Customs, Excise and Gold Tribunal - Delhi
Dollar Co. (P) Ltd. vs Collector Of Central Excise on 3 February, 1998
Equivalent citations: 1999(110)ELT719(TRI-DEL)
ORDER J.H. Joglekar, Member (T)
1. The appellants manufactured Hadensa Medicament in cream form contained in collapsable aluminium tube with a cap. This medicament was marketed in a cardboard box which also contained a separately packed plastic cannula (Nozzle). The instructions supplied alongwith the medicament read follows:
"How to use the ointment: Pierce the tube by reversing the cap and screwing down to break the seal on the tube. Screw the plastic applicator on to the tube and introduce it into the rectum, without soiling the fingers. Wash applicator after use and replace cap. Do not unscrew the applicator. HADENSA ointment does not stain clothes."
In the price list, the appellants claimed abatement towards cost of this plastic cannula. The Assistant Collector denied the deduction. The Collector (Appeals) compared the plastic cannula with eye dropper separately supplied with eye drops. The appellants relied upon the CEGAT judgment in the case of Metal Box of India Ltd. reported in 1983 (13) E.L.T. 956 (CEGAT). The Collector (Appeals) held that the ratio thereof was not applicable to the facts before him. He up-held the disallowance of the deduction, resulting in the present appeal coming up before us.
2. Shri T. Srinivasamoorthy, ld. Advocate arguing for the appellants, stated that the medicament could be administered even without the cannula. Thus, the cannula was not an indispensable part of the medicament. Therefore, its value was not includible in the assessable value of the medicament and the rejection of the claim for abatement was wrong in law. In support of his claim, he cited the following judgments :
1. 1997 (89) E.L.T. 3 (S.C.) - PSI Data Systems Ltd. - Value of Softwares not includable
2. 1993 (63) E.L.T. 565 (Tribunal) - Shree Pipes Ltd. - 'O' Rings not includable in Assessable value Civil Appeal 15356 of 1996 dismissed on 3-3-1997 (S.C.)
3. 1997 (91) E.L.T. 255 (S.C.) - Shriram Bearing Ltd. v. Collector - Accessories not included even if fitted
4. State of U.P. v. Kores India Ltd. - STC (39) 1977 S.C. 8 - Typewriter Ribbon is not includable
5. 1997 (94) E.L.T. 518 (Tribunal) - Collector v. Kamal Engineering Works - Nuts & Washers not includable
6. 1996 (88) E.L.T. 523 (Tribunal) - Baligha Lighting Equipment Pvt. Ltd. v. Commissioner - Value of bought out optional accessories
7. 1996 (86) E.L.T. 685 (Tribunal) - Collector v. Friction Materials - Value of bought out items
8. 1996 (85) E.L.T. 102 (Tribunal) - Collector v. Radiant Electronics Ltd. - Cabling of bought out cables
9. 1994 (72) E.L.T. 342 (Tribunal) - Col-Tubes P. Ltd. v. Collector - Plastic Caps Accessory not includable
10. 1994 (74) E.L.T. 520 (Bom.) - Shalimar Tubes & Industries Ltd. v. U. O.I. - Fitting of Plastic Caps
11. 1988 (34) E.L.T. 662 (Tribunal) - Diamond Clock Mfg. Co. Ltd. v. Collector - Page 663 - Bought out items
12. 1983 (13) E.L.T". 956 (CEGAT) - Metal Box of India Ltd., Calcutta v. Collector It was his claim that the cannula was an item bought from the market and there was no liability to duty on the part of the assessee.
