Customs, Excise and Gold Tribunal - Delhi
Castrol India Ltd. vs Commissioner Of Central Excise on 29 February, 2000
Equivalent citations: 2000(118)ELT35(TRI-DEL)
ORDER
K. Sreedharan, J. (President)
1. Appellants are manufacturers of lubricating oils falling under sub-heading 2710.90 of the Schedule to the Central Excise Tariff Act, 1985. They were removing manufactured products in tankers to their depots/packing stations. From there, the oil was repacked in smaller packings and sold to dealers. Duty under the Central Excise Act, 1944 was being paid at the time of removal from the factory taking the price of 205 litres pack. They filed price declaration under Rule 173C of the Central Excise Rules, 1944 in respect of their sales from the depot. Department took the view that duty on goods sold from depot in smaller packings is not being paid as was required. On this basis, show cause notice was issued as to why the oil should not be assessed on the basis of the assessable value of half a litre packings done at the depot/packing station. Accordingly, differential duty amounting to Rs. 1,19,42,063.00 was claimed for the period from 1-10-1996 to 31-3-1997. Appellant filed detailed objection to the show cause notice. After considering the objection, the adjudicating authority by Order No. 111/Dum/97 dated 28-11-1997 confirmed the demand made in the show cause notice under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944. Penalty of Rs. 20 lakhs was also imposed under Rule 173Q of the Rules. Aggrieved by this order, appeal was taken to the appellate authority. That authority by Order-in-Appeal No. 567-CE/DLH/98, dated 26-11-1998 remanded the issue observing :
"(i) The adjudicating authority has to clearly make out a case for charging duty on the basis of the price of the smaller packings in view of the appellants' claim that they also cleared blended compounded oils in 205 litres packing to independent buyers from their factory and that the price of the compounded oils cleared in 205 litres packing from the depot is the same as that at the factory gate.
(ii) If it is held that in respect of those quantities of compounded oils which were cleared from the depots in smaller packing, the duty for the corresponding quantity cleared in bulk from the factory gate is required to be determined on the basis of the assessable value of each type of smaller packings, the duty amount will have to be re-worked out taking into account the price and quantity of each smaller packing. The order-in- original is, accordingly, set aside and the matter is remanded for de novo decision. In view of the huge amount of revenue involved, I direct the appellants to file complete documents in support of their case within 15 days of the receipt of this order, in order to enable adjudicating authority to expeditiously decide the matter."
2. Learned counsel representing the appellant submitted before us that while assessing the oils to duty, where the same are sold in 205 litre barrels, the bulk oil in tankers should be assessed at the same price of 205 litre barrels minus the cost of barrels and where the blended oils are not sold in 205 litre barrels but sold in smaller packings, the bulk clearances in tankers should be assessed at the price of the largest of the small packings like 20 litres minus the cost of packing and the cost of transportation from the factory gate to the depot.
3. Appellants clear blended lubricating oils from their factory to packing stations in tankers. Excise duty on bulk clearance in tankers was being paid on the basis of the list price of 205 litre barrels. At the packing stations, oil is packed in barrels of 205 litres as also in retail packings of 20 litres, 10 litres, 5 litres and 0.5 litres. Department took the view that assessable item is oil in the smaller packings which are sold to wholesale buyers. Accordingly, they want Central Excise duty to be levied on the price at which the oil was sold from the depot in the smaller packings. This is sought to be done on the premises that depot is the place from where oil is removed and the price of the oil at the place of removal should be the normal price. This stand of the department is presumably on the basis of the amendment which came into force on 28-9-1996 whereby Clause (4)(b)(iii) was added to Section 4 of the Act. By this amendment, depot from where the excisable goods are sold after clearance from the factory became "a place of removal". As per Section 4(1)(a), normal price should be the price at which goods are ordinarily sold in the course of wholesale trade for delivery at the time and place of removal. It appears that the department thinks that when goods are sold from a depot which by the definition became place of removal price at the depot is the normal price. Is this approach made by the department correct ?
