ORDER
V.P. Gulati, Member (T)
1. By this application, the appellants have sought for dispensation of pre-deposit of duty amount of Rs. 3,33,90,893/- under Section 11(a) of the Central Excises & Salt Act, 1944 demanded in terms of the impugned order.
2. The learned Advocate for the appellant has pleaded that the proceedings were initiated by issue of show cause notice dated 6-6-1994 (copy of the show cause notice attached is not bearing any date). He has pleaded that in terms of the show cause notice, the demand has been raised on the grounds that the appellants’ wholesale cash price was inclusive of an element of duty and since the appellants were clearing the goods based on this wholesale cash price and inasmuch as no duty as such was being paid by them in terms of exemption Notification No. 49/86 dated 10-2-1986 as amended from time to time. The element of duty which was included in the wholesale cash price and which was collected from the customers would not have been retained by the assessee and the same was therefore required to be paid to the Welfare Fund under Section 11D of the Central Excise Rules. He has pleaded that no amount as such was mentioned in the show cause notice nor any worksheet as to the amount which could be required to be paid by the appellants was furnished in the show cause notice. In reply to the show cause notice the appellants took various grounds and they have in their letter dated 11th July, 1994 in Para 11 set out as under :-
We have further to state that the allegation made in the said notice to the effect that any Central Excise duty was collected by us from the buyers in respect of even those footwear which were exempted under Notification No. 49/86-C.E., is totally incorrect, contrary to records, baseless and untenable. In respect of the footwear cleared from our factory by availing exemption under Notification No. 49/86-C.E., no Central Excise duty has ever been realised by us from the buyers. In fact, even in our price lists we have all along made it absolutely clear that the said footwear are duty free. Not only this, it would be clearly evident from our invoices also that no amount towards any Central Excise duty was ever collected in respect of the said exempted footwear from any of our buyers. We charged from the buyers only the agreed prices as per our price lists and as already stated above, in the said price lists it was made fully clear in respect of the exempted footwear that the same were duty free. Simply because the amount of Central Excise duty is liable to be deducted from the wholesale price for determination of value in terms of the statutory provisions of Section 4 of the 1944 Act, there is or can be absolutely no scope for making any assumption as if any duty was realised by us from the buyers. You would kindly appreciate that when the fact about the said exempted variety of footwear being duty free is clearly mentioned in the price lists themselves and when no amount towards duty is realised from the buyers, the question of making any assumption as regards our having realised any amount towards duty from the buyers obviously does not and cannot arise. The said allegation made in the said notice is factually incorrect, contrary to records and wholly without any basis or material and we deny and dispute the same. He has pleaded that in their further reply in letter dated 12th December, 1994 in Para 6 they have urged as under :
6. We deny and dispute that in respect of the exempted varieties of footwear any Central Excise duty was collected from the buyers or was retained by us as alleged or at all. As will be evident from the facts stated above and the documents enclosed herewith, the said allegation is factually incorrect. We have further to state and submit that since in respect of the exempted varieties of footwear no duty whatsoever was realised from the buyers, the question of our retaining any such duty or of invoking the provisions of Section 11D of the Central Excises & Salt Act, 1944 in respect of any such assumed realisation does not and cannot arise.
He has pleaded that in the absence of any specific data in regard to the varieties in respect of which the demand had been raised, the appellants could only give their reply in general terms. He has pleaded without taking note of the appellants’ plea that no Central Excise duty had been collected, the appellants were still not put on notice as to in which cases the appellants had collected this duty in respect of clearances made by the appellants of which varieties during the period in question, and the learned lower authority proceeded to adjudicate the matter and passed an order on 30th January, 1995. This order has no discussion on facts of collection of duty by the appellants, in respect of any specified varieties of footwear over the period in question and the discussion in the order basically is on the legal points as to whether where the appellants had shown abatement of duty from the wholesale cash price the duty has to be taken to have been collected by the appellants and the learned lower authority in his concluding portion has suddenly come to the conclusion that an amount of Rs. 3,33,90,893.00 was required to be paid by the appellants under Section 11A read with Section 11D of the Central Excises and Salt Act, 1944. He has pleaded that even in this Asstt. Collector’s order no detailed statements as to how this amount of over Rs. 3.00 crores has been computed has been given. He has pleaded that the learned lower authority’s order has no detailed facts set out and for that reason the proceedings are ab initio void and require to be set aside. He has pleaded that the appellants have filed an appeal before the Collector and mentioned the various grounds taken by them and one of the grounds taken by them is that as set out in the order of the learned lower appellate authority as Ground No. ix which is as under:
“The Asstt. Commissioner has in fact even exceeded and gone beyond the SCN dated 6-6-1994. In the purporated order, the Asstt. Commissioner has raised a demand of Rs. 3,33,90,893/- upon the appellant. For any such demand, neither any SCN was ever issued to the appellant nor any other communication was ever addressed to it nor any opportunity whatsoever was granted to it to make its submissions in the matter.”
They have also taken further grounds as set out in Ground No. ix, which is as under:
“The Asstt. Commissioner erred in holding that excise duty is not a permissible deduction in order to arrive at the value for computing eligibility for exemption under Notification No. 49/86-C.E. The purported findings and reasons for this purpose as given in the said order are wholly misconceived, incorrect and untenable. However, the instant case related to the exempted varieties of footwear whose value, even without notionally deducting the amount of Central Excise duty was well within the ceiling limit mentioned in the said Notification and as such the appellant is not making detailed submissions on the said issue in the instant appeal.”
