Customs, Excise and Gold Tribunal - Delhi
Coromandal Fertilizers Ltd. vs Collector Of Central Excise on 12 August, 1987
Equivalent citations: 1987(14)ECC53, 1987(13)ECR645(TRI.-DELHI), 1987(32)ELT426(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. Brief facts leading to the application for rectification of mistake in the order in Appeal No. 928/86-A dated 22-8-1986 passed by me are set out in the said order in appeal dated 13-8-1986 passed by my learned brother Shri M. Gouri Shankar Murthy as the other Member of the Bench. These are as follows :-
"(a) the appellant filed two price-lists on 15-9-1975 in relation to two of their products, namely 'Fromor' Ammonium Phosphate 28-28-0 and NPK 14-35-14 under Section 4(i)(a) of the Act disclosing the identical price of Rs. 2,930/- per M.T., inclusive of Central Excise Duty and agent's commission;
(b) the assessable value in respect -of both the fertilisers was determined at Rs. 2,547.83 per M.T. (i.e. Rs. 2,930/- minus Central Excise Duty at 15% ad valorem amounting to Rs. 382.17 only) rejecting the element of agent's commission claimed. [The instant revision application now heard as an appeal does not relate to the inclusion of the agency commission in the assessable value. It does not also relate to the assessable value determined in respect of NPK 14-35-14];
(c) between 1-10-1975 and 31-12-1975, when the aforesaid price-list was in operative force, the appellant would appear to have cleared an aggregate quantity of 26,425.05 M.T. out of which 15,445 M.T. were cleared into their depots at various places and 10,980 M.T. directly to independent wholesale dealers. Out of this quantity of 10,980.05 M.T., a quantity of 86 M.T. were cleared direct from the appellant's factory,
(d) notwithstanding the earlier approval, a notice dated 7-9-1976 was issued to the appellant alleging, inter alia, that -
(i) the normal price which should have been declared by the appellant was Rs. 3,000/- per M.T. rather than Rs. 2,930/- per M.T. seeing that the latter price was charged in very stray cases of clearance,
(ii) the appellant had thereby contravened, the provision of Rule 173C(i) of the Central Excise Rules, 1944, and requiring the appellant to show cause as to why a differential duty in a sum of Rs. 2,77,462.55 should not be recovered towards short levy from the appellant and a penalty in terms of Rule 173Q should not be imposed;
(e) in adjudication, it was held that the appellant was liable to pay differential duty amounting to Rs. 2,41,293.03 and a penalty of Rs. 250/- was imposed on the appellant;
(f) in appeal, the penalty was set aside but the demand for differential duty in the aforesaid sum of Rs. 2,41,293.03 was confirmed;
(g) the instant revision application that is now heard as an appeal was the sequel."
2. Learned brother .Shri Gouri Shankar Murthy in his order dated 13-8-1986 has held that where the ex-factory price is available and some sales do take place uniformally at that price, one cannot resort to the price at a place other than the place of removal for ascertaining the assessable value. He has also gone on to add that "in any event, if the price at a place other than the place of removal is to be taken into account for computation of the assessable value, the cost of transportation between the place of removal and the place of sale will, necessarily, have to be excluded from the computation of assessable value." Since it has not been established by the department that the goods at the place of removal have been sold at a price other than Rs. 2,930/- per M.T., that price has to be taken for the purpose of assessment of -duty. This price cannot be discarded just because the Asstt. Collector characterises the sales at factory gate as stray sales.
3. I had, however, allowed the appeal, on the other point without commenting on the point on which appeal has been allowed by learned brother Shri Gouri Shankar Murthy. The assessee (the applicant herein) had contended that even if the price of Rs. 2,930/- per M.T. is not accepted the benefit of deduction of equalised freight included in the price of Rs. 3,000/- per M.T. should be given to him in terms of the Supreme Court's judgment in the case of Bombay Tyre International Ltd. (1983 ELT 1896). This plea of the applicant, herein was accepted by me in my order in appeal dated 22-8-1986. It was, however, left to the lower authorities to verify that the quantum of equalised cost of transportation of Rs. 70/- claimed by the assessee (applicant) is correct..