3. Shri K. Srivastava, ld. D.R. arguing for the department, claimed that on the perusal of the instructions to the customers, the status of cannula was seen that of a part. Citing the judgment of the Tribunal in the case of Heal Well Pharmaceuticals v. C.C.E. reported in 1994 (72) E.L.T. 446 (Tribunal), ld. DR stated that the cannula in the present case were on par with the measured dose dispensing the dropper in that case. The ratio of the judgment was, therefore, fully applicable. He stated that in a number of cases, it had been held that the value of essential parts was includible in the main article. In this respect, he cited the judgment of Bajaj Auto Ltd. v. C.C.E. reported in 1989 (44) E.L.T. 763 which follows the judgment of the Supreme Court in the case of Annapurna Carbon Industries Co. v. State of Andhra Pradesh reported in 37 STC 378. The same was the ratio in the case of the Bombay High Court in the case of Koron Business Systems Ltd. v. Union of India reported in 1992 (58) E.L.T. 48 wherein it was held that lens and timer are the essential parts of photo copiers. In this connection, he also cited the judgment in the case of Nichrome Metal Works v. C.C.E. reported in 1996 (88) E.L.T. 448. He cited the judgment in the case of IGE (India) Ltd. v. CCE reported in 1991 (53) E.L.T. 461 and stated that where all the items were bought out and assembled at site, it has been held that manufactured, did take place. He stated that it was not material that the cannula was sent separately. It was still an integral part. This has been pointed out in the judgment in the case of Backer Mercer reported in 1995 (78) E.L.T. 336.
4. Since the substantial law, cited before us, made a distinction between the parts and the accessories, the Bench suggested that both sides should concentrate on establishing the identity of the impugned goods. For this purpose, some time was given, although the case was closed after hearing. The ld. Advocate has cited the following judgments :
1. 1996 (88) E.L.T. 448 - Nichrome Metal Works
2. 1989 (44) E.L.T. 763 - Bajaj Auto Ltd.
3. 1992 (58) E.L.T. 48 (Bom.) - Koron Business Systems Ltd.
4. 1991 (51) E.L.T. 212 (Bom.) - Koron Business Systems Ltd.
5. 1995 (78) E.L.T. 336 -Baker Mercer (India) Ltd.
6. 1994 (72) E.L.T. 446 (Tribunal) - Heal Well Pharmacueticals.
7. 1996 (88) E.L.T. 718 -Air Control &Chem.Engg.Co. Ltd.
8. 1990 (45) E.L.T. 508 (Tribunal) - Universal Luggage Mfg. Co. Ltd.
9. 1997 (94) E.L.T. 331 (Tribunal) - Eicher Goodearth Ltd..
10. Sales Tax Cases :-
(i) Annapoorna Carbon Industries v. State of Andhra Pradesh - SC - (37 STC-378).
(ii) NAV Naidu v. Commissioner of Commercial Taxes, Bangalore (25 (STC) 381-Karnataka High Court
(iii) CST UP v. Manchar Glass Works
(iv) Shadi Cycle Industries v. CST, UP
(v) C.S.T., UP v. Free India Cycle Industries (vi) STC, U.P. v. Lachman Singh
(vii) Agarwala Brothers v. C.S.T., U.P.
5. The ld. Departmental Representative cited the following judgments:
1. 1987 (31) E.L.T. 700 (Tribunal) - CCE. v. Lawkim Pvt. Ltd.
2. 1997 (94) E.L.T. 264 (Tribunal) - Eagle Flask Ind. (India) Ltd. v. CCE., Pune.
3. 1997 (89).E.L.T. 183 (Tribunal) - Devilog Systems (I) Ltd. v. CCE., Bangalore.
4. 1994 (71) E.L.T. 508 (Tribunal) - Kerala State Electronic Development Corporation v.C.C.E., Cochin.
6. Same submissions and comments were also made by the ld. D.R., which had been taken into account since the liberty had been given only for citation of the case law and not making comments on the case law cited by the appellants.
7. We have carefully considered the facts of the case and the various citations placed before us.
8. The various citations deal with particular commodities. The common issue involved in all those cases is the distinction between "parts and accessories". The distinction has direct bearing on the valuation of the commodity. The value of a part would be includible in the value of the main commodity whereas the value of an accessory would not be so addible. It is not material whether such components - whether parts or accessories - are manufactured by the assessee making the main product or whether they are bought out items. This was so decided by the Bombay High Court in their judgment in the case of Koron Business Systems Ltd. v. Union of India, reported in 1992 (58) E.L.T. 48 (Bom.) and 1991 (51) E.L.T. 212 (Bom.). In the first cited case the assessees were purchasing timer and lenses from the market which went into the making of a camera which in turn was the main component of the photo-copying machine. The High Court observed that timer and lens were the key parts without which the camera and in turn the copying machine would be useless and would not be sold. It was, in this situation that the cost of the bought out component was held to be includible. In the second cited case, the same assessees for the manufacture of the same machine were purchasing plates and black shields. The High Court observed that although, these goods were required for working of the machine, they could not be concluded to be parts and parcel of the machine. Holding them as accessories which could be purchased separately by the customers of the photo-copying machine, the High Court ruled that their value could not be included in the assessable value.
