Customs, Excise and Gold Tribunal - Delhi
Col-Tubes (P) Ltd. vs Collector Of Central Excise on 13 April, 1994
Equivalent citations: 1994(72)ELT342(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. This is an appeal filed by M/s. Col. Tubes (P) Ltd., Pithampur (Madhya Pradesh), against the Order-in-Original No. 15/Collector/CEX/92, dt. 19-8-1992, passed by the Collector of Central Excise, Indore.
2. The appellants have pleaded that the value of the plastic cap, a bought-out item, was not includible in the assessable value of the collapsible aluminium tube, when such tube was removed by them with the cap.
3. The revenue had filed cross-objections in which it has been contended that the collapsible aluminium tube cannot be used without the cap, and as such, these collapsible aluminium tubes are not marketable without the caps. They have stated that nobody would like to purchase a collapsible tube without the cap on it, as it cannot be used without such a cap.
4. The appellants had filed a writ petition in the Madhya Pradesh High Court wherein they had prayed that they be permitted to have their appeal heard on merits without the requirement of any deposit. The Hon. Madhya Pradesh High Court has directed this Tribunal to hear and decide the appeal without insisting for the pre-deposit of the amount as demanded by the Collector of Central Excise, Indore, vide Order dt. 19-8-1992. They also directed to hear and decide the appeal within two months from 19-7-1993.
5. The matter was posted for hearing on 19-8-1993, when Shri K.V. Pradhan, Consultant, appeared for the appellant. The respondents were represented by Shri A.K. Singhal, JDR.
6. Shri K.V. Pradhan, the learned Consultant submitted that the dispute related to the inclusion of the value of the plastic cap, fitted on the aluminium collapsible tube, while arriving at the assessable value of such tubes. He stated that the matter was already covered by the Tribunal Decision (as confirmed by the Hon. Supreme Court), in the case of Metal Box of India Ltd. v. Collector of Central Excise 1983 (13) E.L.T. 956 (Tribunal), read with 1990 (45) E.L.T. A-33.
7. The learned Consultant further stated that the demand was hit by limitation, as extended period of limitation has been invoked, while there was no suppression of any fact.
8. In support of his arguments, the learned Consultant relied upon the following citations:
(1) Extrusion Processes (P) Ltd. v. Union of India, 1987 (31) E.L.T. 866 (Bom.).
(2) A.Z. Metal Industries Pvt. Ltd. v. Collector of Central Excise 1992 (62) E.L.T. 724 (Tribunal).
9. Shri A.K. Singhal, the learned JDR submitted that their sales were against the rate contract but no copy of any rate contract was filed with the department. He stated that it was a case of suppression of facts. Before 1-4-1990 they were paying central excise duty correctly, but thereafter, changed the practice, without any information to the department. He further stated that the cases relied upon by the learned Consultant related to the specific rated old tariff, and that the issue involved therein was different, and not related to the value, as in the present case.
10. In support of his arguments, the learned JDR relied upon the following citations :
(1) Name Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise -1988 (38) E.L.T. 566 (SC), (2) Koran Business Systems Ltd. v. Superintendent of Central Excise -1992 (58) E.L.T. 48 (Tribunal) .
11. We have carefully gone through the facts and circumstances of the case and have given our due consideration and thought to the submissions made by the appellants and the respondent. We have also analysed the various decisions cited on the bar by the learned Consultant as well as the learned JDR.
12 to 38. * * * * * *
39. Accordingly we hold that the cost of the caps is rightly includible for arriving at the assessable value of the aluminium collapsible tubes
40. The appellants have pleaded that the extended period under Section 11A of the Act invoked by the department, was not justified. The demand-cum-show cause notice was issued on 23-4-1992 for the period April 1990 to June 1991.
41. It is seen that the appellants were availing of the facility of declaring the price of goods transacted, on the gate pass, under Rule 173C(11) of the rules. Rule 173C lays down that the assessee has to file the price lists of goods assessable ad valorem. There are provisions regarding prior approval of the price list.