He has pleaded that unless the appellants were put on notice as to the basis of the demand of over Rs. 3.00 crores the appellants could not have been able to explain their position in regard to the quantum. He has pleaded therefore the appellants were prejudiced and in fact there has been for that reason denial of principles of natural justice. He has pleaded the appellants’ understanding on going through the records is that the demand has been raised in respect of those varieties of footwear whereas it is the wholesale cash price is below the exemption limit as set out in the Notification. No. 49/86 and the question of he (sic) pleaded of abatement of Central Excise duty for arriving at the assessable value does not arise in those cases and the further question of collection of duty from the customers would not be also there. He has pleaded that the learned Collector in spite of the specific ground taken even at that stage did not feel it necessary either to explain to the appellants as to the basis of the demand nor there is any finding against the appellant’s plea that the demand raised is in respect of those varieties of which the wholesale cash price is well within the exemption limit. He has pleaded that the learned lower authority has again dealt with the issue from the legal stand point taking into consideration the various judgments in regard to the scope of the notification in question and how the same is required to be interpreted. His plea is that while the above demand has been raised and no basis on facts for the same has been made known to the appellants both at the Original adjudication stage and at the appellate stage nor any notice has been taken on the appellants’ pleas that there has been no collection of duty by them from the customers. In the above view of the matter he has pleaded that the learned lower authority’s order is bad in law and the appellants therefore have a good prima facie case in their favour and the appellants’ prayer for dispensation of pre-deposit could be allowed.
3. The learned JDR for the Department has pleaded that while no detailed worksheet as to how the demand of over Rs. 3.00 crores has been worked out has been furnished to the appellants, the fact remains that in law if any element of duty is included in the wholesale cash price and the same has been collected from the customers, the appellants are liable to pay the same to the Government in terms of Section 11D of Central Excises and Salt Act. He has pleaded that the appellants had been filing price lists from time to time wherein they have been showing the wholesale price, the abatement of discount to be made therefrom and also the abatement of excise duty and thereafter they have been showing the assessable value in the last column. He is asked as to how the duty element has been taken to be included in the wholesale cash price where, as pleaded by the learned Advocate, the wholesale cash price itself is below the exemption limit without effecting the abatement of Central Excise duty element notionally. He has pleaded that he does not have any facts in this regard before him to be able to make any plea in this matter.
4. We have considered the pleas made by both the sides. We observe that a duty demand of Rs. 3,33,90,893/- has been raised from the appellants. The duty demand is on the basis that the appellants’ wholesale cash price after allowing the discount included the element of Central Excise duty which has been recovered by them from the customers. As to what is the duty element involved, according to the Department, the same is reflected in their price list wherein they have given the breakup of their wholesale price along with various abatements and have worked out the assessable value in the last column of their price list. This position is not disputed by the learned Advocate. He has pleaded that while there could be various arguments in regard to the inclusion of various elements in the wholesale cash price where the appellants are claiming benefit of exemption notification after abatement of excise duty element to come within the limit prescribed in the notification for exemption, there should be no case for holding that the duty element has come to be included even in cases where wholesale cash price itself after allowing the trade discount was well within the exemption limit as set out in the notification. We observe that the appellants have taken a stand before the learned lower appellate authority that the demand has been raised in cases where the duty element as such while it has been shown to be abated in the price list but the wholesale cash price itself was below the exemption limit. No worksheet or data has been set out either in the show cause notice issued [or] in the order of the learned original authority nor the learned lower appellate authority has felt the necessity to refer to the data before upholding the order of the learned original authority. We observe that while the quantum of demand is required to be reflected in the show cause notice the basis for the same is also required to be set out in the show cause notice. In the present case we observe while the demand has been raised for the period 1991 to 1994, basis that has been relied upon is that in law the duty element which was included in the wholesale cash price and which has been recovered from the customers has to be deposited with the Government under Section 11D of Central Excises and Salt Act. No facts in this regard as to how this duty element could be taken to be included in the wholesale cash price have been set out in the show cause notice and no basis on facts that duty element has been collected from the customers has been laid by providing worksheet. For us, to appreciate the position, it is necessary for us to know as to whether the demand has been raised in cases where the exemption benefit has been taken by the appellants only by virtue of abatement of excise duty element or whether the same has been raised also in cases where without the abatement of excise duty the wholesale cash price was well within the exemption as set out in the notification. In the absence of this we are not able to enter any finding as to whether prima facie the demand is maintainable in law. In the above view of the matter we hold that the learned lower authority’s order prima facie is not proper and for that reason the appellants’ prayer for dispensation of pre-deposit has to be allowed.
5. Since the issue lies in a short compass with the consent of both the parties we have taken up the appeal itself for disposal today.
6. We observe that for the reasons set out above we hold that there has been a denial of principles of natural justice and for that reason the learned lower authority’s order has to be set aside. We therefore remand the matter to the learned original authority for de novo consideration for passing fresh orders after affording the appellants an opportunity of hearing and in the light of our above observations. The appeal is therefore allowed by remand.