ORDER
R.K. Abichandani, President
1. Since the points involved in these matters are common, they are disposed of together at the instance of both sides.
Appeal No. E/1975/02-NB(A):
2. The appellant M/s. Pure Drinks Ltd. is engaged in the manufacture of aerated water falling under Chapter Heading No. 22.01/22.02 of the Central Excise Tariff Act, 1985. The appellant owns units, at Cannaught Place, Motinagar and Okhla under a common management. The excisable goods were first transferred to these units or to the duty paid godown of the appellant and later sold from there in the course of wholesale trade. The invoices raised from these places for sale revealed collection of certain rental charges and transport charges for the delivery to the buyers, which were not included in the assessable value. Undisputedly, different units to which stocks were transferred belonged to the same entity.
3. The main issue raised in the show cause notice is in connection with the additional charges in the name of transport charges which included rental charges for the bottles in which aerated water was supplied. In the Order-in-Original the additional consideration received at Rs. 12.50 per crate up to 24-4-96 and Rs. 17/- per crate from 24-4-96 to 27-9-96 as well as freight charges from 28-9-96 were held to be includible in the assessable value and the demand pertaining to that was confirmed and a penalty of Rs. 1 lakh was imposed. The Appellate Commissioner held that the additional charges in the name of transportation charges ought to have been included in the assessable value. Observing that the facts of statement regarding the break-up of the subject charges were not disputed by the appellant, it was held that no prejudice was caused to them. Upholding the Order-in-Original the appeal came to be disallowed.
4. It was submitted on behalf of the appellant that the entire charge in the matter was based on the footing that three units of the appellant were different persons related to each other and that proviso to Section 4(1)(a)(iii) was wrongly invoked. Under Section 4(1)(a)(iii), where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail. The assumption in the Order-in-original that three units of the appellant located at different places were related persons appears to be erroneous because admittedly all the three units belonged to the appellant and no other person natural or juristic was involved to bring about any relationship between persons as contemplated by the provision of Sub-clause (iii) of Section 4(1)(a) of the Act, as was applicable at the relevant time.
5. However, the main controversy centres around the question as to whether there was justification for including rental and transport charges in the assessable value of the goods in question. There is no dispute over the fact that the transport charges in question were not in relation to any removal of goods from the factory gate to the godown or other units of the appellant and that they were transport charges in respect of the transport of the goods from the places belonging to the appellant to the destination of supply to the buyers. It was submitted by the learned Counsel appearing for the appellant that the transport charges were not includible in the value of assessment because cost of transportation of the goods to the buyer charged on equalised basis was not includible in the assessable value even after the amendment made on 28-9-96 in the expression “place of removal” Reliance was placed in support of this contention on a decision of the Supreme Court in VIP Industries Ltd. v Commissioner of Customs & Central Excise, Aurangabad . Construing Section 4 of the Central Excise Act, 1944 the Supreme Court in Paragraph 6 of its judgment held that it was required to be read as a whole and that, under Section 4(1)(a) where the price of the goods is different for different places of removal, each such price was deemed to be the normal price of such goods in relation to “such place of removal”. If the place of removal was the factory, then the price would be the normal price at the factory. If place of removal was some other place like a depot or the premises of a consignment agent and the price was different then that different price would be the price. In cases where the price remains uniform or constant all over the country, it does not follow that value for the purpose of excise changes merely because the definition of the term “place of removal” is extended. It was held that normal price remains the price “at the time of delivery” and “at the place of removal”. In cases of “equalised freight” it remains the same as held in UOI v. Bombay Tyre International Ltd. reported in 1983 (14) E.L.T. 1896 (S.C.) and GOI v. Madras Rubber Factory Ltd. . It is not the case of the department before us that different price was charged from different places of removal by the appellant. The material on record indicates that the freight was charged on equalised basis.
6. It has been held by the Supreme Court in UOI v. Bombay Tyre International Ltd. reported in 1983 (14) E.L.T. 1896 (S.C.) that in cases where the goods are sold by the assessee in the course of wholesale trade at a place or places outside the factory gate, the assessee will be entitled to a deduction on account of cost of transportation of the excisable article from the factory gate to the place or places where it is sold. The proposition that the assessee was entitled to a deduction on account of cost of transportation of the excisable article from the factory gate to the place or places where it is sold as laid down by the Supreme Court in Bombay Tyre International (supra) was reiterated in Escorts JCB Ltd. v. Commissioner of Central Excise, Delhi-II . Thus, the transportation charges were wrongly held to be includible in the assessable value.
7. As regards the rental charges for the bottles in which the beverages were supplied, it is not disputed before us that such rental charges also cannot be included in the value. This Tribunal, in its earlier decision in Universal Drinks Pvt. Ltd. v. Collector of Central Excise, Nagpur reported in 1997 (95) E.L.T. 356 (Tribunal) following the decisions of the Apex Court held, that rental charges of the crate or transport charges in relation to empty crates of bottles of aerated waters were not includible in the assessable value of aerated waters. The Supreme Court in Collector of Central Excise v. Indian Oxygen held that charges like rental for cylinders are for ancillary or allied services and that the activity of supply of cylinders was not an activity of manufacturing gas. Therefore, anything charge for supply of cylinders would not be a price for the manufacture of gas.
