ORDER
C.N.B. Nair, Member (T)
1. This appeal of the Revenue is directed against the Order-in-Original No. 58/92, dated 13-8-1992 of the Collector of Central Excise, Jaipur. The Collector had dropped recovery proceedings initiated under show cause notice, dated 21-4-1992 against the respondents.
2. The respondent is a public limited company. Notice for hearing could not be served on the company as the same is remaining closed for a long time. Accordingly, notice has been served on the respondent under Section 37C of the Central Excise Act, 1944 by affixing the same on the main gate of the Unit by the Central Excise authorities. They have submitted Panchnama prepared evidencing such affixing of the notice.
3. The respondents are manufacturers of sulphuric acid and oleum falling under sub-heading 2807.00 of the Schedule to the Central Excise Tariff Act, 1985. They were collecting 4% to 10% of the price of the goods under heading “S.C.” They explained that these Service Charges were collected towards cost of servicing of tankers for transporting the goods and that the nature of servicing was washing, testing, repairs, replacements of gaskets and accessories of the tankers. However, investigation showed that the collections made under the heading “service charges” was not relatable to any services rendered for the tankers. The levy at a flat rate also indicated that the amount collected was not relatable to any repairs etc. of tankers. Instead, it appeared to be a substitute for the sales-tax which was being recovered till 1989-90 when the respondents became eligible for sales-tax exemption. It was also observed from the agreements and other documents covering the sale of the goods that the purchasers were liable to pay sales-tax and not service charge. In these facts and circumstances, the notice charged that the amount collected as service charge was nothing but a part of the price of the goods and service charge was used only as a device to effect additional realisation of price. The notice, therefore, held that the respondents were liable to pay duty on a value inclusive of the service charges. The notice also proposed recovery of duty during the extended period as facts regarding the service charges were concealed from the department with intent to evade duty. The notice, therefore, proposed recovery of duty amounting to over Rs. 10 lakhs on the additional collection of about Rs. 64 lakhs. The Collector, however, dropped the proceedings holding that the extended period was not invocable in the facts of the case and -that if the respondents were not paying the sales-tax even after collecting the same in the guise of sales-tax, it was for the buyers to agitate the matter for refund rather than for the Central Excise authorities to seek recovery of Central Excise duty on the amounts realised in the guise of service charges.
4. The Revenue are in appeal on the ground that the Collector’s findings regarding time bar as well as on merits of the case are erroneous. They have submitted that the contract for sale and other documents covering the sale and purchase of the goods contained no provision for levy of service charge. Those documents specifically provided for levy of sales-tax. The respondents were using the service charge as a disguise and a device for collecting additional amounts. The appeal contends that additional amounts realised being only additional realisation by the manufacturer, the amounts can be treated only as price of the goods. Therefore, the Collector should have confirmed the duty demand. The appeal submits that the Collector should have remanded the matter for working out the duty on the correct amount representing additional realisation, in case he found some merit in the submission of the respondents that they had carried out some services also, rather than dropping the proceedings. The appeal also submits that as the documents submitted before the Central Excise authorities all gave the impression only about realisation of sales-tax in addition to the price of the goods, the Collector was in error in holding that this was not a case involving suppression of facts.
5. We have heard the learned DR representing the Revenue. He drew our specific attention to the grounds for review as indicated in para 5 of the Order No. 158-R/93, dated 10-8-1993 of the Central Board of Excise and Customs directing filing of an appeal before the CEGAT. We are reproducing this para of the order below:-
5. The Board, on going through the records of the case is satisfied that the Collector’s order dropping the proceedings in the case is not legal and proper for the following reasons:-
(A) It is clear from the facts given below that the assessee did not disclose the fact regarding recovery of additional consideration from the customers in the form of sales tax/service charges in the price lists submitted to the Deptt. or in any other manner. Therefore, the duty demand is recoverable for the extended period beyond six months in terms of proviso to Section 11A(1) of the Act.
(i) The fact that the purchase orders/contract papers did not show recovery of service charges from the customers has been admitted by the assessee.
