Customs, Excise and Gold Tribunal - Delhi
Balmer Lawrie And Co. Ltd. vs Collector Of Central Excise on 26 August, 1993
Equivalent citations: 1994(50)ECR428(TRI.-DELHI)
ORDER S.V. Maruthi, Member (J)
1. This is an appeal against the order-in-review No. 29/82-83 dated 6.1.1983 of the Collector holding that the amount of Rs. 9,472.95 realised in excess of the actual amount from their customers in the month of January and February 1978 should form part of the value of their product.
2. The appellants manufacture metal containers. A show cause notice was given on 31.8.1979 proposing to recover the duty by adding Rs. 9,472.95 realised from their customers towards the transport charges on the ground that they have realised the same in excess of the actual amount paid by them to the transport Company. On receipt of the reply, the Asstt. Collector dropped the proceedings. The Collector issued a notice under Section 35(b) of the Central Excises & Salt Act proposing to review the order. The Collector on review held that the company charges loading and unloading expenses at uniform rate of 25 paise per barrel for road transport and 35 paise per barrel for loading. Since these said charges were made without any relationship to the actual expenses incurred, they form part of the assessable value. He also held that the notice is not barred by limitation as the time limit provided under the proviso to Section 11A is applicable against which the appellants have come up in appeal before this Tribunal.
3. It is now settled by the judgment of the Supreme Court in Indian Oxygen Ltd. v. CCE holding that "in so far as the loading charges incurred for loading the goods within the factory are concerned, they are included in the assessable value irrespective of who has paid for the same but the loading expenses incurred outside the factory-gate are excludible." Therefore, the loading charges within the factory are includible in the assessable value whereas the unloading charges incurred outside the factory are excludible.
4. As regards the time limit, admittedly the show cause notice was issued on 31.8.1979 for the months of January 1978 and February 1978 which is beyond the period of six months provided under Section 11 of the Central Excises & Salt Act. Though there is an allegation of wilful mis-statement of facts, neither the Collector nor the Asstt. Collector has discussed the issue. The allegation in the show cause notice dated 31.8.1979 is "Lawrie & Co. Ltd., Calcutta, 43 Containers Div. have been realising freight charges at rates higher than that being paid to the transport Company. The extra amount thus realised as freight charges should form part of the assessable value of their product (metal containers). The cost of transportation means actual transportation charges incurred from the place of removal to place of delivery. The expenses of short-levy.... The mis-statement of facts wilfully has been calculated as Rs. 1420.90 during January and February 1978 as per Annexure A. In other words, the charge against the appellants is that they have charged freight at higher rate than declared. There is no specific charge that they have charged loading/unloading charges at higher rates than declared. It is only the Collector who says that the appellants charged loading and unloading charges at a particular rate. According to the decision of the Supreme Court referred to in the above paragraphs, unloading charges outside the factory-gate are not indudible in the assessable value. Therefore, the question of mis-declaration as regards the inclusion of unloading charges outside the factory-gate falls to the ground. As regards the inclusion of loading charges within the factory-gate, the charge in this show cause is vague. It refers to freight. According to Bombay Tyre International 1983 ELT1896 : 1983 ECR 1627D (SC) : ECR C 663 SC freight is not includible in the assessable value. According to the language used in the show cause notice, the entire charge of charging freight at a higher rate falls to the ground in view of the Bombay Tyre International. However, taking into account the order of the Collector, the loading within the factory is includible. As stated earlier, there is no specific allegation to this effect in the show cause notice. Secondly, the law with regard to the includibility of loading charges within the factory was clarified only in the year 1988 by the Supreme Court in the decision relied upon in the earlier paragraphs. Till the judgment of the Supreme Court in the Indian Oxygen case, the decision as to the includibility of loading charges within the factory is not clear and law was in a fluid state. In Bombay Tyre International it is not specifically stated that loading charges within the factory is to be included although it was categoncally observed that the expenses incurred up to the factory-gate cannot be deducted from the assessable value. Therefore, to charge the manufacturer with mis-declaration when legal position itself is not clear is like charging him in vaccum. Therefore, we aw of the view that the show cause notice is barred by limitation. Accordingly, we allow the appeal and set aside the order of the lower authority on grounds that the show cause notice is barred by limitation. The appeal is, thus, allowed.
Sd/-(S.V. Maruthi) Member (J).
