PETITIONER:
MYSORE ROLLING MILLS (P) LTD.
Vs.
RESPONDENT:
COLLECTOR OF CENTRAL EXCISE, BELGAUM
DATE OF JUDGMENT18/02/1987
BENCH:
MISRA RANGNATH
BENCH:
MISRA RANGNATH
PATHAK, R.S. (CJ)
CITATION:
1987 AIR 1488 1987 SCR (2) 318
1987 SCC (1) 695 JT 1987 (1) 476
1987 SCALE (1)382
ACT:
Central Excise and Salt Act 1944/Central Excise Rules,
1944 Sections 4, 11A & 35L/Rules 6, 9 & 10--Excise
duty--Handling charges to be added for computation of
duty--Manufacturer suppressing disclosure of handling
charges--What is period of limitation applicable.
HEADNOTE:
Between September 1974 and May 1977 the appellant re-
ceived more than 6 lakh rupees from its customers by issue
of debit notes over and above the amounts received under
regular invoices for manufacturing aluminium wire rods on
job basis on their behalf.
The Excise Authorities issued notice under Rule 10(i)(c)
of the Central Excise Rules, 1944, to the appellant to show
cause why the aforesaid amount called as "handling charges"
should not be added to the invoice price and differential
duty recovered. The Assistant Collector confirmed the demand
after cause was shown which was upheld by the Appellate
Collector and confirmed by the Tribunal.
In the appeal to this Court, on behalf of the appellant
it was contended; (1) that on the basis of Rule 6(b)(i) of
the Valuation Rules the statutory levy price of aluminium
should be adopted as being the price of comparable goods and
with effect from 1.10.75 the assessable value should have
been fixed under proviso (ii) to s.4(1)(a) or s.4(1)(b) at
the same amount,. (2) that Rs.60 which was collected as
handling charges was not to be taken into account for com-
puting duty and (3) that the notice was barred by limita-
tion.
Dismissing the appeal,
HELD: (1) With effect from 1.10.1975 a new s.4 has been
inserted into the Central Excise & Salt Act, 1944 providing
for the mode of valuation. The period involved in this
appeal is from 27.9.1974 upto 31.5.1977. Therefore, the
period upto 30.9.1975 would be covered by the old s.4 and
from 1.10.1975 till 31.5.1977 the provisions of new section
would apply for determining the assessable value. [320E]
319
(2) As per arrangement between the appellant and its
customers, the appellant was permitted to lift the allotted
ingots directly and after carrying out the manufacturing
process it used to deliver the same to the customers.
[321C-D]
(3) There has been no sale of the material between the
appellant and the customers. The appellant was collecting
Rs.600 per metric ton as conversion charges and Rs.60 per
metric ton as handling charges. [320G]
(4) The handling charges were intended to cover the
appellant's expenses in lifting the ingots. The Tribunal has
come to the right conclusion in holding that the handling
charges represented pre-manufacturing cost and became part
of the value for computation of duty. [321D-E]
(5) Rule 9 which corresponds to s.11-A of the Act pro-
vided a period of one year for taking of proceedings while
Rule 10 corresponding to the present s. 11 of the Act pre-
scribed a period of three months for such purpose. With
effect from 6.8.1977, the period of six months was substi-
tuted for the period of three months and the period of five
years substituted for the period of one year. [321B-C]
(6) The rule is intended to relate back and cover a
period of five years from the date jurisdiction under the
rule is invoked. The provision, is therefore, retrospective
in operation. [321G]
(7) Once the rule comes into existence and jurisdiction
under the rule is invoked, it has got to cover a period upto
five years preceding the date of issue of notice. [321H]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4542 (NM) of
1985.
From the Order dated 10.6.1985 of the Customs Excise and
Gold (Control) Appellate Tribunal, New Delhi in Appeal No.
ED(SB) (T) A. No. 88 of 1980-A.
M. Chandrasekharan, V.J. Francis, N.M. Popli for the Appel-
lant.
B. Datta, Additional Solicitor General, Ms. S. Relan and
Mrs. Indra Sawhney for the Respondent.
