Customs, Excise and Gold Tribunal - Delhi
Kashmir Vanaspati Ltd. vs Collector Of Central Ex. on 16 October, 1995
Equivalent citations: 1995ECR615(TRI.-DELHI), 1996(81)ELT66(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. The above mentioned four appeals have been filed by M/s. Kashmir Vanaspati Ltd. against the order passed by the Additional Collector whereas the two appeals have been filed by the Collector, Central Excise against the order of Collector, Central Excise (Appeals). As the issues for determination in all these six appeals are the same, they are being disposed of by this common order.
2. The detailed particulars of the six appeals are as under :
Appeal No. Period of demand Date of SCN Amount of
duty Rs.
Appeals by E/2546/91 1-1-82 to 15-9-83 7-4-84 3,44,253.04
M/s.Kash- E/2547/91 1-4-84 to 30-9-84 5-8-85 1,96,902.45
mir Vanas- E/2548/91 1-10-84 to 31-3-85 4-12-85 1,70,957.14
pati. Limited E/2549/91 25-9-83 to 31-3-84 13-11-84 1,34,634.37
Appeals by E/4466/92 1-1-87 to 27-2-88 4-8-87 81,044.99
C C E E/4467/92 11-3-86 to 31-12-86 - 5,83,432.40
3. The facts in brief leading to the above appeals are that M/s. Kashmir Vanaspati Ltd. are engaged in the manufacture of vegetable product. They sell their vegetable product (Vanaspati) to wholesale buyers in Jammu and Kashmir State as well as outside the State and to the Army. In the case of wholesale ('buyers in the State of Jammu and Kashmir, the goods are sometimes delivered at the wholesale buyers' premises and are also sold through their sale depots in the State of Jammu and Kashmir. For delivery of the goods at the wholesale buyers' premises and through their sale depots, the appellants charged an additional amount to cover the cost of transport, outward handling charges and local taxes paid. These amounts were collected through sale invoices from 1-1-1982 to 14-9-1983 and from 15-9-1983, debit notes were issued to the buyers. The appellants were not submitting any price lists but were collecting the duty on the basis of the price in those invoices. While submitting their RT-12 returns copies of invoices were attached but from 15-9-1983 as the additional charges were collected through issue of debit notes, however, a copy of these debit notes was not enclosed with the monthly RT-12 returns. The Department was of the view that the additional charges collected by the appellants in respect of sales of their vegetable product (vanaspati) in the State of Jammu and Kashmir through their sales depots were includible in the assessable value declared by the appellants and therefore, show cause notices were issued to the appellants to explain as to why the duty on these additional charges should not be collected from them. In the four appeals filed by assessee, the Additional Collector confirmed the demand.
4. However, in the two cases which the Department has come in appeal, the Collector (Appeals) set aside the order of the Assistant Collector on valuation holding that the sales by the appellants are at arm's length and thus the prices prevailing at the factory gate are required to be made the basis of assessment under Section 4 irrespective of the volume of such clearances; that the quantum of the goods sold by the manufacturer is irrelevant.
5. Shri K.C. Sachar, the learned Advocate appearing for M/s. Kashmir Vanaspati Ltd. submitted that there was normal price of goods available at the factory gate which should be the assessable value for all clearances; that additional charges have nothing to do where normal price for wholesale clearances at the factory gate was available; that in this view, collection of distribution charges becomes irrelevant; that these distribution charges comprised of freight, transport charges, insurance, octroi and sales tax which are not legally includible in the assessable value; that the relevant records were produced during personal hearing; that the sales tax was being collected as per the judgment of the J & K High Court that sales tax was not includible in the assessable value as provided under Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944.
6. The learned counsel submitted that alternatively according to the order-in-original, normal price (assessable value) included sales tax and as duty was collected on the normal price, therefore, a part of the duty was levied and collected on the element of sales tax included in the normal price which was not required to be so collected. The learned counsel therefore, submitted that the amount of duty paid on the sales tax element in assessable value could be set off by the duty if any payable on the sales tax collected by the assessee.
7. The learned counsel also argued that there was no misstatement on the part of the appellants and therefore, the demand was time barred. Referring to the show cause notice, the learned counsel submitted that there was no allegation of suppression or misstatement in the show cause notices and therefore, longer period beyond six months could not be invoked. The learned counsel argued that the demands for short levy were being raised in the RT-12 returns finally assessed during the material period. The Central Excise authorities were fully aware that the distribution charges were being collected. Referring to the RT-12 returns for the month of July, 1982 to April, 1983, the learned counsel submitted that there is a clear indication by the endorsement recorded in these RT-12 returns that the assessee was collecting the distribution charges. The learned counsel also referred to the assessee's letter dated 21-10-1983 in which an intimation was sent to the Superintendent of Central Excise, Jammu stating that "since all the sales are made on ex-factory basis and we give delivery only in a few cases on buyers' request, so on the advice of our Chartered Accountant and to bring uniformity and clarity in the accounts, we will debit the expenses from the factory gate to buyers' premises in the State of Jammu and Kashmir as also the disputed sales tax incentive through a separate debit note under the Head 'Handling Charges' in the concerned cases which amount we recover separately." The learned counsel therefore, submitted that there was no question of misstatement or suppression. The learned counsel concluded that the demands are clearly time barred as proviso to Section 11A was not applicable in their case. In support of his contentions, the learned counsel cited and relied upon the decisions in the case of Indian Oxygen Ltd. reported in 1988 (36) E.L.T. 723 (SC), in the case of Collector of Central Excise v. Indian Oxygen reported in 1989 (41) E.L.T. 610 and in the case of Voltas Ltd. reported in 1977 (1) E.L.T. (J 177). Summing up his arguments, the learned counsel submitted that in view of the above submissions and the evidence on record, the impugned order may be set aside and the appeals of the assessee may be accepted.
