Customs, Excise and Gold Tribunal - Delhi
Commissioner Of C. Ex. vs Coolade Beverages Ltd. on 5 November, 1999
Equivalent citations: 2000(116)ELT622(TRI-DEL)
ORDER C.N.B. Nair, Member (T)
1. These appeals involve common issues. Therefore, it is expedient to consider them and dispose them of together.
2. Appeal No. 2438/98-A is by the Revenue. The issues as presented in it may be taken as representative for the purpose of decision of all the appeals. The respondent in that appeal, namely, M/s. Coolade Beverages Ltd. are manufacturers of aerated waters/beverages duly liable to Central Excise duty. The manufacturing activity basically consists of bottling. They obtained the concentrate for aerated water from M/s. Britco Food Company Ltd. which is a wholly owned subsidiary for Coca Cola Corporation. The bottled drink is Coke. They sell the bottled beverage to wholesale dealers. Central Excise duty was paid based on the wholesale price of the beverage to dealers. The Central Excise authorities observed that the respondents were collecting from some wholesale dealers rent on containers (ROC) @ Rs. 7.50 per crate. Similarly, they received over Rs. 26 Lakhs from Britco under credit note as price support incentive. Credit Note No. 240, dated 18-12-1995 of Britcoto Coolade Beverage Ltd. states as under :-
"We have credited your account with Rs. 67,500/-towards sales generating assets placed in the franchise market for the year 1995."
3. The Central Excise authorities issued Show Cause Notice alleging that the cost of ROC and the amount received from M/s. Britco are liable to be treated as part of the price of the aerated water, and the value obtained by addition of these to the wholesale dealer price should be taken as the assessable value of the aerated water. It was contended that in terms of Rule 5 of Central Excise (Valuation) Rules, any additional consideration has to be treated as includible in the assessable value.
4. The respondents contested the Show Cause Notice. They maintained that ROC has no relation to the value of the beverages; it is charged only from a few wholesale buyers (about 3%); leasing bottles is separate activity from manufacture of beverages and realisations from that ancillary or allied activity is not includible to the value of beverages. The appellants also maintained that the issue was covered in their favour by the decision of the Hon. Supreme Court in the case of Collector of Central Excise v. Indian Oxygen Ltd. [1988 (36) E.L.T. 730 (S.C.)] and the decision of the CEGAT in the case of Herbertson Ltd. v. C.C.E. [1997 (89) E.L.T. 553]. With regard to the amounts received from M/s. Britco, it was maintained that this payment was immaterial to the wholesale price of the beverages. The sale of the beverage to the wholesale dealers was on principal to principal basis and the wholesale price was the sole consideration. Therefore, the sale price constituted the normal price of the goods at which goods have to be assessed under Section 4(1)(a) of the Central Excise Rules. It was maintained that Rule 5 of the Central Excise Rules had no relevance in the instant case. The Central Excise Rule comes into play only where the buyer is a related person and the price is not the sole consideration for the sale. Further, Rule 5 specifically stipulated that "the amount of the money value of any additional consideration flowing directly or indirectly from the buyer to the assessee" only is to be added to the price where the price is not the sole consideration for the sale. In the instant case, M/s. Britco are not buyers of the beverages.
5. The Commissioner accepted the submissions of the appellant and dropped the duty demand contained in the Show Cause Notice. The Revenue have filed this appeal, contending the order of the Collector to be not legal or correct. Their contention is that the respondent had under-valued the beverages by excluding the ROC and the per unit equivalent (Rs. 1.66 per crate) of the price support. The Revenue have contended that the Collector had not correctly appreciated the facts and evidence inasmuch as he failed to appreciate that the appellants did not have a practice of charging ROC till March, 1994 when duty on aerated water was converted from specific to ad valorem basis. With effect from 1st April, 1994, they started claiming the rent for the bottles in order to under-value the goods. It has been submitted that the Collector had clearly erred in applying the judgment of the Supreme Court in the case of Indian Oxygen Ltd. and the exclusion of the rent from the assessable value is clearly mis-conceived and not proper in the circumstance of the case. It has also been submitted that the Commissioner has not taken note of the planned move on the part of the parent company (Britco) in pricing the product and the manner of invoicing to the wholesale dealers, showing various parts of the total wholesale price and compensating the franchise unit indirectly with a view to getting away with low assessable value and minimising excise duty incident. The appeal contends that the pricing and marketing pattern were changed by the appellants at the instance of Britco only to evade duty. The payment was made by M/s. Britco to the respondent only to compensate them for the low price at which the beverages were sold at the dictate of Britco. Therefore, the payment by Britco should be considered to be an additional consideration for the goods and in the absence of such payment, the respondent would have increased the price of the product. With particular regard to Rule 5 of Central Excise (Valuation) Rules, the appeal has submitted that the adjudicator has given a simple reading to Rule 5 with regard to the provision that additional consideration should flow directly or indirectly from the buyers to the assessee. The appeal submits that the adjudicator "has never tried to go with the spirit of issuing credit note by Britco to the party".