4. Applicant's learned advocate has now stated that the order in appeal dated 22-8-1986 passed by me is not correct inasmuch as 1 ought to have accepted the price of Rs. 2,930/- available at the factory gate for the goods in question. It is immaterial whether the sales were scanty. This ratio has been laid down by the Hon'ble Supreme Court in the case of A.K. Roy v. Voltas Ltd. ,(1977 ELT 3.177-para 20). It has been observed by the Hon'ble Supreme Court in the said case in para 20 that "quantum of goods sold by a manufacturer on wholesale basis is entirely irrelevant. There are facts that such sales may be few or scanty does not alter the true position". Learned advocate has stated that this law laid down by the Hon'ble Supreme Court in Voltas case has not undergone any change. In effect it has been confirmed by the Hon'ble Supreme Court in its judgment in the case of Bombay Tyre International Ltd. (1983 ELT 1896) wherein it has been observed that the scheme of valuation of excisable goods under old Section 4 and new Section 4 are not materially different. He invites special attention to para 31 of the said report of the latter judgment which reads as follows :-
"31. It will be noticed that the basic scheme for determination of the price in the new Section 4 is characterised by the same dichotomy as that observable in the old Section 4. It was not the intention of Parliament, when enacting the new Section 4 to create a scheme materially different from that embodied in the superseded Section 4. The object and purpose remained the same, and so did the central principle at the heart of the scheme. The new scheme was merely more comprehensive and the language employed more precise and definite."
5. Accordingly, the learned advocate has submitted that the aforesaid being the true legal position namely where the wholesale price at the factory gate is available howsoever scanty the sales are, that price ought to have been adopted in the first instance and accordingly, the price of Rs. 2,930/- per M.T. should be taken as the price for the purpose of assessment of duty. He has drawn attention to the commentary of the learned author at page 927 Vol. I-7th edition of 'Kanga and Palkhivala's The Law and Practice of Income Tax' by N.A. Palkhivala and B.A. Palkhivala which reads as follows :-
"A glaring and obvious mistake of law can be corrected under this section. For instance, the levy of tax under a statutory provision which is subsequently held by the Supreme Court to be inoperative and ineffective or making an assessment which on the basis of a later decision of :the Supreme Court or the appropriate High Court is found to be erroneous ... is a mistake apparent from the record."
He relies upon the judgment of the Supreme Court in the case of Narayan Row v. Model Mills Nagpur Ltd. (64 ITR 67 SC) and judgment of Maharashtra High Court at Bombay in the case of Walchand Nagar Industries Ltd. v. ITO (44 ITR 260) in which the above principle as commented upon by the learned author of the aforesaid book has been enunciated. The learned advocate for the applicant has stressed that even a subsequent judgment according to the above principle has been held to be applicable in rectifying the mistake apparent from record as laid down in Section 35C of the Central Excises and Salt Act, 1944 (the Act). While in the instant case a mistake has occurred in not applying the existing law laid down by the Supreme Court in the case of Voltas and as confirmed later in the case of Bombay Tyre International Ltd.
6. Learned SDR, on the other hand, has urged that all arguments including the judgments' ratios laid down in the cases of Voltas and Bombay Tyre International Ltd. had been taken into account by the Tribunal before passing the order dated 22-8-1986. The question, therefore, is not one of rectification but of interpretation of law as laid down by the Supreme Court in the aforesaid two cases. The proper course, therefore, for the applicants is to file an appeal to the Supreme Court and not by way of rectification application. Application under Section 129B(2) of the Customs Act (corresponding to Section 35C of the Act) can be entertained by the Tribunal only if there is an obvious and patent mistake, either of fact or of law as has been laid down by the Tribunal in the case of Jai Hind Oil Mills Co. v. Collector of Customs [1987 (28) ELT 305]. The Tribunal in the said case has relied upon a judgment of the Supreme Court in the case of T.S. Balaram v. Volkart Bros. [1971 82 ITR 50 SC : AIR 1971 SC 2204]. Voltas case has been pronounced under old Section 4 and therefore, ratio of that judgment cannot be applied to the provisions of new Section 4 which in term is quite different.