42. It is also provided that where the price declared on the gate pass or accompanying Challan or advice note, does not represent the value as determined under Section 4 of the Act, the proper officer may after such further enquiry as he may consider necessary, reassess the duty due and thereupon the assessee shall pay the deficiency, if any, by a debit in his account current.
43. Prior to 1-4-1990, the assessee were including the value of caps and labour charges in the assessable value of the tubes, and were paying the duty on the whole amount. Thus up to 30th March, 1990 their invoice value and the assessable value plus duty, were the same. With effect from 1-4-1990 on their own, without any intimation to the department, without any approval from the proper Central Excise Officer, they stopped including the value of caps and the labour charges for fitting the cap on the tubes in the assessable value of the tubes, and thus invoice value was higher than the assessable value + duty. We have already referred to above that under the proviso to Rule 173C(11), where the price declared by the assessee did not represent the value under Section 4, then the deficiency was to be made good by the assessee by a debit in his account current.
44. Under this proviso there was no stipulation regarding raising of a demand but only of the re-assessment of duty.
45. The facility of exemption from filing price lists has been abused by the assessee.
46. Although the proviso to Rule 173C(11) referred to reassessment and paying the deficiency by a debit in the account current, the provisions of Section 11A of the Act have been invoked and the larger period of limitation has been applied for recovering the differential reassessed amount.
47. Section 11A of the Act provides that where any duty of excise has been short-levied or short-paid by reason of suppression of facts, then the differential amount could be demanded from the assessee, within five years from the relevant date.
48. It is obvious that the assessee had suppressed the fact of non-inclusion of the value of the caps and the labour charges in the assessable value of the tubes.
49. In the case of Collector of Central Excise v. Chemphar Drugs and Liniments -1989 (40) E.L.T. 276 (SC), the Hon. Supreme Court have observed that "whether in a particular set of facts and circumstances there was any fraud or collusion or wilful mis-statement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case".
50. As observed by the Hon. Supreme Court in the case of Jaishri Engg. Co. (P) Ltd. v. Collector of Central Excise -1989 (40) E.L.T 214 (SC), the question whether there was any fraud, collusion, wilful mis-statement or suppression of facts for the department to be justified to claim duty beyond a period of six months is a question of fact. The Hon. Supreme Court observed that "the fact that the deptt. visited the factory of the appellants and they should have been aware of the production of the goods in question were no reason for the appellant not to truly and properly to describe these goods.
51. We may also refer the observations of the Hon. Supreme Court in the case of Binod Bihari Singh v. Union of India - AIR 1993 SCW 475 (Para 10) and in the case of Union of India v. Harnam Singh - AIR 1993 SCW 241 (Para 6) wherein it has been held that the limitation bars a cause of action when there is "undesirable lapse of time" and when the claimants "sleep over their rights and allow the provisions of limitation to expire". In this case the appellants did not disclose the fact of non-inclusion of the cost of caps in the assessable value of the aluminium collapsible tubes, and this came to light only on the basis of the investigations and inquiry by the department at a later date.
52. In the case of Pushpam Pharmaceutical v. Collector of Central Excise -1989 (40) E.L.T. 74 (Tribunal), the Tribunal has observed that the extended time limit for raising demand was applicable when fact of manufacturer was not brought to the notice of the deptt., and exemption was also availed of. In such circumstances the Tribunal held that "the lower authorities have rightly invoked the longer period of five years in raising demand of duty against the appellants".
53. Accordingly we consider that the duty has rightly been demanded for the extended period.
54. However keeping in view the circumstances of the case the amount of penalty is reduced from Rs. 2000 to Rs. 500. The appeal is otherwise rejected and the impunged order is confirmed and we order accordingly. The cross-objections filed by the Revenue are also disposed of accordingly.
