Customs, Excise and Gold Tribunal - Delhi
Venkatesh Beverages Ltd. vs Collector Of Central Excise on 13 July, 1998
Equivalent citations: 1998(62)ECC200, 1998(108)ELT163(TRI-DEL)
ORDER
U.L. Bhat, J. (President)
1. Appellant is absent in spite of notice of hearing, but has sent a request for decision of the appeal on merits. We have heard Shri K. Srivastava, SDR and perused the papers. Shri K.V. Swaminathan, Consultant assisted us.
2. Appellant, engaged in the manufacture of fruit drinks, was filing price lists from time to time and on approval thereof clearing the goods on payment of appropriate duty. The dispute in this appeal relates to the period from January 1989 to March 1989.
3. On scrutiny of the invoices it was noticed that appellant was charging separately for straw supplied along with each container but had not included the cost of the straw in the declared assessable value of which approval had been sought and obtained. Accordingly show cause notice dated 8-8-1991 was issued referring to the result of investigation and alleging suppression of facts with intent to evade duty and invoking larger period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944. Appellant resisted the notice contending that the straw was not an integral or component part of the carton of fruit drink, that straw is supplied only at the option of the wholesale buyers, that in many instances wholesale buyers do not require supply of straw and in those cases straw is not supplied. It was also contended that every retail carton contains an indication that it could be either consumed using the straw after piercing the hole at the designated place or by slitting the top of the carton at the designated place and pouring out the contents. Collector of Central Excise overruled these contentions and held that the value of the straw would be part of assessable value of cartons of fruit drink sold to wholesale buyers and confirmed the demand proposed in the show cause notice and imposed penalty of Rs. 3000. This order is now challenged.
4. Appellant has produced a sample retail carton of "Frooti" and 'appy'. The carton contains a small circle with the instruction "Pierce". Straw will have one edge sharp and sharp edge is to be used to pierce the whole at the designated place in order to enable the consumer to consume the drink. Above the instruction "Pierce", is a dotted slanting line with the drawing of scissors and the words "Cut here to pour". A customer who does not want to drink using straw can cut the corner of the carton at the place indicated and either drink the contents by tilting the packet or pouring the contents into another vessel. The carton itself indicates alternative modes of user by the consumer.
5. It is not the department's case that the contents of the carton can be consumed only using straw. Even if there is such a contention, that would go against the indication given in the carton itself that it can be cut and the contents poured. Viewed in this light it does not appear that the straw can be regarded as an integral part or component of the carton of fruit drink. This is consistent with the contention of the appellant that all wholesale buyers do not insist on supply of straw and on many occasions wholesale buyers buy cartons without straw. The factual basis of this contention is not denied. The Collector at one place stated that most of the sales are with straw and at another place stated that almost all sales are with straw. He has not given factual data to support his conclusion that almost all sales are with the straw. We can therefore proceed only on the basis that straw is supplied along with cartons to those wholesalers who require the same and only cartons unaccompanied by straw are supplied to other wholesalers. It may be that same wholesaler on different occasions requires part of the cartons to be supplied with straw. It could even be that in placing a single order for a particular quantity of cartons, he may require straw for lesser number. All these indications strengthen the case of optionality set up by the appellant.
6. Shri K. Srivastava, SDR placed reliance on two decisions of the Tribunal, namely Heal Well Pharmaceuticals -1994 (72) E.L.T. 446 (Tribunal) and Dollar Co. (P) Ltd. - 1998 (25) RLT 332 (Tribunal).
7. Heal Well Pharmaceuticals related to includibility in the value of pediatric drops, the value of dropper supplied along with the drops. Droppers are kept separately in the cartons along with sealed bottles of pediatric drops. The appellant had included the value of the dropper in the assessable value of pediatric drops and the value had been approved. Dispute arose in connection with the claim of the appellants for Modvat credit in respect of the duty paid on the dropper. The department took the stand that dropper cannot be regarded as used in the manufacture of pediatric drops. It was noticed that dropper is connected with the administration of prescribed dosage of drops and has great significance particularly since drops are to be administered to babies. In a sense, as functionally designed, it is an attachable component of the bottle containing drops. Having regard to the circumstance that according to both sides the value of dropper was includible in the assessable value of pediatric drops it was held that dropper is used in relation to the manufacture of pediatric drops since the package which is sold also contained a dropper. It was also noticed that in other cases the appellate authority had allowed Mod-vat benefit in respect of duty paid on the dropper. The Tribunal in Jaggsonpal Pharmaceuticals Ltd. - 1997 (92) E.L.T. 414 (Tribunal) held that syringe and needle packed with Medatec 25 ampoule cannot be regarded as an attachable component of the final product which is an independent marketable item.
8. In Dollar Co. (P) Ltd. the Tribunal held that the cost of plastic cannula (applicator) packed in cardboard box along with collapsible aluminium tube with caps containing medicament by name Hadensa is to be included in the assessable value as part of medicament and cannula was not merely an accessory. This conclusion was arrived at on the basis of several circumstances, namely, that the instructions supplied along with the medicament required the applicator to be used for the purpose of administering medicine and that from the point of view of preventing infection it was mandatory to use the applicator though theoretical possibility of digital use can also existed. Reference was also made to Heal Well Pharmaceuticals. It was pointed out that dropper was necessary to ensure correct dose to be administered to a baby. At the same time the Tribunal pointed out that similar applicator when used for dispensing glue or a dropper enclosed with bottle of ink for ease in filling a pen would be accessory and not component part.
9. The present controversy has to be decided in the light of the aforesaid decisions. In the case of Dollar Co. (P) Ltd. the manufacturer himself printed instruction about the use of the ointment by using applicator. In the present case, the manufacturer has suggested alternative ways of using or consuming the contents of the carton - by piercing a whole at the designated place and using a straw or slitting a part of the carton at the designated place. Thus it is evident that alternative modes of user are available in case of fruit drink, intended to cater to the different requirements of consumers. It is in this light that fact-situation that all supplies of fruit drinks are not accompanied by straw has to be considered. Basically and ultimately it has to be realised that fruit drinks packed in cartons as in the present case are capable of being consumed without the use of straw. A straw is supplied only to provide convenience to the consumer to consume the contents conveniently. Such an article cannot be regarded as an integral or component part of the main product. Therefore, the cost of straw is not liable to be included in the assessable value of fruit drink.
10. For the reasons indicated above, we set aside the impugned order and allow the appeal.