Customs, Excise and Gold Tribunal - Mumbai
Reliance Industries Limited vs Commissioner Of Central Excise on 5 October, 2000
Equivalent citations: 2001(73)ECC299
ORDER Gowri Shankar, Member (T)
1. The appellant manufactures in its factory purified terephthalic acid (PTA for short), the principal raw material for polyester filament yarn. Part of this PTA was captively consumed in its factory for making the yarn, the remaining being cleared on payment of duty. The PTA cleared for home consumption is packed in laminated plastic bags. The PTA cleared for captive consumption is generally not packed although some quantity of it was to be so packed. At the relevant time PTA captively consumed was not exempted from duty. The appellant filed price lists showing the cost of the PTA for captive consumption. This was not accepted on the ground that the price of PTA that was cleared for home consumption being available, it is that price that should be applied. Adjudicating on the notice the Assistant Collector, whose order has been confirmed by the Collector (Appeals), confirmed the demand for duty. He did not accept the appellant's contention that since the PTA cleared for captive consumption is not packed, packing cost is to be excluded. Hence this appeal.
2. The Advocate for the appellant made it clear to us that the demand for duty which was not initially not quantified, but later quantified, does not take into consideration the clearances of the packed material. Duty on such PTA has been paid at a value including the cost of packing. The appeal is therefore concerned only with that PTA which is unpacked.
3. On this, he brings to our notice a decision of the Tribunal in Gujarat Insecticides Ltd. v. CCE 1999 (84) ECR 612, in which the Tribunal has held that the cost of metaphenoxy benzaldehyde captively consumed by Gujarat Insecticides Limited, could not be different from the value of those goods cleared for home consumption. He says that this decision had relied exclusively upon the earlier decision of the Tribunal in CCE v. Ashok Leyland 1987 (12) ECR 247 but that earlier decision did not deal with those issues of valuation of captively consumed goods and that neither of these two decisions dealt with the question as to whether the cost of goods cleared for home consumption should be applied in a situation where there is a difference in the nature of goods. He contends that, where the value of goods is to be determined under Clause (a) of Sub-section (1) Section 4 of the Act, the cost of packing would only form part of the value of the goods where the goods were cleared packed at the cost of the manufacturer. If the goods were cleared unpacked, or in packing provided by the purchaser of the goods, the cost of such packing would not form part of the assessable value. This is the ratio of the Supreme Court's judgment in Hindustan Polymers v. CCE . In other words, only the cost of packing incurred by the manufacturer of the goods would be includable in the value of the goods under Section 4(1)(a). The same position would obtain if the value is to be determined under Section 4(1)(b). In that case it is Rule 6(b)(1) of the Valuation Rules that would apply. The value would have to be determined on the value of the goods cleared for home consumption after making adjustments on account of packing, as provided in proviso under this rule.
4. The Tribunal's decision in Gujarat Insecticides Limited v. CCE tested entirely upon the decision of the Tribunal in CCE v. Ashok Leyland Limited. A close analysis of that decision shows that it did not lay down the law on the valuation of goods captively consumed by a manufacturer that the value of such goods would be of the similar goods cleared by him for home consumption is available. The Tribunal records in paragraph six of the order as follows:
The final stand of the respondents as put forth before us is that the respondent would not press for any legal or technical objection to the department's appeals and it also would not ask for any refund in respect of sales made to Government Bodies and Departments etc. provided their plea to apply the net dealers price was accepted as the assessable value for other categories of sales and removals (retail sales, captive use and stock transfers to regional sales officers).
After this there is no discussion on the valuation of the goods captively cleared except in paragraph 9(1), which says:
Sales to main dealers, retail sales, removals for captive use and stock transfers to regional sales offices of the respondents should be assessed at the normal price under Section 4(1)(a) i.e., the net dealer price charged by the respondents from their main dealers from time to time.
5. This sentence is apparently based upon the concession contained in paragraph six of the order, which we have reproduced above. It is therefore not correct to say, as was said in Gujarat Insecticides Limited, that this decision has laid down the law with regard to valuation of captively consumed goods.
6. The departmental representative has no answer to the other arguments raised by the Advocate for the appellant except with regard to quantification of duty. He contends that Section 4 of the Act provides for valuation of "such goods" i.e., excisable goods manufactured and cleared and there is no difference between the PTA unpacked or packed. What is cleared is PTA. This is really is no answer. If the appellant had cleared for home consumption PTA unpacked and PTA packed at the same time, the value of each of this has to be arrived at differently. Where the manufacturer does not incur any expenses on account of packing, the packing charges would not form part of the price. In other words, the unpacked PTA and packed PTA for the purpose of valuation are different goods. Therefore cost of packing should not form part of the value of PTA cleared without packing. The same position would also apply if we resort to Section 4(1)(b). Adjustment would have to be made on account of expenses incurred for goods cleared for home consumption among which is packing.
7. The departmental representative then contends that it had not been shown that the difference between the value of the goods declared and the value determined by the department is only on account of packing and the matter should be remanded to the Assistant Commissioner for determining this. After hearing the Advocate for the appellant on this point, we are unable to agree for the following reason.
8. The Collector (Appeals) records the submissions made in the appeal filed by the appellant before her saying that the assessable value of the captively consumed PTA should have to be determined after deducting from the value of the goods cleared for home consumption overhead expenses, sales promotion expenses, additional sales tax, surcharge on sales tax, turnover tax, etc., and that what has been claimed before him is deduction only on account of packing. She does not find any of the submissions made is incorrect and she inclines to accept the submission by saying that there is no difference between packed PTA and unpacked PTA.
9. Neither the show-cause notice nor the Assistant Collector's order quantified the amount of duty payable. The Collector (Appeals) remanded the matter for quantification of duty. The duty was quantified by order dated 14.4.1996 of the Assistant Commissioner. The duty payable was determined to be Rs. 1,56,96,296. The amount was quantified after issuing notice to the appellant, which again did not give particulars of the items. In the reply to the notice the appellant broke up the demand into various components, interest on receivables, packing cost included in the assessable value and other deductions. The costs incurred towards packing are shown to be Rs. 79,47,651. In the absence of anything to the contrary in the records we accept that this is the amount that is payable on this account.
10. The appeal is accordingly allowed. Impugned order set aside.
Consequential relief.