ORDER
V.P. Gulati, Member (T)
1. By this application, the applicants/appellants have sought for dispensation of pre-deposit of duty of Rs. 43,86,814/- demanded in terms of the impugned order. After hearing both the sides in the stay petition since it was felt that the matter could be remanded, the appeal was taken up with the consent of the parties by granting waiver of pre-deposit of duty.
2. Shri Sarabeswara Rao, the learned Consultant for the appellants pleaded that the appellants have been denied the benefit of MODVAT Credit in respect of glass bottles and crates used in relation to the manufacture of aerated waters for the reason that the appellants had not included the value of these two items in the assessable value of aerated waters. The Consultant pleaded that the appellants had furnished data to the original authority and had produced a certificate from the Chartered Accountant clearly showing the value of glass bottles and crates having been included as aforesaid and the learned lower appellate authority, he pleaded, had taken note of the appellants’ pleas in his order and not considered the certificate of the C.A. and produced by the appellants. He pleaded that the CA’s certificate shows the inclusion of cost of bottles and crates in the cost of aerated waters as under :
1. Bottles and crates
(Breakage and unserviceable rates) : 33,86,163
2. Depreciation on bottles and crates : 46,81,236
3. Grates repair charges : 4,81,021
Total : 85,48,420
He pleaded that the original authority has misdirected himself in not including the value of breakages of the bottles and the cost of the unserviceable crates for consideration of their plea. The appellants’ plea is that cost of breakages etc. and depreciation could be taken to be indicative of the inclusion of cost of crates and the bottles was mentioned. He pleaded that the appellants had furnished the data which fully showed the particulars of expenditure incurred towards bottles and crates and which should have been included in the assessable value. In any case, he pleaded that the rate of duty on the aerated waters was fixed at a specific rate during the year 1993-94. He pleaded that the question of admissibility of MODVAT Credit in respect of the goods had come up before the Collector’s conference and it was felt during the conference that cost of containers and bottles would have been taken note of while fixing at the specific rate of duty in the case of aerated waters. He pleaded as it is, the board has clarified vide their, circular F. No. 267/52/92-CX. 8, dated 3-9-1992 copy filed in the paper book that MODVAT Credit was available in respect of bottles and crates under Rule 57A. He pleaded that MODVAT Credit is available in respect of packing materials in case cost of the same is included in the assessable value. It has been clarified that MODVAT Credit would be available in case of packing materials only when cost of the same is included in the assessable value in the previous year or in the current year. In the present case, he pleaded that the earlier rate chargeable was a specific rate in 1993-94 and the costs of packing material was taken note of while fixing the specific rate and therefore stipulation of inclusion of cost of packing material could be taken to have been satisfied for the previous year. From 1-3-1994 onwards rate chargeable became ad valorem. He pleaded that the appellants had been including all the cost of the materials. He pleaded that the lower appellate authority in his order has ignored this fact and has not gone into the specifics of the issue whether the cost of packing material has been included. He pleaded that the appellants as it is could have been called upon to produce the evidence in support of their plea in this regard. But the Collector (Appeals) in his findings however has only made a general observation and taken note of the fact that the appellants had taken deposits from the buyers and has assumed that the costs of the packing materials would have been recovered through the medium of deposits. He pleaded that the appellants should have been called upon to explain the position in this regard and produce evidence. He pleaded that the Collector himself in para 13 of his order has dealt with as under :
It is agreed that certain assumptions are made in this order. The first assumption is that the appellants collect deposits from the retailers and the second assumption is that such deposits are interest free. These assumptions are based on the practice prevailing. It is open to the appellants to rebut these assumptions and produce evidence to that effect if they wish to make a fresh bid for MODVAT Credit.
He pleaded that the Collector has not decided on the issue and has left open for the appellants to make a fresh bid for the MOD VAT Credit in respect of bottles and crates. He pleaded that the forum to decide the eligibility was Collector himself and he should have asked the appellants to explain the position rather than going by mere assumptions against the appellants. The Collector in para 10 of his order has held as under :
The Chartered Accountant’s certificate speaks of cost of breakages, depreciation and repairs. What it does not speak is the deposits, in a continuous process, where the soft drinks are supplied again and again in bottles and crates after collecting the deposits it is not possible to ascertain as to who bears the cost of the packaging material The appellants have to furnish a full picture of the transaction, instead of filing certificate from the Chartered Accountant depicting the cost of breakages, depreciation and repairs. It is not possible to arrive at any conclusion on the basis of the Chartered Accountant’s certificate.
He pleaded that the Collector has merely stated that it is not possible to ascertain correct position on the basis of the CAs certificate. He pleaded that the appellants could have been called upon to clear any doubts, if any. He pleaded that the deposits taken are for different reason and not for recovery of cost of packing material. He therefore pleaded that the lower authority’s order is not sustainable in law.
4. Shri Murugandi, the learned DR pleaded that inasmuch as the Ld. lower appellate authority had not given opportunity to the appellants to adduce evidence in support of their plea to sustain a claim for eligibility to MODVAT Credit in respect of the inputs namely, bottles and crates, the matter may be remanded to the Assistant Collector for reconsideration of the issue afresh in accordance with law.
5. We have considered the pleas made by both the sides. We observe that the short issue that falls for consideration is whether the appellants are eligible for MODVAT Credit in respect of bottles and crates. We observe that the appellants before the lower authority has pleaded that under Rule 57A MODVAT Credit could be denied if cost of materials had not been included in the previous year in respect of finished product or in the current year when clearances were made and the claim to MODVAT has been staked. It has been urged that during the year 1993-94 rate of duty was specific and cost of bottles and crates would have been taken into consideration while fixing the specific rate of duty and for that reason it could be stated that cost of the inputs was included in the assessable value for assessment purposes in the previous year. The appellants have also furnished data regarding the breakages, depreciation and the repair charges. We have held in one case where question of breakages of bottles etc. during the course of manufacture came tip for consideration before us for the purpose of MODVAT Credit that so long as the breakages can be taken to have occurred during the course of manufacture, MODVAT Credit would be available as breakages take place during the course of manufacture after a material had been taken into vise subject to other provisions of law. The learned Collector should have applied his mind in respect of these aspects i.e. breakages and depreciation. Whether it is to be assumed that the cost of packing material has been taken into account during the year 1993-94 while fixing the specific rate of duty also requires to be addressed. It is a relevant factor which should have been gone into. The learned lower authority has taken note of the deposits taken. He himself has stated in his order that there are assumptions. We are afraid, the assumptions should have been made on some rational basis. The appellants should have been called upon to furnish the data in regard to the deposits taken and also explain the position whether the same can be reckoned towards recovery of cost of bottles and crates the besides, the appellants should have been called upon to make available the data for the relevant time in regard to the inclusion of cost of materials. The learned Collector has left open all the issues as observed in para 13 of his order in the following terms :
“it is open to the appellants to rebut these assumptions and produce evidence to that effect if they wish to make a fresh bid for MODVAT Credit”.
The learned lower authority has not examined the issue in depth and we therefore, hold that his order is not a proper order. We, therefore, set aside the order and remand the matter for reconsideration of the issue in the light of our observations above in. accordance with law after affording the appellants reasonable opportunity of being heard.
