ORDER
K.S. Venkataramani, Member (T)
1. This appeal is directed against the order dated 27-2-1987 passed by Collector of Central Excise (Appeals), Bombay. The facts briefly are as follows :-
M/s. International Computers (India) Manufacturing Co. Limited are engaged in the manufacture of office machines and apparatus and computers falling under Tariff Items 33D and 33DD respectively of the Central Excise Tariff. The goods are assessable to duty on ad valorem basis. The appellants filed price lists and had claimed deductions on account of marketing and administration costs, finance costs, selling profits, and excise duty. In addition they submitted that packing is entirely to the account of the buyer and, therefore, does not form part of the assessable value and is, therefore, not shown in the price. The price lists were approved provisionally. After the pronouncement of the judgment by the Hon’ble Supreme Court in the Bombay Tyre International case, the Assistant Collector proceeded to finalise the price lists and show cause notices had been issued which intended to disallow the deductions claimed on account of marketing and administration costs, finance costs, selling profit etc. The Assistant Collector after following the adjudication proceedings allowed deduction on account of duty and disallowed the rest. He also confirmed the demands for Rs. 43,13,683.70 and Rs. 1,51,60,731.16.
The Collector (Appeals) upheld the Assistant Collector’s order leading to the present appeal.
2. Shri T.K. Ramasubramanyam, learned Counsel for the appellants submitted that the appellants sell the computers directly to customers who put them to use. There had been orders by the Assistant Collector dated 20-7-1989 directing them to file price list in Part V prescribed for cases where there is direct retail sales to customers. This recognises the appellants’ sales pattern in which case, the learned Counsel urged, the Assistant Collector was bound to grant suitable deductions from the retail price in terms of Rule 6(a) of Valuation Rules and arrive at reduced wholesale price and in fact on an appeal from the Assistant Collector’s order, the Collector (Appeals) in his order dated 20-4-1990 had remanded the matter with this very direction to the Assistant Collector. The learned Counsel contended that the impugned order of the Collector (Appeals) herein endorses the Assistant Collector’s decision without disclosing why the deductions claimed from the retail price are not permissible. If they were to sell the goods through wholesale dealers, the learned Counsel pointed out, they would not have had to incur these elements of cost, and their price would have been lower. There is also evidence of sales according to the general practice in the trade as seen in their sales to Public Sector Customers like LIC to whom higher discount had been offered on account of bulk orders. Such discounts, it was contended, should be allowed. It was submitted that for the price lists for the subsequent period, the Department had allowed such deductions. The learned Counsel also cited and relied upon the Tribunal decision in the case of Modi Zerox v. Collector of Central Excise – 1989 (40) E.L.T. 481, that sale even of one machine to a customer is sale in retail. In the same context, the learned Counsel cited Government of India order in revision in the case of Kelvinator of India Ltd. – 1982 (10) E.L.T. 552 (G.O.I.). It was further argued by the learned Counsel that the lower authorities have erred in including the packing cost in the assessable value. The goods were packed in the extra packing of wooden crates only on specific request of customers who wanted it for protection of the goods in transport. Hence, the cost of such packing, the learned Counsel contended, is excludable from the assessable value.
3. Learned Senior Departmental Representative Smt. C.G. Lal contended that the Supreme Court in Para-33 of its decision in Union of India v. Bombay Tyre International – 1983 (14) E.L.T. 1896 had observed that the central principle for the determination of the value of the excisable goods should be the same, whether the case falls under Items (a) and (b) of Section 4 of Central Excises and Salt Act, 1944 and hence the learned Senior Departmental Representative urged, the argument of the appellants that the Supreme Court decision covers only Section 4(1)(a) Valuation, is unacceptable. The appellants cannot claim deduction of all the elements of cost listed in the price list, and each of them has to be shown to the satisfaction of the Assistant Collector to be permissible deductions in order to determine assessable value. As regards packing charges the learned Senior Departmental Representative urged that the issue had been settled by Supreme Court decisions especially the case of Union of India v. Ponds India Ltd. – 1989 (44) E.L.T. 185 wherein Supreme Court has held that the amount of packing cost necessary to make the goods marketable has to be included in the assessable value. It is not material, the learned Senior Departmental Representative contended, whether the packing is of secondary nature or that such packing is at customer’s request. Hence, in this case as the goods are cleared in crates at the factory gate, their cost has rightly been included in the assessable value, submitted the learned Senior Departmental Representative.