9. This distinction is valid irrespective of the manner in which parts or accessories are cleared with the main commodity. Thus, in their judgment in the case of Shriram Bearings Ltd. v. Collector of Central Excise, Patna, reported in 1997 (91) E.L.T. 255 (S.G). The Supreme Court observed that cost of accessories would not be includible in the value of the main article even if said article was fitted with accessories at the time of clearance. On the other hand, the value of bought out part would be includible even if such parts are not fitted on to the main article.
10. A number of judgments were cited to bring out the distinction between parts and accessories. The meaning given in Webster Third New International Dictionary of the word "accessory" was "an object or device that is not essential in itself but that adds to the beauty convenience or effectiveness of something else" was taken note of by the Supreme Court in the Sales Tax matter of Annapoorna Carbon Industries v. State of Andhra Pradesh SC - (37 STC-378) cited by the Tribunal in the Bajaj Auto Ltd. v. Collector of Central Excise, reported in 1989 (44) E.L.T. 763 (Tribunal). In their judgment in the case of Electrosteel Castings reported in 1989 (43) E.L.T. 305 (Tribunal), the Tribunal defined a component part as that whose absence will disable a machine or an appliance.
11. The judgments cited by both sides deal with the number of items which were classified into one of the two categories by the Tribunal or by the Courts, regard being had to attendent circumstances. In the light of these judgments, we will have to determine whether the plastic cannula (Nozzles) supplied by the assessee with the medicament were parts or merely accessories.
12. The medicament is specifically for application on piles and fissure both external and internal. The learned Advocate claimed the ointment could be applied with a finger and, therefore, the applicator was not indespensible for the application of the ointment. He has his contention by the following diagrams:
It was his claim that external piles are external to the anal sphincter making for its application by finger. It was his claim that internal piles are also equally, easily accessable by finger. It is his claim that bulk of the piles are external. We have carefully considered these claims. No statistical evidence has been led to sustain the claims. No statistical evidence has been led to sustain the claim that the bulk of the piles are external. As per Bailey & Love's A short Practice of Surgery XVIIth Edition', piles or Haemorrhoids are dilated veins occurring in relation to the anus, and originating in the subepithelial plexus formed by radicles of the superior, middle, and inferior rectal veins. The cited reference book states that internal Haemorrhoids are exceedingly common.
13. The pathology of internal Haemorrhoids is narrated as under :
Pathology. - Internal haemorrhoids in association with the terminal divisions of the superior rectal artery are arranged in three groups at 3, 7, and 11 O'clock with the patient in the lithotomy position (fig. 1209). This distribution is due to the arterial supply of the anus whereby there are two subdivisions of the right branch of the superior rectal artery, but the left branch remains single. In between these three primary haemorrhoids there may be smaller secondary haemorrhoids. Each principal haemorrhoid can be divided into three parts:
The pedicle is situated in the rectum just above the ano-rectal ring. As seen through a proctoscope, it is covered with pale pink mucosa through which large tributaries of the superior rectal vein can be seen. Occasionally a pulsating artery can be felt in this situation. The internal haemorrhoid, which commences at the ano-rectal ring and ends at the denate line. It is bright red or purple, and covered by mucous membrane.
14. In the clinical features, the following is the extract:
Clinical Features. - Bleeding, as the name haemorrhoid implies, is the principal and earliest symptom. At first the bleeding is slight; it is bright red and occurs during defaecation (a splash 'in the pan'), and it may continue thus for months or years. Haemorrhoids that bleed but do not prolapse outside the anal canal are called first-degree haemorrhoids.