P.C. Jain, Member (T)
4. I have carefully gone through the order proposed by my learned sister Ms. S.V. Maruthi, Judicial Member but I regret I am unable to persuade myself to agree with the said order.
5. The facts are stated in the proposed order so I need not set them here again in detail. Some additional facts wherever they are needed will be referred to hereinafter.
6. Show cause notice dated 31.8.1979, while making the allegation that the appellants herein had been realising freight charges at the rate higher than that being paid to the transport company and thus the extra amount realised as freight charges should form part of the assessable value of their product (metal containers), it also enclosed an annexure to the show cause notice showing the details of the quantity delivered etc. by the appellants. The annexure, inter alia, refers to the rate of delivery charges as per the bill and the rate as per the contract with the transport contractor paid by the appellants thus bringing out the difference in rate per piece and calculating the total amount of duty short-levied. This annexure refers to expression 'delivery charges' instead of freight charges'.
7. In reply to the aforesaid show cause notice the appellants in para 2 of their reply stated as follows:
...
(d) The 'delivery charges' as distinct from 'mere transport expenses' are recovered from the customers. Here again, it is open to the customers to arrange their lifting, handling and transport ex our works, if they choose; but for obvious and administrative reasons they invariably prefer us to undertake this service for them.
(e) This is purely a 'service charge' from customers, as permitted separately in our contract with the customers, and include such odd expenses as on (i) removing barrels from shop floor and stocking them at the stocking bay, (ii) transportation charges per barrel which include charges for removing the barrels from stocks. loading them on to the lorries/Wagons. (iii) transporting them to destinations, (iv) unloading them at the destinations, (v) loading them on customer's own trucks where so placed, etc. etc.
(f) The rates charged by us thus constituting the 'service charges' from individual customers, are more than for the mere, 'transport' from despatch to destination by Truck/Wagons', and are to be obviously treated as a package handling/shifting/transportation and not on individual customers basis.
...
(i) The data in Annexure A to S.C.N. are not disputed except that the differential demand alleged thereunder is not admitted.
(Emphasis supplied) 7.1. The Assistant Collector dropped the proceedings in the show cause notice vide his order dated 3.4.1982 after obtaining from the appellants a statement of expenses for the period April/September 1980 known as despatching expenses and comparing them with the despatch recoveries with the finding that despatching expenses incurred by the appellants were more than the despatch -ing recoveries made by the appellants inasmuch as despatching expenses were to the tune of Rs. 2,39,350.65 during the period April/September 1980 and the despatching recoveries made on the basis of bills for transportation were to the tune of Rs. 2,15,726.12 p.
7.2. The Collector of Central Excise in exercise of his powers under Section 35A(2) of the Central Excises and Salt Act, 1944, as it then stood, issued a notice dated 26.7.1982 as to why the order issued on 3.4.1982 passed by the Assistant Collector should not be revised. Since the question of considering transport/delivery charges as post manufacturing expenses was irrelevant in the sense that assessable value as per Section 4 of the said Act was the normal price and this normal price made no reference to any post manufacturing expenses. It also stated that Section 4(2) of the said Act referred to only the actual cost of transportation/delivery deductable from the normal price and when such transportation/delivery charges were not based on actual expenses incurred, they would rightly form a part of the assessable value.
7.3. After considering the reply of the appellants to the said show cause notice for revising the order of the Assistant Collector, the said Collector has confirmed a basic Central Excise duty at the rate of 15% ad valorem and 5% of the basic excise duty as special excise duty on the aforesaid differential value of Rs. 9,472.95 p. in the impugned order. In their reply to the show cause notice, the appellants had stated, inter aha, they arranged despatch of barrels to the various destinations for which 'transportation charges' were paid through separata bills. This did not, in any way, constitute a source of income deliberately pre-planned and executed. It was only a facility and a service which they provided to their customers keeping in view their requirements. They also highlighted that this 'transportation' includes loading, unloading and handling the barrels, subsequent to their manufacture and stacking. There is thus an admission on the part of the appellants that the so-called transportation charges' or 'delivery charges', whatever the name was given to them by the appellants, included some charges towards loading within the factory on the wagons, trucks, etc from the stacking place after the manufacture of barrels and metal containers. This being the position and in view of the Supreme Court's Judgment in the case of Indian Oxygen Ltd v. CC expenses incurred towards the loading of the goods within the factory are required to be included in the assessable value of the goods. Since a separate break-up of these charges is not given out of the total transportation cost or delivery charges collected by the assessee from its customers, the case has necessarily to be remanded for determining the charges collected towards loading and handling of the goods within the factory for the purpose of charging duty thereon and I order accordingly.