ORDER Harish Chander, President
55. I have perused the order written by learned brother Shri Lajja Ram, Member (Technical). I am afraid, I do not agree with his conclusions. The issue in the present matter is whether the value of the plastic cap, a bought out item, is includible in the assessable value of the collapsible aluminium tube when such tubes are used by them with the cap. My learned brother in his judgment narrated the detailed arguments advanced by both the sides and also the facts. So, I need not reproduce the same in my order. The value of the goods is assessed in terms of provisions under Section 4 of the Central Excises and Salt Act, 1944. The main ground on which my learned brother has come to the conclusion that the value of the plastic cap is to be includible in the assessable value is on Rules of Interpretation incorporated in the new Tariff. For proper appreciation of the position of Rule 2(a) of the Rules for Interpretation of the Schedule to the Central Excise Tariff Act, 1985 is reproduced below :-
"Any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished, provided that, the incomplete or unfinished goods have the essential character of the complete or finished goods. It shall also be taken to include a reference to those goods complete or finished (or falling to be classified as complete or finished by virtue of this rule), removed unassembled or dis-assembled."
A perusal of the same shows that the words "removed unassembled or dis-assembled" are incorporated in the interpretatory Rule 2(a). Classification or valuation are two separate aspects of the matter. The classification is to be done keeping in view the tariff read with the rules of interpretation, section notes and chapter notes, whereas the value has to be determined in terms of Section 4 of the Central Excises and Salt Act, 1944 read with Central Excise Valuation Rules. In the matter before me, the product in dispute is flexible metal tube. The appellant in addition to this has bought out plastic caps and for fixing those plastic caps with the tubes, the appellant has incurred certain expenditure and the appellant has not included the value of the cap as well as the labour charges incurred by him in fixing the cap in the assessable value. The learned advocate for the appellant had placed heavy reliance on the Larger Bench decision of this Tribunal in the case of Metal Box of India v. Collector of Central Excise, reported in 1983 (13) E.L.T. 956 (Tribunal) and the Tribunal has held as under :-
* * * * *
56. Hon'ble Bombay High Court in the case of Extrusion Processes Pvt. Ltd. v. U.O.I, reported in 1987 (31) E.L.T. 866 (Bom.) has held as under :-
* * * * *
57. My learned brother has referred to old and new Tariff. For the proper appreciation, Heading 76.12 of the new tariff is reproduced below :-
* * * * *
Tariff Item 27(f) and Explanation I thereunder are reproduced below :-
* * * * *
A comparative study of both the tariffs shows that in the old tariff the container has defined in Explanation I of Tariff Item 27(f)/ whereas in the new Tariff the details of the flexible tubes have been given as "Plain, Lacquered, Printed and Other". In the essence, I do not find any difference in the old and new Tariff. Section 4 of the Central Excises and Salt Act is independent to the classification aspect. Valuation has to be done in terms of the Central Excise Valuation Rules. The learned DR has cited the following decisions : -
(1). Name Tulaman Manufacturers Pvt. Ltd. v. CCE, reported in 1988 (38) E.L.T. 566 (SC), (2). Koran Business Systems Ltd. v. Supdt., C.E. reported in 1992 (58) E.L.T. 48 (Bom.).
The judgments cited by the learned JDR do not help him as in my view plastic cap is an accessory. The Tribunal had an occasion to deal with accessories in the case of Grindivell Norton Ltd. v. CC reported in 1986 (24) E.L.T. 426 (Tri.), and the relevant portion is reproduced below :-
* * * * *
61. In view of the above discussion I hold that the plastic cap is nothing but an accessory and as such the value of the plastic cap as well as the labour charges for fixing the plastic cap cannot be included in the assessable value. The Tribunal in the case of Metal Box of India v. CCE reported in 1983 (13) E.L.T. 956 (Tribunal) had held that fixing of plastic caps on the aluminium collapsible tube does not amount to manufacture. In view of these circumstances I order that the value of the plastic cap should not be included in the assessable value.
62. Now, coming to the limitation aspect I am in full agreement with the views expressed by my learned brother and as such I need not give any separate decision in this regard. In the result, the appeal is allowed.
