ORDER
I.J. Rao, Member (T)
1. We heard all these appeals together as all of them involve common issues relating to one particular aspect of valuation, viz., whether the authorities were correct in increasing the assessable value of the goods. In some of the appeals the Assistant Collectors passed orders whereas in one Appeal (No. ED/SB/396/83-A) the Collector passed the orders.
2. The facts relevant for a decision in these appeals are that the appellants, a statutory body responsible for generation, transmission and distribution of electricity within the State of Andhra Pradesh, require poles which are, in the words of the appellants (Statement of facts, Appeal No. E/483/86-A) “made by the Board at its Units through Contractors on contract basis”). These poles are used by the Board for their consumption for various trnasmission and distribution schemes. The appellants do not sell the poles and, therefore, wholesale price is not available. The value hss, therefore, to be arrived at with the help of the Valuation Rules. While doing so, the cost of the poles was taken and margin of profit was being added to such costs. This margin is sought to be revised upwards in most of the appeals before us. The grievance of the appellants in all these appeals are that margin of profit has been incorrectly added to the cost of production. Also certain deductions like breakages, maintenance charges, depreciation charges and interest on capital investment were not allowed by the Department.
3. We heard Shri Ashok Grover, the learned Advocate for the appellants. The learned Advocate accepted that the judgment of the Tribunal in respect of the same appellants v. Collector of Central Excise, Hyderabad reported in 1984 (16) ELT 579 (Tribunal) was against the appellants. He brought to our notice that an appeal has been filed against the said judgment but nothing has happened in the Supreme Court so far. He, however, relied on another judgment of the Tribunal [1990 (47) ELT 62 (Tri.) Order No. 91/88-D, dated 1-1-1988 in Kerala State Electricity Board v. Collector of Central Excise, Cochin]. He argued that in terms of that order the appellants are not the manufacturers, but the contractor is the manufacturer. He stated that the Electricity Board deals with the contractor on a principal to principal basis and it is the contractor who is liable to duty and not the appellants. The learned Advocate further argued that under Section 3 of the Central Excises and Salt Act, excise duty is payable only on excisable goods. Prestressed cement concrete poles which are the articles in question are not liable to duty because they are not goods. He further submitted that Rule 6 of the Central Excise Valuation Rules, 1975 does not contemplate the determination of the value of the electric poles as these are not capable of being bought and sold in the market. The learned Advocate extensively referred to the contracts, price lists, tender notices and general conditions to support his plea that the Contractor is independent. He submitted that the appellants have no control except to claim damages and to conduct quality tests. He referred to case law including Union of India v. Union Carbide of India [1978 (2) ELT 1 Allahabad] (reversed in 1986 (24) ELT 169 SC) to argue that goods are goods only if they can ordinarily come to the market for being bought and sold. He further submitted that Revenue filed a special leave petition before the Supreme Court against the Tribunal’s order in Kerala State Electricity Board (supra) and the same was dismissed. He emphasised that marketability was an essential pre-requisite for dutiability.
4. On the question of margin of profit, the learned Advocate submitted that earlier the Department used to add a margin of 2% to the cost of production and by the impugned orders the margin of profit was raised to 10%. Referring to the Valuation Rules, the learned Advocate argued that the margin of profit can be added only if there is any profit in view of the words “if any” appearing in Rule 6 of the Valuation.
5. Smt. Baliga, the learned SDR opposed the submissions and argued that the question as to who is the manufacturer was not at all a point raised by the appellants before the Assistant Collector, Appellate Collectors or Collectors. Therefore, this argument cannot be considered by the Tribunal at this late stage. She submitted that the electric poles were goods identifiable as such and though they are not ordinarily bought and sold, the reason therefor was purely technical as, if necessary, they can be bought and sold. She supported the addition of margin of profit at 10% and justified the best judgment rule.
In this context, the learned representative cited 1988 (33) ELT 331 (P & H) -Food Specialities Ltd. v. Appellate Collector of Central Excise and Customs. Referring to the judgment of the Tribunal in Kerala State Electricity Board, Smt. Baliga submitted that the poles in that matter were made in the contractor’s yard whereas in the present case they were admittedly made in the appellant’s yard.
6. We have considered the arguments of both sides.
7. The questions that arise for a decision in the matter are as follows :
(i) Whether the ratio of the Tribunal’s judgment in Kerala Electricity Board (supra) is applicable to the facts of this matter or whether the judgment of the Tribunal in respect of the same appellants (supra) is applicable ?
(ii) Whether the electric poles manufactured by the appellants are "goods"? (iii) If so, whether addition of margin of profit to arrive at the assessable value under the Central Excise Valuation Rules is correct ? (iv) If so, whether the increase of margin of profit from 2% to 10%, ordered in most of the impugned orders, is sustainable ?