8. Shri T.R. Malik, the learned SDR appearing for the Department submitted that a part of the amount collected as handling charges was sales tax; that according to the admission of the assessee sales tax was already included in the normal price approved by the Directorate of Vanaspati, therefore, the question of collecting the element of sales tax as handling charges did not arise. The learned DR submitted that the additional amount collected as sales tax naturally should be included in the assessable value. On the question of limitation, the learned DR submitted that the assessee was submitting invoices along with RT-12 returns upto 15-9r1983; that therefore, the additional amount was being collected through debit notes issued to the buyers but no copy of these debit notes was enclosed with the RT-12 returns, therefore, to this extent, there was suppression and misstatement and therefore, the lower authorities have rightly demanded the duty and confirmed the demand beyond the period of six months; that the Jammu and Kashmir High Court in their order dated 27-3-1987 while deciding the Writ Petition No. 5/83, held that sales tax was included in the ex-factory price arrived at which was approved by the Directorate of Vanaspati and accepted by the Department as normal price. The learned DR therefore, submitted that collecting sales tax again as additional charges was nothing but collecting a part of the price. The learned DR therefore, submitted that both on merits as well as on limitation, the assessee has no case and prayed that the impugned orders may be upheld in respect of four appeals filed by the assessee and set aside in respect of the two appeals filed by the Collector.
9. Heard the submissions of both sides. In a short compass, there are two issues for determination before us. The first issue is that when there was normal price for wholesale buyers at the factory gate approved by the Department, can the additional charges collected by the assessee for sales through their sale depots be includible in the assessable value and the second issue is whether in the facts and circumstances of the case, there was suppression or misstatement requiring extension of the time for demands beyond six months.
10. On the first issue, we find that Section 4 of the Central Excises and Salt Act, 1944 talks of normal price at the factory gate prividing that "(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 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...." From the above definition of valuation, we have to examine in the present case whether there was a normal price for the vegetable product manufactured by the assessee in the course of wholesale trade for delivery at the time and place of removal. In the instant case, we find that there was a wholesale price at the factory gate which was approved by the Department. We also observe that this was the price at which the vegetable product manufactured by the assessee was ordinarily sold. No doubt, there were certain sales within the State of J&K through the depots of the assessee in which the assessee collected a higher price. Now, the fundamental question that arises is whether this higher price which was collected in the form of additional handling charges could also be termed as a normal price for a different class of buyers.
11. We observe that the Hon'ble Supreme Court in the case of Voltas Ltd. reported in 1977 (1) E.L.T. (J177) had held as under :
"20. Excise is a tax on the production and manufacture of goods (see Union of India v. Delhi Cloth and General Mills (AIR 1963 SC 791). Section 4 of the Act therefore, provides that the real value should be found after deciding the selling cost and selling profits and that the real value can include only the manufacturing cost and the manufacturing profit. The Section makes it clear that excise is levied only on the amount representing the manufacturing cost plus the manufacturing profit and excludes post-manufacturing cost and the profit arising from post manufacturing operation, namely selling profits. The Section postulates that the wholesale price should be taken on the basis of cash payment thus eliminating the interest involved in wholesale price which gives credit to the wholesale buyer for a period of time and that the price has to be fixed for delivery at the factory gate thereby eliminating freight, octroi and other charges involved in the transport of the articles. As already stated it is not necessary for attracting the operation of Section 4(a) that there should be a large number of wholesale sales. The 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."
It is pertinent to note that in the above rulings, the Apex Court held that it is not necessary for attracting operation of Section 4(a) that there should be a large number of wholesale sales; that the quantum of goods sold by the manufacturer on wholesale basis is entirely irrelevant; that there are facts that such sales may be few or scanty does not alter the true position. Examining the facts of the present case in the light of the above ruling of the Apex Court, we find in the instant case that Vanaspati was sold to buyers of States other than J. & K. as well as to the Army at a price which was admittedly the normal price and in which the sales were at arm's length. Therefore, applying the Hon'ble Supreme Court ruling to the present case, we hold that the price at which the goods were sold to the Army and buyers of States other than Jammu and Kashmir was the normal price for the purposes of assessment of duty.
12. We also find that in the case of Indian Oxygen Ltd. reported in 1988 (36) E.L.T. 723 (SC), the Hon'ble Supreme Court had held [in paras 5, 6 and 9] as under :
* * * * * * * The admitted position in the present case is that there was a price at the factory gate which was the wholesale price and therefore, there should be the basis upon the value is to be determined, the other expenses, costs or charges must be excluded.
12A. Again in the case of Indian Oxygen Ltd. reported in 1989 (41) E.L.T. 610 (T), this Tribunal had held that "When the appellant's goods are sold in wholesale at the factory gate, the wholesale cash price/normal price is ascer-tainable at the time and place of removal itself and therefore, it is not lawful to the assess the goods on the basis of actual sales price, ex-depots which is neither the price at the time of removal nor at the place of removal. There is no reason why the wholesale price represented at the factory gate should not constitute the basis for assessment for the goods at the time of removal from the factory. The assessment should, therefore, be in terms of this price." Having regard to the above decisions, we allow the four appeals filed by the assessee and reject the two appeals filed by the Revenue.
13. The second issue is that of limitation. Since on merits, we have already come to the conclusion for disposal of the above appeals, we do not see any useful purpose for being served by passing an order whether the demand has been hit by limitation or not.
14. In the result, the four appeals filed by the assessee are allowed and the two appeals filed by the Department are rejected.