Prolapse is a much later symptom. In the beginning the protrusion is slight and occurs only at stool and reduction is spontaneous. As time goes on the haemorrhoids do not reduce themselves, but have to be replaced digitally by the patient. Haemorrhoids that prolapse on defection but return or need to be replaced manually and then stay reduced are called second-degree haemorrhoids. Still later, prolapse occurs during the day, apart from defaecation, when the patient is tired or exerts himself. Haemorrhoids that are permanently prolapsed are called third-degree haemorrhoids. By now, the haemorrhoids have become a source of great discomfort and cause a feeling of heaviness in the rectum.
Discharge. - A mucoid discharge is a frequent acccompaniment of prelapsed haemorrhoids. It is composed of mucus from the emgorged mucous membrane, sometimes augmented by leakage of ingested liquid paraffin. Pruntus will almost certainly follow this discharge.
Pain is absent unless complications supervene.
Anama can be caused very rarely by persistent profuse bleeding from haemorrhoids.
The reference book also states that bleeding is the principal and the earliest symptom. At this stage, they are called first degree Haemorrhoids. As the time goes on, Haemorrhoids proceed to the degree where a prolapse occurs. Where the haemorrhoid returns to their original position, they are called 2nd degree haemorrhoids. When permanently prolapsed they are called 3rd degree haemorrhoids. The complications in haemorrhoids patient are several. The least of which is suppuration which is the result of infection. Ulceratons are also common. The thrombosed haemorrhoids may result in gangrene also.
15. Since there is no dearth of harmful bacteria in the rectum, the patients are advised to maintain fullest hygiene. This consists of taking a sitz bath periodically and before application of medicament.
16. The piles are an external or internal in relation to the anal ring. While it may be possible or feasible to apply the ointment by digitally, such application is certainly not recommended where the piles are internally situated. The anal ring while it expands substantially when the faeces leave the rectum, it tends to resists access from the outside. The patient being subjected to rectal examination has repeatedly to be told to relax his sphicture muscles to assist the Doctor. In certain cases muscles relaxant medicament has to be orally administered. The plastic canulla, on the other hand, by virtue of its small diameter and also the conical tip faces no such resistence.
17. The plastic applicator can be easily washed and its tip rendered sterile before insertion in the rectum. The finger no matter how well washed, would not achieve the same degree of asepticity as the canula would. The canula would be preferable over the digit as means of application. In the case of possibility of infection, it would be mandatory to use the applicator.
18. In the first paragraph of our order, we have reproduced the printed instructions. The instructions do not give the consumer a choice between using the applicator and using the finger. The user is expected to follow the instructions and to fit the applicator to the tube as soon as the tube is opened for use. Once the applicator is in position, the use would use only the applicator and not his finger. The instructions thus indicate that the applicator is on separable part of the package and not merely a device of convenience.
19. As we have observed earlier, the identity if a certain device as a part or an accessory, would depend upon the circumstances attendent to its use. For instance, the applicator similar to the one before us is also found to be supplied with tubes of synthetic resin based adhesives. Due to high cost and high adhesibility only a small quantity of such glue is required. The outlet of the canula being smaller than the mouth of the tube to which inlet of the canula is fixed, a small quantity exits when the collapsable tube is pressed. However, more often than not, the use would use his finger to spread the glue on the surface. Therefore, a similar applicator when used for dispensing glue would become an accessory and not a part.
20. Ld. D.R. cited before us the Tribunal's judgment in the case of Heal Well Pharm (supra) in which the dropper enclosed with the medicament was meant to ensure that the correct dose would be administered to the child. The danger of over dose being more in the case of a child than in the case of adult, such dropper would be held as part of the medicament. However, where a dropper is enclosed with the bottle of ink to ease the filling of a pen, an identical dropper would have to be held as an accessory and not as a part. Seen in this manner, the Collector was correct in drawing the analogy of a dropper supplied with eye drops.
21. On consideration of the location of haemorrhoids in the human anotomy as also the fact that in the absence of the applicator, the subject ointment could not be applied in hygienical manner, we hold that in this particular case, the canulawas a part of the medicament and hot merely an accessory. On this observation, we up-hold the impugned order and dismiss this appeal.