8. The aforesaid view is further fortified by an admission by the appellants on ground Nos. (VII) and (VIII) of their appeal memo which state as follows:
VII) Handling and delivery charges: These charges will constitute post manufacturing charges so long as they are distinguishable and identifiable from the sale price. The manufacture of metal containers is complete before loading of goods in the Lorry or Wagon. Handling of goods are shown separately in the bill for transportation and they are borne by the customers. While the realisation of charges by the appellant from its customers is done under the nomenclature of 'transportation', the actual expenses incurred by it is not only for actual transportation, but also for loading/unloading etc. Their inclusion in the assessable value would thus amount to saying that the wholesale market exists at the buyer's premises, which is not correct and legally permissible. They cannot form part of the assessable value.
VIII) The appellant are charging from the buyers an ex-works wholesale cash price for metal containers at the place of manufacture and independent dealers like I.O.C., H.P.C., B.P.C. etc. are taking delivery of the said products from your appellant's factory and the actual prices of delivery after the sale of goods involves the process of loading of trucks which are either owned by the customers or arranged on their behalf by vour appellant. This facility is provided by your appellant for delivery of the subject goods after the final product has been fully manufactured and the sale has been completed and hence expenses towards loading realised separately and shown separately in the bill amount form part of the assessable value, as their inclusion would mean that wholesale market exists at the buyers premises which is contrary to the provisions as contained in Section 4 of the Act. The loading charges for the subject products and unloading charges at the buyer's premises after the goods actually manufactured and distinguishable and identifiable as such and are distinct from the price of the goods, as indicted in the contract (Emphasis supplied)
9. As regards the limitation it is admitted by the appellants, as already set out above, that they were collecting charges through separate bills and therefore, there was no declaration of these charges in the price list because the prices declared were ex-works. Apparently, therefore, there was a wilful mis-statement or suppression of facts calling for invoking a larger period of 5 years for demanding the differential duty. The show cause notice was, therefore, well within the time. This finding has been made categorically by the Collector in the impugned order in the following words:
So far as the time limit is concerned, since the said company suppressed this material information from their price list submitted to the Asstt. Collector of Central Excise, Division XVII, the time limit applicable to such case would be 5 years as laid down under Section 11-A of the said Act and not six months, as contended by the said company.
The appellants in their appeal memo while taking the plea that the original show cause notice was time barred and that the realisation of transport cost from its customers was within the knowledge of the department, it has not been substantiated by the appellants with any evidence whatsoever. They have not rebutted the finding in the impugned order that they did not declare the separate collection of transport cost/delivery charges from the customers in the price list. In the circumstances, the plea of time bar is of no avail.
9.1. As regards the point raised by the learned sister in the proposed order that the law regarding includibility of loading charges within the factory was clarified only in the year 1988 by the Supreme Court in the Indian Oxygen case, it may be mentioned that the appellants have not taken this plea in their appeal memo or in the course of arguments by the learned advocate Shri P.K. Chatterjee. Such a plea in my view is too vague a plea for the purpose of determining the question of limitation of the show cause notice unless the appellants came positively with definite judgements of the legal position which prevented them from showing such charges in the price list
10. In view of the aforesaid discussion, I direct the Assistant Collector to redetermine the differential duty after the appellants herein have furnished the break-up of the so-called delivery charges incurred towards the loading etc of the goods within the factory of the appellants which alone would be includible the assessable value of the goods.
11. Appeal disposed of in the above terms.
Dt. 2.5.1991 Sd/-(P.C.Jain)
Member (T).
S.V. Maruthi, Member (J)
I have seen the two question formulated for the purpose of making a reference to the President. As far as the loading charges within the factory are concerned, there is no dispute about it in view of the judgment of the Supreme Court in Indian Oxygen. Therefore, the only question that may have to be referred to the President is the question of limitation. Since we are having a difference of opinion on the question of limitation, I am of the view that only the question of limitation should be referred to the President. I am formulating the same for your consideration:
(i) On the facts and circumstances of the case, whether the show cause notice dated 31.8.1979 for the months of January 1978 and February 1978 is barred by limitation.