4. Wherever duty of excise is chargeable for any goods with reference to value, such value shall be the normal price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal where buyer is not a related person and price is the sole consideration for the sale. Thus, the normal price should be that at the time and place of removal of the goods. If the goods are removed from the factory gate, price at the time of removal at the factory gate should be the basis for assessment. Place of removal after the amendment of 1996 can be the depot as well. If the place of removal is the depot, should the time of removal also be the time of removal of the goods from the depot. If the time and place of removal in the case of removal from the depot happens to be the time at which the goods are removed from the depot, then the value of the goods when it was removed from the depot should be the basis for assessment,
5. "Time of removal" has also been defined with reference to the place of removal, namely, depot by Sub-clause (ba) to Clause (iv) of Section 4. That definition reads:
" "time of removal" in respect of goods removed from the place of removal referred to in Sub-clause (iii) of Clause (b), shall be deemed to be the time at which such goods are cleared from the factory."
So, in the case of removal of goods from depot the time of removal should be the time at which such goods were cleared from the factory. In other words, time and place of removal provided by Section 4(1)(a), in relation to goods removed from the depot will be the factory gate and depot, respectively. Whenever goods are removed from depot, such goods are to be valued with reference to the time when it was removed from the factory.
6. Clause (4)(d) of Section 4 defines "value" in relation to any excisable goods where the goods are delivered at the time of removal in a packed condition, value includes the cost of such packing. So, the condition of the goods at the time of removal is to be the basis for finding the value. If the goods were not packed in smaller containers at the time of removal from the factory, its condition at the time of removal from the depot cannot be of any relevance. In this view of the matter, we are clear in our mind that the nature of packing of the oil at the depot when it was removed is irrelevant in finding out the assessable value for the purpose of charging it with duty of excise.
7. In the instant case, blended lubricating oils of various grades were removed from the appellant's factory in bulk in tankers as also in barrels of 205 litre capacity. Bulk removal was also assessed and tax paid on the basis of the list price of 205 litre barrels. Some grades of lubricating oil are not sold in barrels of 205 litre capacity. They are sold in smaller packing of 20 litres, 10 litres, etc. The price of such grade should, therefore, be on the basis of the price of the largest of the small packings. Under no circumstance can value of oil in smaller packings be the basis for assessment. Then the question that arises is whether the value of the packing can be included in the assessable value ? As stated earlier, the price at the time and place of removal is the basis for assessment. Time of removal of those goods which are removed from depot is the time of removal from the factory. At the time of the removal from the factory, the oil was not in packed condition. It was removed in tanker. Value of the tankers cannot have any relevance in finding out the assessable value of the oil, because they are durable and returnable. So, the cost of the packing done at the depot or packing place cannot be reckoned in finding out the assessable value. Therefore, where blended oils are sold in barrels of 205 litre capacity, duty must be assessed at the price of 205 litre barrels minus the cost of barrels. Where blended oils are not sold in 205 litre barrels but sold in smaller packings of 20 litres and below. Assessment should be made on the basis of the largest of the small packings minus the cost of packings of transportation from the factory to the depot is not eligible for deduction as ex-depot price constituted assessable value (and this value includes the cost of transportation from factory to depot) in respect of goods sold from depot in view of the amendment of the Section 4 of Central Excise Act with effect from 28-9-1996.
8. Almost an identical issue came up before the West Zonal Bench of this Tribunal in Savita Chemicals Ltd. v. Commissioner of Central Excise, Mumbai-VI, 1999 (34) RLT 573. In that case, an attempt was made by the department to fix the value of bulk lubricating oil on the basis of the price at which the oil was packed and sold in smaller containers from the depot. This attempt and the consequent claim for differential duty was turned down by the Tribunal. We also come to the same conclusion but for different reason.
9. In view of what has been stated above, we dispose of the appeal directing the adjudicating authority to make the assessment in the light of the observations made earlier in this order.