ORDER
G.R. Sharma, Member (T)
1. The captioned appeal has been directed against the order of Collector, Central Excise, Bombay-II. The Collector, Central Excise in his order dated 31-8-1983 had held as under :
“I order confiscation of the goods under seizure i.e. 52 pressure cookers valued at Rs. 7,264/- under Rule 173Q of the Central Excise Rules, 1944 read with Rules 9(2) and 52A ibid. However, the same are allowed to be redeemed on payment of a fine of Rs. 1,500/- (Rupees One thousand five hundred only) in lieu of confiscation within 3 months from the date of this order.
I order that Central Excise duty at the rate applicable during the material period should be paid by M/s. Noble Electric Co., on the following goods under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Sub-rule 1 of Rule 10 (as then in existence) ibid and further read with proviso to Sub-section 1 of the Section HA of the Central Excises and Salt Act, 1944 :
(Goods removed during 1980-81 up to 22-7-1980)
(1) 2385 pressure cookers valued at Rs. 5,26,826.60 (Annexure D-I to D-I1I to show cause notice)
(2) 216 Electric Mixers valued at Rs. 1,59, 840/- (Annexure ‘C to show cause notice)
(3) 3 Electric Motors valued at Rs. 435/- (Para 5 of Annexure ‘A’ to show cause notice)
(4) 689 pressure cookers valued at Rs. 1,51,487/- removed during 1979-80 (as detailed in Annexure ‘F-2’ to the show cause notice)
(5) 122 Electric Mixers valued at Rs. 89,211/- removed during 1979-80 as detailed in Annexure ‘C’ to the show cause notice)
I impose a penalty of Rs. 15,000/- (Rupees Fifteen thousand only) on the Noble Electric Company under Rule 173Q read with Rule 9(2) and Rule 52A of the Central Excise Rules, 1944″.
2. The facts in brief of the case are that M/s. Noble Electric Company are engaged in the manufacture of Pressure Cookers, Electric Mixers and Electric Motors. With pressure cookers, the appellants also supplied aluminium utensils which they got manufactured from job workers after supplying raw material to them. On scrutiny of the records of the appellants, the Department had observed that during the year 1979-80, the appellant cleared the products as under :
(a) Pressure Cookers ... Rs. 13,90,549.50
(b) Electric Mixers ... Rs. 5,89,221.00
(c) Electric Motors ... Rs. 1,05,560.00
(d) Aluminium Utensils ... Rs. 40,194.05
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Total Rs. 21,25,524.55
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It was alleged that since the value of all excisable goods had exceeded Rs. 20 lakhs during 1979-80, they were not entitled to duty free clearances of excisable goods upto Rs. 5 lakhs for the year 1980-81. It was also alleged that during the year 1979-80, the appellants had crossed the limit of Rs. 5 lakhs in respect of pressure cookers on 17th Sept., 1979. It was also alleged that during the year 1979-80, the appellants had crossed the limit of clearance of Rs. 5 lakhs in respect of electric mixers on 19-2-1980, therefore, they were not eligible to the benefit of concessional rate of duty during the year 1980-81. Therefore, the appellants were asked to explain as to why the duty on the goods manufactured by the appellants for the entire financial year 1980-81 and duty for the period 17-9-1979 to the end of the financial year ending on 31st March, 1980 in respect of pressure cookers and duty in respect of 122 electric motors cleared after 19-2-1980 should not be recovered from the appellants. The appellants were also asked to show cause as to why the goods seized should not be confiscated and why penalty should not be imposed. The appellants in their reply submitted that the total value of clearances during the year 1979-80 had not exceeded Rs. 20 lakhs for the following reasons :-
(a) that the discount which had been passed on in the normal course of their business was to be deducted; that the total discount allowed by them during the period 1-4-1979 to 31-3-1980 amounted to Rs. 1,18,601.35;
(b) that the cost of special packing which was made for upcountry delivery was to be deducted; that the total amount spent as cost of special packing was of the order of Rs. 25,000/;
(c) that the appellants had incurred expenses to the tune of Rs. 2,05,165.53 on advertisement which should also be deducted from the total value;
(d) that the electric motors were the specified goods and were wholly exempt from payment of duty under Notification No. 35/69, dated 1-3-1969 and therefore, the value of electric motors should not be taken into consideration for computing the total value in view of Explanation IV to Notification 71/78; that if the value of electric motors manufactured in the factory is taken into account and the value of the mixers is also taken into account it amounts to taking the value of motors twice over;
(e) that the value of aluminium utensils should not be included inas-much as the same are not manufactured by the appellants.