Learned SDR has also relied upon a judgment of Karnataka High Court in the case of State of Karnataka v. Union of India and Ors. (1978 ELT 3.564). He has drawn attention to para 8 of the said report. In para 2 facts of the case are set out to the effect that the petitioner (State of Karnataka) had sold 96% to 97% of the soap manufactured at its factory to the zonal agents in terms of agreements entered into by the petitioner with those agents. The remaining 3 to 4% were sold to other dealers at the factory premises to whom the petitioner allowed a lesser rate of discount. The department had contended that since 3 to 4% of the soap manufactured at the factory was sold to the various dealers at the factory premises, that sale price and the discount allowed thereon should alone be taken into consideration for determining the wholesale cash price for the product. The contention, however, was negatived by the Court in the following words :-
"8. The contention proceeds on the ground that the quantum of goods sold by the petitioner on wholesale basis is entirely irrelevant for determining the wholesale cash price. That in my view also is the correct approach. But to accept the contention would be to ignore the true facts of the case and the purpose for which the petitioner has entered into agreements for the distribution and sale of soap manufactured in the factory. The petitioner has entered into agreements with the sole selling agent and zonal agents, with a view to sell the soap on wholesale basis or at the wholesale market rate. The bulk of the soap manufactured by the petitioner was sold as per the terms of the agreements. The respondents have neither denied the execution of those agreements, nor doubted the validity of bona fides of the terms thereof. That being the true position in the case the terms under which the said sales were made, should be the basis for determining the price of the soap, and not the terms by which a few isolated sales were made apart from the agreements, because the sales effected under the agreements did not cease to be wholesale sales, merely because the wholesale dealers have entered into agreements with the petitioner. [Emphasis supplied by the learned SDR] Learned SDR has pointed out that in the case under consideration sales at the factory gate at the alleged wholesale price were merely to the extent of 0.3 to 0.4% of the total sales during the relevant period under consideration which is far less than 3 to 4% of the sales not relied upon by the Karnataka High Court in the case referred to above.
In view of the aforesaid pleas, learned SDR stated that the ROM application deserves to be dismissed.
7. We have carefully considered the pleas advanced on both sides. We observe that the application under Section 35C of the Act must relate to patent and obvious mistake which is apparent from the record. The mistake must not relate to debatable points of law or to facts which are required to be investigated further or which are to be arrived at by tortuous process of reasoning. We can do no better than to quote the observation of the Hon'ble Supreme Court in the case of T.S. Balaram v. Volkart Bros, referred to above. Para 8 of AIR 1971 SC 2205 observes as follows :-
"8. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on which there may conceivably be two opinions.... A decision on debatable point of law is not a mistake apparent from the record."
An observation by the Hon'ble Supreme Court in the context of interpreting the provisions of old Section 4 need not apply to the provisions of new Section 4 which in terms in many respects is worded differently from that of old Section 4. Observations of the Hon'ble Supreme Court in para 31 of 1983 ELT 1896 is in the context of the controversy before it, that is, which is laid down in para 37 of the said report, namely whether the value of an article for the purposes of the excise levy must be determined by reference exclusively to the manufacturing cost and the manufacturing profit of the manufacturer and should be represented by the wholesale price charged by the manufacturer. A close reading of para 31 itself indicates that the Supreme Court was merely referring to the central principle at the heart of the scheme both under old Section 4 and new Section 4. It did not refer, while making these observations, to the details of the wording in old Section of and new Section 4. In fact, in para 33 the Supreme Court goes on to set out the differential features between old Section 4 and new Section 4. Further, the reliance placed by the learned SDR on a decision of the Karnataka High Court in 1378 ELT J.564 is also well taken. All this shows that it is a debatable point of law whether stray sales for the purpose of determining the wholesale price at the time and place of removal is to be ignored or not in terms of new Section 4. Accordingly, as held by Hon'ble Supreme Court in the case of T.S. Balaram v. Volkart Bros, such a debatable point of law cannot be rectified through an application for rectifying the mistake apparent from the record. Case law relied upon by the learned advocate for the applicant in this connection is, therefore not relevant. Hence ROM application is dismissed.