4. The submissions made by both the sides have been carefully considered. On the question of determination of wholesale price from the retail price to buyers, it is seen that in the earlier order of the jurisdictional Assistant Collector of October, 1975, there is a finding that the computers are not sold in wholesale by the appellants but are sold to customers and hence the Assistant Collector had directed the filing of price list in Form V prescribed for such sales. This view is reiterated in a subsequent order of Assistant Collector dated 20-7-1987, but on appeal the Collector (Appeals) in his order dated 20-4-1990 remanded the matter to the Assistant Collector to consider afresh the case under Rule 6 (a) of the Valuation Rules for finding out the deductions from retail price which have to be made according to that Rule to arrive at the notional wholesale price. From the above, it is evident that in the facts of this case, the ratio of the Tribunal decision in Modi Xerox v. Collector of Central Excise -1989 (40) E.L.T. 481 will be applicable that sale of even one machine direct to a consumer is not treatable as wholesale trade and it was also held therein that dealers’ margin is excludable even if retail sale is made directly to consumers. An exercise in terms of Rule 6(a) in respect of allowing reasonable deductions from the retail price is required to be made which does not seem to have been properly undertaken in this case by the lower authorities. It is found that there are in fact certain instructions issued by the Ministry of Finance at the time of promulgation of Central Excise (Valuation) Rules, 1975 vide F. No. 312/1/75-CX. 10, dated 8-8-1975. On a clarification relating to Rule 6(a), it has been stated that where the goods are sold by the assessee in retail, Rule 6(a) provides the authority for determination of value on the basis of the retail price after making suitable reduction. The amount to be reduced, says the instruction, should be ; such as to bring the net value in conformity with the price at which the assessee : would have sold such goods in the course of wholesale trade to an unrelated buyer. It is further clarified that the amount to be reduced from the retail price may be determined keeping in view the margin of difference between the assessable value and the retail price of comparable goods, the assumption being that roughly the percentage of difference between the assessable value and retail price of comparable goods will not vary to a large extent. The instruction suggests that where this margin of difference varies considerably, some averaging may have to be done. There is, therefore, need in this case for the Assistant Collector to have regard to the scope of Rule 6(a) in the light of the Department’s own understanding as above, and to determine the assessable value in this case by deducing the wholesale price after making suitable reduction from the retail price. The appellants on their part should also furnish material to the Assistant Collector to enable him to redetermining on the above lines. In this context we also note the submission made before us that in subsequent price lists the Department had in fact adopted the above method of deducing the wholesale price. It is ordered accordingly.
5. In respect of the question of inclusion of packing charges, the Collector (Appeals) has disallowed it for the reason that merely because the customers pay for it, the charges cannot be excluded and the Collector (Appeals) has further found that it is not the case of the appellants that this is secondary packing or special secondary packing. The appellants say that the normal method of supplying the goods at factory gate is to mount the goods wooden planks and the goods are covered with polythene sheets. They say there are customers who have taken delivery in that mode of packing. There are however, other customers, they say, make special request for additional packing for the purpose of safe transport. Then the goods are packed in a wooden case in addition to the wooden plank with or without polythene covering and the customer is charged extra for it. The appellants contend that such special packing at customer’s request meant for safety of goods in transport, is not includible. Examining this issue it is seen that now it is well settled by the Supreme Court decisions on the subject including Collector of Central Excise v. Ponds India – 1989 (21) Scale 849, the correct position is that the cost of that much of packings, be they primary or secondary, which are required to make the articles marketable would be includible in the value. The Supreme Court further noted that as to how much packing would be necessary to make the goods marketable is a question of fact to be determined by the application of the correct approach. Packing, which is primarily done or mainly done for protecting the goods, and not for making the goods marketable should not be included, observed the Supreme Court. Hence, in the present case it is for the Assistant Collector to apply the law laid down by the Supreme Court and adopt the correct approach in the factual context of the packings employed by the present appellants and the rationale therefor, and then the Assistant Collector may decide whether cost of such packing is in-, cludible in the assessable value or not. The appellants should also furnish the necessary material in this regard to substantiate their claim regarding the nature of the packing. This issue is also accordingly remanded to the Assistant Collector in the above terms.
6. As regards discounts and admissibility thereof, since as above the appeal is being remanded, it may yet be mentioned that the Supreme Court in its clarificatory order on Bombay Tyre International decision – 1984 (17) E.L.T. 329 has laid down that discounts allowed in the trade (by whichever name such discount is described) should be allowed to be deducted, having regard to the nature of the goods, if established under agreements or under terms of sale, or by established practice, the allowance and nature of the discount being known at or prior to the removal of the goods. Such trade discounts shall not be disallowed, observed the Supreme Court, only because they are not payable at the time of each invoice or deducted from the invoice price. It is, therefore, felt that the Assistant Collector may usefully bear in mind the above decision of the Supreme Court on this aspect in the fresh proceedings in this case.
7. The appeal is accordingly remanded to the jurisdictional Assistant Collector to redetermine assessable value afresh in the light of the above discussions in accordance with the law and after hearing the appellants in the matter.