ORDER
K. Sreedhran, J. (President)
1. Appellant manufactures rigid HDPE and PVC pipes and their fittings. They were classifying the produce under Central Excise Tariff sub-heading 3917. Duty was being paid accordingly. Show cause notice dated 27-5-1998 was issued calling upon them to show cause why Central Excise duty amounting to Rs. 64,85,956.00 should not be recovered under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944, why interest at 20% on the duty so claimed should not be recovered under Section 11AB of the Act and why penal action should not be taken against them for violation of the provisions contained in Rule 173Q of the Rules. The appellant disputed the claim made in the show cause notice. After considering the contentions, Commissioner by order in-original No. 22/CE/99, dated 31-3-1999 confirmed the demand made in the notice, directed payment of interest as claimed in the notice and also imposed penalty of a like sum under Section 11AC of the Act read with Rule 173Q of the Rules. This order of the adjudicating authority is under challenge.
2. Learned counsel representing the appellant raised three points for our consideration. The first one was that the Commissioner was not justified in denying the benefit of the decision of the Tribunal in Dai Ichi Karkaria Ltd. v. Collector of Central Excise reported in 1996 (81) E.L.T. 676 to the appellant. The second argument was that the goods manufactured by the appellant should have been classified under Chapter 84 of the Central Excise Tariff Act and not under Chapter 39 as has been done. The third contention was that the cost of the production of the HDPE and PVC pipes was not properly assessed by the Commissioner while confirming the demand of duty made in the show cause notice. We shall proceed to deal with these arguments hereunder.
3. It is settled position of law that assessable value of the goods manufactured should be calculated under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975. In arriving at the assessable value as per that, the duty paid on the inputs should not have been taken into account. That was the decision rendered by this Tribunal in Dai Ichi Karkaria Ltd. v. Collector of Central Excise, 1996 (81) E.L.T. 676. The Commissioner while passing the impugned order did not apply that principle to the facts before him on the ground that that decision of the Tribunal was taken in appeal before the Supreme Court. In the appeal filed before the Supreme Court, their Lordships did not grant any stay of operation of the order passed by this Tribunal. Since there was no order of stay, the Commissioner was bound to follow the law laid down by this Tribunal. As an authority subordinate to this Tribunal, the Commissioner was clearly in error in denying the benefit of that decision to the manufacturer in this case. Now the Supreme Court has dismissed the appeal of the Revenue reported in 1999 (112) E.L.T. 353 and this Tribunal’s order stands confirmed, we direct the Commissioner to requantify the tax liability of the appellant. This order will deal with the first point raised by the learned counsel representing the appellant in his favour.
4. The second point raised by the learned counsel was that the HDPE and PVC pipes manufactured by the appellant are part of Sprinkler Irrigation System (for short, SIS) and so fall under Chapter Heading 84.24 of the Central Excise Tariff Act. Heading 84.24 deals with :
“Mechanical appliances for projecting, dispersing or spraying liquids or powders; Fire extinguishers, whether or not charged; spray guns and similar appliances; steam or sand blasting machines and similar projecting machines.”
Sub-heading 8424.10 relates to mechanical appliances of a kind used in agriculture or horticulture. Sub-heading 8424.91 deals with parts of goods covered by sub-heading 8424.10. Learned counsel argued that the HDPE pipes form part of SIS and so classifiable under sub-heading 8424.91. According to the submission made by the manufacturer before the Commissioner, the HDPE pipes manufactured by them were of 63, 75, 90 and 100 mm diameter having 2 kgs., 2.5 kgs. and 3.5 kgs. pressure. This type of HDPE pipes are in use in the market not as part of SIS system but as pipes for taking liquids. Pipes having diameter of 63, 75, 90 and 100 diameter which can withstand the pressure as mentioned above, are common pipes available in the market. Such pipes when attached to the Sprinkler cannot form part of the Sprinkler System. Any pipe which takes water to the Sprinkler can make the rinkler work and discharge water through the Sprinkler. The pipes that are manufactured by the appellant can, under no circumstances, be considered as part of the Sprinkler Irrigation System. These pipes can be used to take liquid from one point to another. If it is used for taking water from one point and at the other end Sprinkler is added, the Sprinkler will work depending on the water head. That by itself will not make the pipes part of the SIS. So, we overrule the contention raised by the learned counsel that the HDPE pipes manufactured by the appellant are part of the Sprinkler Irrigation System.
5. Appellant furnished details regarding the manufacturing cost incurred in production of HDPE pipes. In arriving at the manufacturing cost, cost of raw material, cost of powder and fuel, labour charges, interest, administrative and other charges were reckoned. To the manufacturing cost so arrived at, they added 10% margin by way of profit. By doing so, the cost of production was arrived at, as Rs. 59.76 per kg. This, even according to the appellant, varied from year to year. In 1994-95, the average cost of HDPE pipe per kg. worked out to be Rs. 58.24. In 1997-98, it came to Rs. 53.40 per kg. The factual data supplied by the appellant was rejected by the Commissioner and he fixed the manufacturing cost and the assessable value of the HDPE pipes from Rs. 92 to Rs. 99.00 per kg. for the various years. No acceptable data has been given by him to support his assessment of this value. The Commissioner should have got acceptable data for modifying the valuation given by the assessee. Since there is no material before us, we are also not in a position to fix the value of the goods manufactured by the appellant for the various periods covered by the show cause notice. In this state of affairs, we are constrained to remand the matter to the Commissioner for fixing the value of the goods manufactured by the appellant strictly in terms of Rule 6(b)(ii) of the Central Excise (Valuation) Rules.
6. In view of what has been stated above, we set aside the order passed by the Commissioner, which is impugned in this appeal in its entirety and remand the issue for de novo disposal in the light of the observations made earlier in this order. We make it clear that a reasonable opportunity of being heard in the matter should be afforded to the assessee before passing the final order.
7. Appeal is disposed of in the above terms.