In support of the above contentions, the appellants relied upon and cited a lot of case law. After careful consideration of the submissions made, the Collector passed the order as reproduced in the preceding paragraph.
3. Shri Gopal Prasad, the learned counsel appearing for the appellants submitted that the value of clearances for the financial year 1979-80 was less than Rs. 20 lakhs, if discount on pressure cookers, cost of special packing, the expenses incurred on advertisement and the cost of aluminium utensils are deducted. The learned counsel submitted that aluminium utensils were cleared separately as they were not manufactured by the appellants but were manufactured through job workers; that it was well settled law now that job workers themselves are manufacturers; that the cost of secondary packing is not in-cludible as has been held by the Hon’ble Supreme Court in the case of Godfrey Philips. Ponds India, G. Flash Light cases etc.; that the electric motors were used in electric mixers and if the values of electric mixers and motors are taken separately, then it will amount to taking the value of motors twice; that the secondary packing was not used for the delivery of the goods at the factory gate but was used for despatches to upcountry destinations and therefore, the cost of secondary packing was not includible. In support of his contentions, he cited and relied upon the judgment of the Hon’ble Supreme Court in the case of Bombay Tyre International. The learned counsel submitted that it is a very well settled principle of law that discount allowed cannot be included in the assessable value; that they had adduced adequate evidence before the lower authorities to show what the total amount of discount allowed on pressure cookers was; that if the above amounts are deducted from the total clearances of 1979-80, the value will come down to less than Rs. 20 lakhs and therefore, they will be eligible for the benefit of concessional rate of duty to Small Scale Industry during the year 1980-81.
4. Shri A.K. Singhal, the learned JDR appearing for the respondents submitted that the value of clearances of electric motors used in electric mixers cleared by the appellants during the financial year 1979-80 shall be added for computing the total value of clearances during the year 1979-80 inasmuch as electric mixers manufactured by the appellants were cleared as exempted goods in terms of Notification No. 71/78, dated 1-3-1978.
5. On the question that the value of aluminium utensils should also be excluded from the total value of clearances for the year 1979-80. The learned DR submitted that the appellants got these utensils manufactured by supplying the raw material; that since the goods were manufactured for and on their behalf and since they have supplied the raw material they are to be considered as manufacturers and the value of the utensils has to be included in the total value of excisable goods. In support of his contentions, he cited and relied upon the ratio of the decision in the case of Pawan Biscuits reported in 1991 (53) E.L.T. 595 and others reported in 1986 (26) E.L.T. 317; 1987 (27) E.L.T. 269 and 1986 (25) E.L.T. 609.
6. On the question of trade discount, the learned DR submitted that no such trade discount was claimed by the appellants in the price lists and therefore, the claim for deduction of the same was not admissible. In support of his contention, the learned DR cited and relied upon the ratio of the decision of the Tribunal reported in 1984 (17) E.L.T. 39; 1992 (62) E.L.T. 696 and 1993 (67) E.L.T. 241.
7. On the question of secondary packing, the learned DR submitted that no evidence was brought by the appellants on record to show as to how the goods were packed and therefore, this claim remains unsubstantiated.
8. On the question that the value of clearance of pressure cookers, and electric mixers comes to below Rs. 5 lakhs, the learned DR submitted in view of the above discussions, no deduction on account of trade discount or secondary packing and advertisement can be made and hence the total value of clearances remains more than Rs. 5 lakhs in the above two cases.
9. On the question of the seizure of the goods, the learned DR submitted that as the goods were removed without payment of duty and therefore, seizure was justifiable. The learned DR therefore, submitted that having regard to the submissions made above and the evidence on record, the penalty imposed is reasonable and justified and therefore, the order of the lower authorities is fully justified and maybe sustained.
10. Heard the submissions of both sides and considered them. We find that a number of issues have cropped up. Let us discuss those issues one by one.