6. The respondents have forcefully denied the contentions and submissions made in the appeal. It has been submitted that collecting rent on reusable containers is common in the industry. Supplying of containers is an ancillary or allied activity. The rent charged for the containers in such a case, in no way, can be connected to the price of the goods. In the appellant's case, the rental was also charged only from a very small fraction of the wholesale buyers. Therefore, on facts also an allegation that the rent was a consideration for the sale of the goods could not be raised inasmuch as in most of the sales, the eventuality did not arise. The Commissioner had correctly followed the law as laid down by the Supreme Court in the Indian Oxygen case. Further, the Tribunal had held with reference to beverages itself in Herbertson's case that ROC is not to form part of the assessable value. In these circumstances, Revenue had no ground to fault the Commissioner's order. With regard to payments by Britco, it has been submitted that the appellants were suffering huge losses on account of price war between Pepsi and Coca Cola during the relevant time. Britco paid the amount to the appellant only to share a part of the loss. This was no consideration for the sale price at which the goods were sold to wholesale dealers. The appellants have also explained that the valuation provisions in the Central Excise law on this score are very clear. If there is a normal price at which goods are sold to unrelated buyers and the price i.e. the sole consideration, the same has to be the basis for assessment under Section 4(1)(a) of the Central Excise Act. In the instant case, sale price was the sole consideration for the sale of the goods. Therefore, no addition was required to be made to this price. In any event, there was no warrant for making an addition in consideration of the amounts received from Britco because Rule 5 clearly stipulates that only consideration flowing from the buyer is to be added to the price.
7. On both the above issues, the legal position is clear. Renting of containers in the case of packing of gases and liquids in reusable containers is a common trade practice. This is an ancillary or allied venture and the gains or profits from this activity are not to be added to the assessable value of the goods. Hon. Supreme Court has given a quietus to this controversy by ruling in the Indian Oxygen case that these rental charges are not includable in the assessable value of the goods supplied in the containers. The Tribunal has followed this decision in respect of aerated waters in the case of Hsrbertson (supra). Therefore, the Collector was acting entirely according to law in discharging the assessee from the illegal demands raised in the Show Cause Notice on account of the proposed inclusion of ROC in the assessable value of goods. The contention in the appeal that the Collector has committed an error or he has mis-conceived the judgment is entirely without substance. Therefore, Revenue's appeal on this issue has to fail.
8. The submissions in the appeal relating to valuation of goods under Rule 5 of the Valuation Rules also is wholly without basis. The Rule itself reads as under :-
"Where the excisable goods are sold in the circumstances specified in Clause (a) of Sub-section (1) of Section 4 of the Act except that the price is not the sole consideration, the value of such goods shall be based on the aggregate of such price and the amount of the money value of any additional consideration flowing directly or indirectly from the buyer to the assessee."
It is clear from the words used that "any additional consideration flowing directly or indirectly from the buyer to the assessee (emphasis supplied) alone is to be added where excisable goods are sold in the circumstances specified in Clause (a) of Sub-section 1 of Section 4 of Central Excise Act." The Commissioner was right in following this clear provision of law. The Revenue's submissions that "the adjudicator has given a simple reading to Rule 5 which, inter alia, requires that additional consideration should flow directly or indirectly from the buyer to the assessee" and that "he has never tried to go with the spirit of issuing Credit Note by Britco to the party", are totally against the canons of interpretation of statutes. The meaning of a legal provision is to be obtained from the plain meaning of the words used. Looking for the "spirit" of a provision is permissible only in cases of ambiguity in the language of the statute and not otherwise. This being the legal position, Revenue's appeal on this score also has to fail.
In view of the above discussions, the Appeal No. 2438/98-A filed by C.C.E., Meerut against Order-in-Original No. 34/97, dated 7-6-1997 is dismissed. We pass the following orders in respect of the other appeals.
E/1333-1336/98-A
9. This appeal involves an additional issue of collection of about Rs. 19 Lakhs by the appellant on account of transportation charges for transporting the excisable goods within the factory and from godown to factory gate for delivery of the goods to wholesale buyers. The appellant's explanation is that these collections were "mistakenly charged to their customers as extra transportation charges". They have submitted that they had returned the amount of Rs. 18,26,258/- out of Rs. 18,76,190/-. They also produced certificate from Chartered Accountant along with proof of return of Rs. 3101.25 to one of their customers. It has also been submitted that the demand of over Rs. 9 Lakhs on this score was time barred. We find that there is no merit in these submissions. Demand had been raised from time to time by competent authorities in respect of these charges and they were consolidated and adjudicated under the impugned order. Therefore, question of time bar does not arise. Further, the appellant was making additional collection in the name of the transport charges under separate invoices. The fact of such collections was never disclosed to the Excise authorities. It is settled law that all costs incurred upto delivery at the factory gate are includable in the assessable value of goods. In the instant case, it is an admitted position that the realisation over Rs. 18 lakhs was for movement of the goods within the factory premises and up to delivery at the factory gate. The appellant's submissions regarding return of the amounts so collected is also not relevant to the issue as assessable value is the normal price at the time and place of removal. It is not in dispute that at the time of sale, these collections were made. Therefore we hold the demand of Rs. 9,38,059.90 to be correctly made and confirm the same. We also confirm the penalty of Rs. 2 Lakhs imposed on the appellant. The rest of the orders relating to levy of duty on transportation charges etc. are set aside.
E/116/99-A & E/1668/99-A The issue involved in these two appeals is the payments made and expenditure incurred by M/s. Britco. In view of our orders in E/2438/98-A, these appeals are allowed with consequential relief, if any, to the appellants.