Customs, Excise and Gold Tribunal - Delhi
Digvijay Cement Co. Ltd. vs Collector Of Central Excise on 30 October, 1996
Equivalent citations: 1997ECR187(TRI.-DELHI), 1997(92)ELT273(TRI-DEL)
ORDER
U.L. Bhat, J. (President)
1. The assessee has filed these appeals against the common order passed by Collector (Appeals) setting aside the three orders passed by Assistant Collector allowing three refund claims in part.
2. Appellant, engaged in the manufacture of asbestos cement pipes and asbestos sheets, was clearing the finished products on payment of excise duty. Subsequently refund claims were submitted alleging that freight charges, packing expenses, forwarding charges 21 /2% commission allowed to sole-selling agent and 5% commission allowed to other agents had been erroneously included in the assessable value on which duty had been paid and proportionate duty on the part of assessable value reflecting the aforesaid elements was to be refunded. Assistant Collector held that only freight charges were to be deducted in arriving at the assessable value and accordingly allowed refund of Rs. 4,14,064.98, Rs. 5,31,664.88 and Rs. 3,91,718.88 and disallowed refund of balance amounts claimed. The amounts refunded represented the duty element on the freight charges deducted from assessable value. On the authorisation of Collector of Central Excise, Assistant Collector filed application before Collector (Appeals) under Section 35E(4) of the Central Excises Act, 1944 (for short, the Act) raising two questions. Collector (Appeals) held on the first question that the amount to be refunded would form part of the assessable value and recalculation has to be made of duty on the new assessable value and thereafter the net amount of refund was to be arrived. On the second question, he held that deduction of freight and average freight has to be allowed if the expenses on element of transportation incurred after goods were cleared from the factory gate and this matter required verification by the jurisdictional Assistant Collector. Accordingly, the order passed by the Assistant Collector was set aside. This order is being challenged by the assessee.
3. Learned Counsel for appellant has raised only one contention in the course of his submissions. He does not dispute that amount to be refunded has to be arrived at after deducting the duty element. His objection is to the method suggested by the Collector (Appeals), namely, by treating the gross amount of refund as part of the assessable value and adding the former to the latter. According to him, the correct method is to add the gross amount of refund to the normal price and thereafter to arrive at the assessable value and arrive at the total duty amount and determine the net amount of refund.
4. In Synthetic Detergents Ltd. v. Collector of Central Excise, Cochin -1987 (30) E.L.T. 954 (Tribunal) the view taken by the Collector that the amount of duty collected from customers and not paid to the Government should form part of the assessable value of the goods as amount of duty element should form part of the value of the goods and it is not the amount of duty deductible in terms of Section 4(4)(d)(ii) of the Act was upheld. In Ashoka Batteries v. Collector of Central Excise -1990 (50) E.L.T. 375 (Tribunal), the view taken in an unreported decision of the Tribunal to the effect that duty collected from customers and not payable to Government was not to be excluded from the assessable value was followed. In Collector of Central Excise v. VST Industries -1991 (52) E.L.T. 59 (Tribunal), following the decision of the Supreme Court in Hindustan Polymers v. Collector of Central Excise - 1989 (43) E.L.T. 165, the Tribunal held that additional consideration by way of interest which flowed to the manufacturer from the buyers has to be added to the wholesale price and assessable value has to be worked back after allowing admissible deductions and the addition of such extra accruals to the assessable value would distort the meaning of Section 4 because there is no way in which abatement of duty which is permitted by Section 4 can be given if the extra accrual is directly added to the assessable value. In Sanghi Beverages Pvt. Ltd. v. Collector of Central Excise - 1991 (55) E.L.T. 375 (Tribunal), it was held that amount collected as duty from customers though not payable becomes part of the sale proceeds and such proceeds have to be taken into consideration in arriving at the assessable value. In Union of India v. Alembic Glass Industries Ltd. - 1992 (61) E.L.T. 193 (Kar. H.C.), it was held that for purpose of levy of duty, only the actual amount of duty payable alone should be deducted from the total wholesale price charged and collected from customers and when excess amount is collected as duty from customers and benefit of lesser amount of duty has not been passed on to the customers, the differential amount has to be added to the normal price. In Vijayawada Bottling Co. Ltd. v. Collector of Central Excise -1993 (63) E.L.T. 460 (Tribunal), it was held that it is the effective rate of duty alone that is to be deducted from the price and where the assessee collects duty at the tariff rate, Department is justified in revising the assessable value while granting refund treating the difference in tariff rate and effective rate of duty as profit and adding the same to the assessable value.