(ii) The fact that the assessee did not disclose the recovery of service charges in the price lists has also been admitted by the assessee.
(iii) There is no evidence produced on records to show that the assessee had submitted the documents showing recovery of some charges in the name of ‘S.C.’ to the department in respect of the purchase orders submitted by them. The documents submitted by the assessee to the department are those which convey assessee’s acceptance to the customers of the prices and taxes including sales tax mentioned in purchase orders by the customers. The purchase orders placed by the customers giving reference of the prior discussions with the assessee also showed the rates at which sales tax was chargeable and in response the assessee had simply conveyed their acceptance and had submitted copy of such acceptance to the department. Such documents submitted to the department nowhere mentioned ‘S.C.’ or any such recovery from customers.
(B)
(i) Even on merits the demand was sustainable as may be seen from the facts mentioned below and the Collector’s order dropping the demand on merits is also not correct, legal and proper.
(i) The fact that no accounts were maintained of the servicing and repairing carried out on tankers belonging to others or of the expenses incurred in such servicing, has been admitted by the assessee. If at all any such servicing was carried out, the same was done in their own factory premises and with the help of their own employees as admitted by the assessee. There is no evidence on record that the assessee could recover or recovered from the customers any such service expenses over and above the prices fixed for the goods. If at all the assessee incurred some expenses towards maintenance of tankers as a separate activity which had to be recovered from the purchasers of finished goods over and above the values disclosed in the Price Lists submitted to the department, the Collector was required to quantify such expenses keeping in view the number of tankers provided servicing and the amount incurred per tanker for making a comparison between the actual expenses incurred and the recoveries effected from the customers. The recoveries were effected from the customers in the manner as if these were sales tax amounts not having any nexus with the consignment-wise activities. If any, performed on tankers which did not even belong to the assessee.
(ii) The Collector was also required to ascertain the manner in which the expenses on account of servicing of tankers were passed on to the customers during the period when the assessee was paying sales tax and not recovering service charges on this account from the customers before attributing the recovery the service charges from customers to any post manufacturing activity for the period the assessee availed sales tax exemption.
(iii) When the assessee had recovered an extra amount from the customers and had kept the fact of such recovery completely suppressed from the department in all Central Excise statutory records, the Collector was required to examine and quantify whether the whole or any part of such recoveries made from the customers could be treated as a consideration for the sale of goods before coming to the conclusion that if any excess amount had been recovered from the customers then it was for the customers to seek refund from the assessee.
6. We have perused the records of the case and have considered the submissions made by the learned DR. We find that the Collector’s order holding that it is for the buyers to seek refund from the respondents in case the amount collected by way of sales-tax from them is not paid to the sales-tax authorities, is not a correct appreciation of facts. It is agreed on both sides that no sales-tax was payable during the relevant time. In spite of that, the respondents continued to make additional collections giving the impression to the buyers that sales-tax was payable. This amount, therefore, represents an additional realisation of price. As the Central Excise duty is payable on normal price at which the goods are sold, this additional realisation which forms part of the price was also liable to be included in the assessable value of the goods. The Collector’s finding to the contrary was, therefore, erroneous and the order is required to be set aside on this ground.
7. It is clear from the appeal that the documents produced before the Central Excise authorities all gave the impression that the collections were sales tax/service charges. It was not at all disclosed that the collections bore no relation to sales tax/service charges and that they were at the same rate as the sales tax which was prevalent. Even if a certain cost is incurred towards delivery of the goods to the buyers inside the factory it is includible in the assessable value. It is clear from the rate at which the collection has taken place that the realisations made by the respondents cannot be towards service charges of the tankers. In these facts and circumstances, we accept the submission of the Revenue that the order impugned in the present appeal is erroneous with regard to findings on time bar and merits. Accordingly, we set aside the impugned order with the direction to work out the correct amount of duty leviable on the additional collection made by the respondents during the period covered by the notice after giving the appellants an opportunity to present their case regarding the quantum of duty leviable. The appeal is allowed on these terms.