11. For determining the total value of clearances during the financial year 1979-80, we have to see whether the discount purported to have been allowed can be allowed, whether the secondary packing was resorted to and in case it was undertaken whether expenses incurred on secondary packing should be deducted from the total value of clearances. Whether the value of aluminium utensils supplied with pressure cookers shall be deductible from-the total value. Whether the value of electric motors was taken twice and therefore, will be deductible from the total value of clearances and whether the total value of clearances of pressure cookers and electric mixers had exceeded Rs. 5 lakhs and separately whether the seizures and confiscation of the goods was justified or not and whether the penalty imposed was justified.
12. First we take up the discount. We find that the appellants had submitted a detailed statement indicating that discounts were being allowed to different customers on regional basis. It was argued before us that it is well settled law that different discounts can be allowed for different regions. It was therefore, claimed by the appellants that the discount allowed by them should be deductible from the value of clearances in terms of the provisions of Section 4 of the Central Excises and Salt Act, 1944. Let us examine whether this discount was indicated in the price list submitted by the appellants. It is pertinent to point out here that Rule 173C of the Central Excise Rules, 1944 specifically says “Every assessee who produces, manufactures or warehouses goods which are chargeable with duty at a rate dependent on the value of the goods, shall file with the proper officer a price list, in such form and in such manner and at such intervals as the Collector may require, showing the price of each goods and the trade discount, if any, allowed in respect thereof to the buyers along with such other particulars as the Central Board of Excise and Customs or the Collector may specify”. It would thus be seen that a trade discount allowed, if any, in respect of manufacture should be indicated in the price-list. Now, let us see what the finding in this respect is. The Collector in his rinding has very clearly held that no such trade discount has been declared by the appellants in the price-list and therefore, the claim for the deduction of the same appears to be an after-thought. This finding of the adjudicating authority has not been rebutted by the appellants. Examining this aspect in the light of the provisions of Rule 173C(1), we hold that in the absence of the trade discount being indicated in the price-list, the discount cannot be allowed. Recently, the Hon’ble Supreme Court in the case of M.R.F. clearly held that the discount should be known in advance. There is no indication in the price-list that this discount claimed by the appellants was disclosed in advance. No evidence has been led before us to prove that such discount was disclosed in advance. As the price-list did not indicate any discount, therefore, the amount claimed as discount was not deductible from the total value of clearances.
13. On the question of secondary packing, again we have to examine what was the evidence adduced before the adjudicating authority by the appellants to substantiate that secondary packing was being resorted to in respect of despatches to upcountry destinations. The adjudicating authority has given a finding that no evidence has been produced by the appellants to show that the goods in fact were packed in secondary packing at the instance of the buyers. The appellants have not brought out any evidence before us also about the precise secondary packing which was being resorted to. In the absence of sufficient evidence, we hold that the claim that secondary packing was resorted to in respect of despatches for the upcountry destinations is not substantiated and therefore, expenses, if any, incurred on secondary packing as claimed by the appellants cannot be allowed to be deducted.
14. On the question of value of aluminium utensils, the finding of the Collector is that since the raw material was being supplied by the appellants for manufacture of aluminium utensils and therefore, the supplier of the raw material should be treated as manufacturer. However, the appellants have stated that the said utensils were manufactured by independent manufacturers over whom the appellants had no control and therefore, dealings on principal to principal basis were at arm’s length and therefore, the appellants cannot be treated as manufacturer of the goods in view of the case law laid down on the subject. It is well settled in law that the supplier of raw material is not a manufacturer unless the manufacturer is a dummy unit of the supplier of the raw materials and the dealings between the two are not at all at arm’s length. Having regard to the case law on the subject, we agree with the contentions of the appellants and hold that the value of the aluminium utensils will not be includible in the total value of clearances for the purpose of determination of the quantum of duty leviable.
15. On the question of value of electric motors being taken twice and expenses on advertisement we observe that after some arguments, the learned counsel for the appellants did not press these points further and we would not therefore, disagree with the findings of the lower authorities.
16. Having regard to the above findings, no further issues are left for determining the value of clearances for the year 1979-80 or of pressure cookers and electric motors for the period mentioned above.
17. In regard to the seizure, we find that the goods were removed without payment of duty and therefore, seizure and confiscation thereof is sustainable in law. The quantum of penalty is also commensurate with the offence and hence is upheld.
18. In the light of the above findings, the impugned order is modified to the extent stated above and the appeal is disposed of accordingly.