8. We examined the pleas of both sides. With reference to the judgment of the Tribunal in Kerala Electricity Board (supra), we note the submissions made by the ld. SDR that the appellants cannot be allowed to raise a question as to who is the manufacturer at this stage, which is very remote in point of time from the original adjudications made. We see much force in the submissions. It would have been proper for the Id. Advocate to make an application for raising this ground before advancing it. Such a course of action would have given the other side time to examine the facts and be ready, if arguments are necessary. Therefore, while we do not approve of the ground being put forward in this fashion, we take an extremely lenient view and consider the grounds purely in the interests of justice.
A perusal of order No. 91/88-D in Kerala State Electricity Board shows in the very opening para that when the Board were issued show cause notice, they replied that they were not the manufacturers of the poles but only their contractors. In paragraph 9 of the said order, the Tribunal examined the material as to whether the State Electricity Board were the manufacturers or not. We need not go into the details of the findings but have only to observe that the factual position projected by the State Electricity Board right from the very beginning was found to be correct, and that is why the Tribunal allowed their appeal. Here the facts are different. Even in the statement of facts in their appeals (Appeal No. 483/83-A), the appellants stated that “in the discharge of its duty by distribution of electricity, Board requires poles which are made by the Board at its Units through contractors”. It has not been shown to us that it was the case of the appellants at any stage that they were not the manufacturers. On the other hand, what we quoted above shows that they were arguing that they were the manufacturers. Therefore, not only are the facts different here as compared to the facts of Kerala Electricity Board but on the contrary there is a positive assertion by the appellants that the poles were made by the Board. This file was the one which was referred to during the course of hearing and therefore, and also because, there was no submission that the constitution or the working of the Board changed during the relevant period, we accept this statement as the factual position. For this reason, the ratio of the Tribunal’s judgment in Kerala State Electricity Board is not applicable to the facts of the present matter.
9. That takes us to the next question as to whether the electric poles manufactured by the appellants are “goods”. This question was decided in respect of the same appellants on 21-2-1984 (supra). In para 18 of the order, the Tribunal considered the issue referring, inter alia, to the Allahabad High Court’s judgment in UOI and Ors. v. Union Carbide India reported in 1978 (2) ELT 1. A judgment referred to by the Id. Advocate be- fore us also. Following the ratio of the judgment, we hold that the poles are “goods” and were correctly subjected to excise duty.
10. The next question that arises is whether the value should be arrived at in the light of the Central Excise Valuation Rules by adding a margin of profit. We have carefully considered the submissions of the Ld. Advocate that margin of profit should be. added only when there is profit through trade in goods. This was because the words “if any” occurring in the Valuation Rule 6(b) has to be given its proper meaning. However, we find that this question was discussed in detail in Tribunal’s Order No. 211-214/84-D, dtd. 21-4-1984 and the Bench held that the profit margin added @ 2% was not excessive. Therefore, following the ratio of the said judgment we hold that the addition of profit margin was correct.
11. This brings us to the final question as to whether the increase of margin of profit added to the value, from 2% to 10% is sustainable. The plea advanced was that the appellants do not deal in the poles but use them for discharging their duties in producing and supplying electricity to the people of the State. We have already referred to the earlier judgment of the Tribunal. Earlier too, we observed that the duties of the Board have not changed over a period of years. It is not the case of the Department that the Board began making any higher profit or that it changed its mode of operations during the relevant period. Therefore, we hold that the addition of 2% margin of profit is warranted and that increase in the margin is not warranted.
12. In the light of this discussion, we order as follows :
(i) In Appeal No. 396/83-A, the demand for duty is upheld but the penalty is set aside in view of the facts of the matter.
(ii) Anneal No. 497/84-A This appeal is against the impugned order which dismissed the matter on limitation u/s 35(1) of the Central Excises and Salt Act. No arguments were advanced at all. On perusing the Collector's order and in the absence of any arguments by the appellants, we dismiss the appeal. (iii) Appeals Nos : 95 & 96/84-A, 686/85-A, 483/86-A, 245/87-A, 246/87-A, 482/86-A, 470/86-A, 273/87-A, 274/87-A, 284/87-A, 352/88A, 279/87-A, 687/85-A. These appeals are allowed to the extent that the margin of profit to be added is limited to 2%. They are otherwise rejected. 13. Miscellaneous applications Nos. 1037/90-A, 1040/90-A, 1038/90-A, 1034/90-A, 1028/90-A, 1029/90-A, 1039/90-A, 1036/90-A, 1033/90-A, 1026/90-A, 1030/90-A, 1035/90-A, 1027/90-A for seeking the admission of the Paper Book were granted. Cross-objections Nos. E/134/87-A, 138/87-A, 136/87-A, 139/87-A, 137/87-A, 135/87-A are not maintainable under law. They are dismissed.