller. The argument that the fixed price was the assessable price would be true and would remain true if M/s Southern Petrochemical Industries did not ask for the refund. In that case the money would have been duty and there can be no duty on duty and its addition to the assessable value cannot arise since it did not enrich M/s Southern Petrochemical Industries. However, when the factory asked for the refund and obtained it, it took an action which it knew would bring to it a monetary gain directly flowing from the transaction. This is not to suggest that the appellants are guilty of wrongdoing in asking for the refund but only that when they received the money, they must also accept the chain of events that might flow if the money so received can influence the tax liabilities. It can, therefore, be said in the light of subsequent events that the fertilizers were not sold at such fixed price, and therefore, were not "goods so sold" so as to qualify under this definition.
8. Accordingly, the action of the central excise authorities was correct and we reject the appeal.
G. Sankaran J.
9. I have perused the order proposed by my learned brothers but regret that I find myself unable to agree with them. I have also perused Order No. 343/84-C, dated 6th June, 1984 in Appeal No. ED(SB)(T)A.No. 463/80-C.
10. The relevant portion of Section 4 of the Central Excises and Salt Act, 1944 (the Act, for short) reads thus:
"4(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section, be deemed to be -
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale;
Provided that -
(i) X X X X
(ii) Where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price,, as the case may be, so fixed, snail, in relation to the goods so sold, be deemed to be the normal price thereof";
[The remaining portion-, of Sub-section (1) and Sub-section (2) are not relevant for the present purpose.] Sub-Section (3) reads :
"(3) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under Sub-section (2) of Section 3."
"Value", for the purpose of Section 4 has been defined as:
Section 4(4)(d) - "Value" in relation to any excisable goods, -
(i) X X X X
(ii) does, not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale."
As explanation was added to the above provision by the Finance Bill, 1982 reading thus -
Explanation:- For the purpose of this sub-clause, the amount of the duty of excise payable on any excisable goods shall be the sum total of-
(a) the effective duty of excise payable on such goods under this Act; and
(b) the aggregate of the effective duties of excise payable under other Central Acts, if any, providing for the levy of duties of excise on such goods, and the effective duty of excise on such goods under each- Act referred to in clause (a) or clause (b) shall be, -
(i) in a case where a notification or order providing for any exemption (not being an exemption for giving credit with respect to, or reduction of duty of excise on such goods equal to, any duty of excise already paid on the raw material or component parts used in the production or manufacture of such goods) from the duty of excise under such Act is for the time being in force, the duty of excise computed with reference to the rate specified in such Act in respect of such goods as reduced so as to give full and complete effect to such exemption; and
(ii) in any other case, the duty of excise computed with reference to the rate specified in such Act in respect of such goods."
11. It may be seen that in the case of goods required to be sold at a price fixed under any law for the time being in force, the statute provides that the price so fixed (or, the maximum price, so fixed) shall be deemed to be the normal price of the goods. The value for charge of excise duty in such a case is deemed to be the normal price so arrived at, of course, provided that the assessee sells such goods in the course of wholesale to all at such statutorily fixed prices.
12. It is not in dispute that the goods herein, namely, urea, was sold by the assessee at the price statutorily fixed under Clause 3 of the Fertilizer (Control) Order, 1957. The notification G.S.R. 865 (E) dated 2-11-1976 (a copy of which was produced at the hearing by the Counsel for the appellants), fixes Rs. 1245.00 as the maximum (net) price per tonne at which a manufacturer shall sell Urea at the factory gate. There is an explanation in the said order reading thus -
"The maximum price specified above shall be exclusive of the excise duty, Central Sales Tax, Local Sales Tax, or other Local Taxes wherever levied. This price also does not include Fertilizer Pool Equalisation charge payable by the manufacturer to the Central Government at the rates determined by the Central Government from time to time."
Thus, the price at which Urea was sold by the assessee was the maximum price fixed under the Fertilizer Control Order and that price was exclusive of the excise duty element. In accordance with the second proviso to section 4(1 )(a) of the Act, that price shall be deemed to be the normal price of such urea. And, in accordance with the opening clause of the said Sub-section (1),read with the second proviso, the value for the purpose of charging excise duty on such Urea shall be deemed to be its normal price so arrived at. The said normal price, in the present case, is devoid of the element of excise duty. Therefore, in my view, there is no question here of re-determination of the assessable value as in the case of goods whose prices are not statutorily fixed by invoking the "explanation" to section 4(
13. The fact that Sub-section (3) of Section 4 of the Act provides that the provisions of section 4 shall not apply to excisable goods for which a tariff value has been fixed under section 3(2) of the Act and that there is no such express provision in respect of excisable goods whose sale prices are statutorily fixed does not, in my opinion, detract in any way from the position set out in the preceding para which is the inherent result of the provisions of Section 4 I have adverted to.
14. In order No. 343/84-C the effect of the statutory price fixation does not seem to have been considered.
15. In the result, I would propose an Order allowing the appeal with consequential relief to the appellants. But then, in accordance with the majority opinion, the appeal fails.