5. A careful examination of the said decisions of the Tribunal excepts in VST Industries case, Sanghi Beverages Pvt. Ltd. and Vijayawada Bottling case shows that the particular controversy whether the amount of refund should be treated as part of the wholesale price or the assessable value was not considered and what was considered was whether amount to be refunded or excess amount collected should be added to the assessable value or not.
6. In Hindustan Polymers v. Collector of Central Excise - 1989 (43) E.L.T. 165 (S.C), Sabyasachi Mukharji, J. (as he then was) observed that the measure of excise duty is price and not value and noticed with approval, the observations in Bombay Tyre International case, 1983 (14) E.L.T. 1896 (S.C) that value of an excisable article has to be computed with reference to the price charged by the manufacturer, the computation being made in accordance with the terms of Section 4. In Metal Box India Ltd. v. Collector of Central Excise, Madras -1995 (75) E.L.T. 449 (S.C), the Supreme Court observed :
"10 ...If the price in a particular transaction is not the sole consideration flowing directly or indirectly from the buyer to the assessee-manufacturer, either in cash or in any other form, the additional consideration quantified in terms of money value is to be added to the price declared by the assessee for determining the normal price of the goods..."
7. Under Section 4(1)(a) of the Act, assessable value of excisable goods shall be deemed to be the normal price thereof, that is to say, the ordinary wholesale price at the factory gate subject to the conditions indicated in the provision. Under Section 4(4)(d)(ii) of the Act, value does not include effective duty of excise and certain taxes payable on the goods. Where the wholesale price is cum duty price, the effective excise duty element has to be deducted from the price (apart from other admissible deductions) in order to determine the assessable value under Section 4 of the Act. In the present case, originally assessable value had been arrived at by including freight charges in the assessable value and excise duty paid on the basis of such assessable value. Assistant Collector found that freight charges could not have been included in the assessable value and hence the excise duty on the freight element should be refunded. If X was the freight charges erroneously added to the assessable value, Assistant Collector calculated excise duty on X and refunded such amount. Collector (Appeals) gave two directions, one to direct verification of expenses incurred on transportation after goods were cleared from the factory gate, and the second, that the amount of refund would form part of the assessable value and thereafter the amount to be actually refunded has to be arrived. If the amount of refund is added to the assessable value, it will result in calculating excise duty on the amount of refund. If the amount of refund is added to the wholesale price that is the cum duty price and first of all, duty element in the enhanced cum duty price has to be deducted. This would mean that duty element on the amount of refund has to be deducted and only the balance amount is to be refunded. This aspect was not considered in the decisions of the Tribunal in the cases of Synthetic Detergents Ltd. and Ashoka Batteries; but this aspect was adverted to by the Tribunal in the case of VST Industries, Sanghi Beverages Pvt. Ltd. and Vijayawada Bottling Co. and by the High Court of Karnataka in Alembic Glass Inds. case and it was held that the differential amount which represented profit earned and not passed on to customers would be part of sale proceeds or price and not the assessable value. The amount involved which was collected from customers and not returned to them has to be treated as part of consideration or sale proceeds and on that basis assessable value has to be arrived at. This is clear from the decision of the Supreme Court in Metal Box India Ltd. case. The decisions of the Tribunal, which are contrary to the decision of the Supreme Court in Metal Box India Ltd. case cannot be regarded as laying down good law.
8. It is contended for appellant that Collector (Appeals) was in error in setting aside the order of the Assistant Collector. We do not agree. In the light of the two defects in the order of the Assistant Collector noticed by Collector (Appeals), the former's order required to be set aside. In effect, he ordered remand of the case to verify the aspect already indicated and work out the correct amount to be refunded. This was also justified.
9. In the result, we modify the order passed by the Collector (Appeals) by directing that the duty element on the deductible freight charges should be added not to the assessable value but to the wholesale price and thereafter the assessable value and the actual amount to be refunded should be arrived at. The appeals are allowed to this extent.