The Judgment of the Court was delivered by
320
RANGANATH MISRA, J. This appeal under section 35-L of
the Central Excises and Salt Act, 1944 is directed against
the decision of the Customs, Excise and Gold (Control)
Appellate Tribunal upholding the decision of the Appellate
Collector of Central Excises, Madras. The short facts rele-
vant for disposal of this appeal are that the appellant
manufactures aluminium wire rods out of duty paid E.C. grade
aluminium ingots on job basis on behalf of various custom-
ers. Between September 1974 and May 1977 it received a sum
of more than 6 lakh rupees from customers by issue of debit
notes over and above the amounts received under regular
invoices. The Excise Authorities came across 966 such debit
notes and on the basis thereof called upon the appellant to
show cause why that’amount which was said to be handling
charges should not be added to the invoice price and differ-
ential duty thereupon be recovered. The Revenue took the
stand that there was suppression of information on the part
of the appellant with regard to collection of handling
charges and, therefore, the notice was issued under Rule
10(i)(c) of the Rules framed under the Act. The Assistant
Collector confirmed the demand after cause was shown. The
Appellate Collector upheld the demand by dismissing the
appeal. The Tribunal has confirmed the Appellate order.
There is no dispute that with effect from 1.10.1975 a
new Section 4 has been inserted into the Act providing for
the mode of valuation. In view of the fact that the period
involved in this appeal is from 27.9.74 upto 31.5.77, the
period upto 30th of September, 1975 would be covered by the
old Section 4 and from 1.10.75 till 31.5.1977, the provi-
sions of new Section would apply in the matter of determin-
ing the assessable value. It is not disputed that from
15.7.75 the levy price of aluminium had been statutorily
fixed at Rs.7062 per metric ton. It is the contention of the
appellant that on the basis of Rule 6(b)(i) of the Valuation
Rules the price of Rs.7062 should be adopted as being the
price of comparable goods and with effect from 1.10.1975 the
assessable value should have been fixed under proviso (ii)
to Section 4(i)(a) or Section 4(1)(b) of the Act at the same
amount. The admitted position is that there has been no sale
between the appellant and the customers of the material. The
appellant was collecting Rs.600 per metric ton as conversion
charges and Rs.60 per metric ton as handling charges. The
dispute in the appeal is confined to the question as to
whether Rs.60 per metric ton collected as handling charges
could be added for computation of duty.
Two contentions are advanced in support of the appeal;
firstly, Rs.60 which was collected as handling charges was
not to be taken into
321
account for computing duty and secondly, the notice dated
13th of October, 1978 had been issued more than a year after
the last date of the period in question and was barred by
limitation. Prior to 6.8. 1977, Rule 9 which corresponds to
Section 11-A of the Act provided a period of one year for
taking of proceedings while Rule 10 corresponding to the
present section 11 of the Act prescribed a period of 3
months for such purpose. With effect from 6.8.1977, when the
rules were amended, the period of six months was substituted
for the period of three months and the period of five years
substituted for the period of one year. The Tribunal has
held that the period of five years was applicable to the
facts of the case on the basis that it is a case of suppres-
sion. It is the case of the appellant that for convenience
the arrangement between the appellant and its customers was
that instead of the customers collecting the ingots on the
basis of allotment at their respective factories and then
transporting the same to the appellant situated at Belgaum
in the State of Karnataka, the appellant was being permitted
to lift the allotted ingots directly and after carrying out
the manufacturing process it used to deliver the same to the
customers. The handling charges were intended to cover the
appellant’s expenses in lifting the ingots. The Tribunal
has, therefore, come to the right conclusion in holding that
the handling charges represented pre-manufacturing cost. We
agree that the Tribunal came to the appropriate conclusion
in holding that the handling charges became a part of the
value for computation of duty.
The Tribunal has recorded a finding that the appellant
had suppressed the disclosure of receipt of handling charges
and, therefore, the longer period of limitation applied. The
same view had been taken by the departmental authorities. We
see no justification to take a different view on the facts.
The only other submission of the appellant which remains
for consideration is the tenability of the contention that
the period of limitation under the old provision having
expired the five year rule which has been applied was not
available to be applied. Undoubtedly, the rule is intended
to relate back and cover a period of five years from the
date jurisdiction under the rule is invoked. The provision
is, therefore, retrospective in operation. It is not the
stand of the learned counsel for the appellant that only
when a period of five years has elapsed from the date of
introduction of the rule, jurisdiction under the rule can be
exercised in respect of that preceding period of five years.
Once the rule comes into existence and jurisdiction under
the rule is invoked it has got to cover a period upto five
years preceding
322
the date of issue of notice. The Tribunal has endorsed such
action of the departmental authorities. The plea of limita-
tion has no force.
Both the contentions in support of the appeal fail. We
dismiss the appeal but without costs.
A.P.J. Appeal dis-
missed.
323