Sd/-
(Harish Chander) Dated: 18-10-1993. President POINT OF DIFFERENCE
63. Whether in the facts and circumstances of the case the value of the plastic cap and labour charges incurred in fixing the plastic cap to the flexible tube can be included in the assessable value of the flexible tube or not?
Sd/- Sd/-
(Lajja Ram) (Harish Chander)
Dated: 18-10-1993 Member (T) President
Order
Harish Chander (President) and K.S. Venkataramani, Member (T)
64. When the matter was called none was present for the appellants who have submitted in their letter dated 31-1-1994 that the matter regarding difference of opinion may be decided on the basis of submissions already made by them. Shri A.K. Singhal, the learned Departmental Representative addressed arguments on the difference of opinion. It was submitted that the appellants themselves were including the cost of the caps in the assessable value of the collapsible tubes manufactured by them before April 1990. He reiterated the submissions made before the referring Bench and the case law reported in 1988 (38) E.L.T. 566 in the case of Name Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise and in the case of Koran Business Systems Ltd. v. Supdt., Central Excise reported in 1992 (58) E.L.T. 48 (Bom.) which have been referred to already in the refering order. These decisions clearly go to show that even bought out part's value has to be added to the assessable value of the final product which is manufactured by using these bought out parts. The learned Departmental Representative also contended that mere facts that the goods are accessories will not be a ground for excluding their parts and in this context he relied upon the Tribunal decision in the case of Bajaj Auto Ltd. v. Collector of Central Excise, reported in 1989 (44) E. L. T. 763 (Tribunal) holding that the value of foot rest in two wheeler has to be added to the assessable value of scooter. These have been confirmed by the Supreme Court.
65. The submissions made by both the sides have been carefully considered. The appellants are relying heavily on the Bombay High Court decision in the case of Extrusion Processes (P) Ltd. v. Union of India reported in 1987 (31) E.L.T. 866 (Bom.) to say that the Bombay High Court had held in an identical case that the cost of the caps is not to be included in assessable value of extruded tubes. The question will be, how valid is this decision of the Bombay High Court to the facts of the present case. The factual background of the Extrusion Processes (P) Ltd. case is given in Para 4 of the judgment which is as follows :-
* * * * *
66. The Bombay High Court while giving this decision has considered the amendment to the Tariff Item 27 by the Finance Bill of 1980 with reference to Item 27(e) of the Central Excise Tariff. The High Court had also considered the Supreme Court decision in the case of Bombay Tyres International Ltd. In fact it was brought to the notice of the Bombay High Court that in the similar case, the court in Writ Petition of 1104 of 1980 in the case of Shalimar Textile Mfg. P. Ltd. v. Union of India and Ors. the Court had dismissed the petition in the light of the decision of the Supreme Court in the case of Bombay Tyres International Ltd. After considering all these submissions the Court had observed in Para 9 as follows :-
"However Mr. Sethna submits that as against the dismissal of appeal by the Division Bench in Metal Box case, the department has taken the matter to the Supreme Court and the matter is pending. But till such time, Metal Box is reversed the petitioners are entitled to claim deductions in respect of costs of caps and capping charges."
Therefore, in the present case also the factual situation is similar. The records further show invoices indicating sale of aluminium flexible tube without caps from the appellants' factory. In such a situation it may not be appropriate for the Tribunal to deviate from the ratio of the Bombay High Court judgment in the Extrusion Processes (P) Ltd. case unless it is shown that the other decision of the Bombay High Court in the case of Metal Box Company in Writ Petition No. 511 of 1973 has been upset by the decision of the Supreme Court where the appeal against that order is said to be pending. In the circumstances the order proposed by the Hon'ble President is concurred with.
Sd/-
(K.S. Venkataramani)
Dated : 6-4-1994 Member (T)
FINAL ORDER
67. In view of the majority opinion of the members the appeal is allowed.
Sd/- Sd/-
(Harish Chander) (Lajja Ram)
Dated : 12-4-1994 President Member (T)