Sd/-(S.V. Murthi) Dt. 10.5.1991 Member (J) P.C. Jain, Member (T) There is no clear finding in Ld. Judicial Member's Order that the changes collected partly pertain to loading within the factory. In view 'X' this at P/4 of her order it has been found as freight. Therefore there is a difference on this point too. Her finding is that the situation was fluid before SC Judgment in Bombay Tyre International Ltd No further noting.
Sd/-(P.C. Jain)
Dt. 21.5.1991 Member (T).
In view of the difference of opinion between the two Members, the matter is submitted to the Hon'ble President for reference to a third Member on the following point:
(1) Whether in the facts and circumstances of the case the order proposed by the Judicial Member is correct or whether the order proposed by the Technical Member is correct.
Sd/-(S.V. Murthi) dt. 5.7.1991 Sd/-(P.C. Jain)
Judicial Member. Technical Member
S.K. Bhatnagar, Member
12. In view of the difference of opinion between the Hon'ble Judicial Member and the Hon'ble Technical Member, the matter has been referred to me by Hon'ble President (Vice-President as he then was) to consider the following point:
Whether in the facts and circumstances of the case, the order proposed by the Judicial Member is correct or whether the order proposed by the Technical Member is correct.
13. The appellants had forwarded written submissions for consideration in their absence vide their letter, dated 30th June 1992. As such these written submissions were gone through and learned S.D.R. was heard and the order was reserved.
14. I have gone through the written submissions of the appellant and the submissions of the D.R. and also perused the orders proposed by both the Hon'ble Members.
15. I observe that both the Hon'ble Members have observed that loading and handling charges incurred within the factory gate were includible in the assess -able value on the basis of Supreme Court's judgments. In other words, there is no difference of opinion on this point.
16. I also observe that both the Members have also stated virtually the same thing, although in different ways, that actual transport charges, if included in the declared price for delivery, were excludable therefrom in view of Section 4(2) and the Supreme Court's judgments.
17. Again both the Hon'ble Members are also of the view that unloading charges incurred outside the factory gate were excludible from the composite prices. Therefore, on this point also, there is no difference of opinion.
18. The learned Judicial Member has, however, found that the charges were rather vague and the appellants could not be charged with suppression or mis-statement of facts as the law was still fluid during the relevant period and therefore, she was of the view that the show cause notice was barred by limitation. On the other hand, the learned Technical Member has emphasized that the appellants have themselves not taken recourse to this argument at any stage and "since a separate break-up of these charges is not given out of the total transportation cost or delivery charges collected by the assessee from its customers, the case has necessarily to be remanded for determining the charges collected towards loading and handling of the goods within the factory".
19. I observe that admittedly the charges in question were not declared in the price list. Furthermore, undisputably the law relating to the determination of the assessable value in the central excise cases required filing of the price list and supplying the relevant information to enable the officers to judge the correctness of the declaration and assess the value according to law. Hence irrespective of the appellants'own views complete information was required to be supplied to the Department voluntarily--(whether as apart of the price list or a remark or as an enclosure or covering memo). The Department was also required to be vigilant and expected to call for full particulars at the earliest However, non-supply of the information normally required for assessment amounted to suppression of relevant facts. Hence the extended period was available to the Department and the show cause notice was not time barred. Once this was the position, the Assistant Collector was required to re-determine the differential duty after the appellants furnished the required break-up. Hence I agree with the learned Technical Member that the matter was required to be remanded for re-determining the correct duty liability.
Sd/-(S.K. Bhatnagar) Vice-President).
Majority Opinion G.P. Agarwal, Member
20. In accordance with the opinion of the learned Third Member, following Order is passed:
It is held that the demand was not time-barred, as such the case be now remitted to the concerned Assistant Collector of Central Excise, Calcutta, to re-determine the differential duty after the appellant furnishes the break-up of the so-called delivery charges incurred towards the loading etc. of the goods within their factory which alone would be includible in the assessable value of the goods. For this purpose, the Assistant Collector would give reasonable time to the appellants to furnish the break-up, as aforesaid.
21. Since the case is an old one, the Assistant Collector concerned is expected to dispose of the matter expeditiously.
(Dictated and pronounced in the open court).