8. It is, therefore, evident that the transport charges as well as rental charges were both not includible in the assessable value of the excisable goods, in the facts of the present case. Therefore, no adverse inference could have been drawn, as was sought to be done by the Appellate Commissioner, from the fact that rental charges were included in the transport charges. The genuineness of rental charges or the transport charges has not been disputed, and, by including rental charges in the transport charges, the appellant did not derive any additional gain since both were not included in the assessable value in the facts of this case. For the foregoing reasons, the impugned order cannot be sustained and is therefore, set aside.
Appeal No. E/4286/04-NB(A):
9. So far as the departmental Appeal E/4286/04-NB(A) which emanates from the same Order-in-Original is concerned, the Appellate Commissioner in view of the fact that the appeals were preferred not against the notices which were dropped, observed that the proceedings initiated in the five show cause notices under which the demand was raised had not been dropped, and dismissed the appeal on the ground that it was not sustainable since the appeal was challenging the adjudication order in respect of five show cause notices the outcome of which was already in favour of the department. Strictly speaking, therefore, the question of going into the questions arising in Appeal No. E/1975/02-NB(A) would not arise in this appeal. However, in the context of the issues raised on the aspect of rental and transport charges, the matter would stand concluded in view of our above findings. This appeal is, therefore, required to be dismissed.
Appeal No. E/1976/02-NB(A):
10. It was held in the impugned Order-in-Appeal that the findings made by the adjudicating authority in the Order-in-original following the decision of the Larger Bench of the CEGAT in the case of CCE, Meerut -II v. Prabhat Zarda Factory Ltd. reported in 2000 (119) E.L.T. 191 (Tri.-LB) = 2000 (38) RLT 637 (CEGAT-LB) was justified, and that the cost of transportation under issue was in respect of point up to the place of sale and not beyond the place of sale. The demand in respect of Rs. 26,12,591.74 in respect of transportation charges was, therefore, upheld. The decision in Prabhat Zarda Ltd. rendered by this Tribunal was carried in appeal and the Supreme Court, in its decision allowing the appeal held that the question was covered in Escorts JCB Ltd. (supra) and that the freight charges in respect of sale from the depot would not be includible in the assessable value. For the foregoing reasons, therefore, the impugned Order-in-Appeal will have to be set aside and appeal allowed.
Appeal No. E/1808/02-NB(A):
11. Departmental Appeal No. E/1808/02-NB(A) arises from the same order from which Appeal No. E/1976/02-NB(A) arises and it challenges Order-in-Appeal to the extent that the Order-in-original confirming the demand in respect of the period prior to 28-9-96 was set aside. That demand was in connection with transport charges and the grievance of the department was that rental charges were recovered under the guise of transport charges raising suspicion about the genuineness of the rental charges. In view of the settled legal position, as noticed hereinabove, that the transport charges as well as the rental charges were not includible in the assessable value of the excisable goods. There is no substance in the departmental appeal and it is required to be dismissed.
12. For the foregoing reasons, the impugned orders in E/1975/02-NB(A) and E/1976/02-NB(A) are set aside and the appeals allowed. Both the Departmental Appeal Nos. E/4286/04-NB(A) and E/1802/02-NB(A) stand dismissed.
Appeal No. E/2366/02-NB(A):
13. This departmental appeal is directed against the order dated 31-3-2001 made by the Commissioner dropping the proceedings initiated against the respondent, under the two show cause notices dated 29th September, 1995 and 15th January, 1996 asking them to show cause why Modvat credits availed on the bottles during the periods 3rd March, 1995 to June, 1995 and July, 1995 to October, 1995 be not denied and the amounts mentioned therein recovered from them under Rule 57-I of the Central Excise Rules, 1944 and as to why penal action under Rule 173Q should not be taken against them.
14. The Commissioner was required to verify the factual position regarding inclusion of cost of packing material in the cost of aerated waters, pursuant to the directions given by this Tribunal by its order dated 6-4-99. The Commissioner accordingly took into consideration the break up of cost of production furnished by the Chartered Accountant of the respondent under various heads such as, manufacturing cost, packing cost, over-heads and others, and depreciation. It was held that the details shown in the computation chart tallied with the balance sheet of the relevant years and that it was demonstrated in clear terms, on the basis of records, that the cost of packing materials was included in the value of aerated waters. The Commissioner, therefore, held that the respondent was entitled to Modvat credit.
15. It has come on record that the certificate was submitted by the Chartered Accountant of the party in which it was stated that the value of bottles was included in the value of goods which was also verified from computation chart/balance sheet. The bottles in which aerated water was supplied were of durable nature and as held by the Tribunal in the case of Black Diamond Beverages Ltd. v. CCE, Calcutta-I reported in 1998 (103) E.L.T. 340 Modvat credit was admissible when cost thereof was included by the assessee in the assessable value of aerated water. There is, therefore, no substance in the department’s appeal and it is dismissed.
(Dictated and pronounced in the open Court on 20-4-2005)