J.H. Joglekar, Member (T)
1. The appellants manufacture Glazed Tiles paying duty in terms of Notification No. 175/86-C.E., dated 1-3-1986. Show cause notice dated 29-4-1993 made a number of allegations and alleged that on the various grounds enumerated therein, duty amounting to Rs. 38,94,376.69 had been short levied. It was separately alleged that the assessee had manufactured certain machinery for installation of the factory on which duty had not been paid. That duty amounting to Rs. 69,922.07 was also demanded. After hearing the assessees, the Commissioner passed orders confirming the demands and imposing penalty of Rs. 5 lakhs on the assessee. He confiscated the plant building etc. but permitted the redemption on payment of Rs. 1 lakh. Against this order the present appeal has been filed.
2. We have heard Shri J.C. Patel for the appellants and Shri U.V. Gaitonde for the revenue.
3. The assessees cleared certain broken glazed tiles without payment of duty. Demand amounting to Rs. 6,02,099.58 is on that count. Shri J.C. Patel relied upon the Tribunal Judgment in the appellant’s own case reported in 1998 (99) E.L.T. 425 in which the Tribunal had held such broken tiles as not excisable. Following the Judgment we hold that this portion of the demand does not sustain.
4. The assessees were accepting advances from customers. Notional interest was calculated thereupon and the duty calculated on adding interest to the assessable value. The duty was quantified at Rs. 7,44,452.23. Shri J.C. Patel relying upon the Tribunal Judgment in the case of VST Industries Ltd. v. CCE 1998 (97) E.L.T. 395 and succeeding judgments submits that such addition to value can be done only where it is shown that the fact of charging of advance resulted in depression of prices to that particular buyer. In dealing with the various charges against the present assessees elsewhere in the show cause notice, it has come that within the same region there was no change in the prices declared for various customers. The taking of advances is a trade practice. Such practice may not result in specific equivalent depression in the price. In this light the Supreme Court has given the requirement of the Department establishing nexus between the charging of advance and depression of prices. The bare allegation as is made in the present proceedings does not suffice to discharge this burden. Applying the ratio of the cited Judgment, we hold that demand for Rs. 7,44,452.23 does not sustain.
5. The assessees had filed separate price lists for three regions. In the show cause notice it is alleged that separate prices could not be charged on the basis of regions, but that the highest price in any region must prevail for all clearances. This conflict has been laid to rest in a number of Judgments, the principle being that in the case of Goramal Hariram Ltd. v. CCE 1994 (69) E.L.T. 269. The same view has been held in the later Judgment in the case of CCE v. Punjab Chemicals & Pharmaceuticals 1999 (107) E.L.T. 57. Therefore to the extent of Rs. 14,429/- also in the appeal succeeds.
6. Apart from selling at the factory gate, the assessees were also selling goods from their depot. The depot prices were higher than the factory gate prices. It was the case of the buyers that this was necessitated by ‘certain overheads. Demand to the extent of Rs. 5,37,254.77 was on the ground that irrespective of the factory gate price, the higher prices at the depot gate should be made the basis for calculation of duty. Prior to the amendment of Section 4 wherein the phrase “place of removal” was re-defined in 1996, the law in this respect was well set and that was where there was the price prevailing at the factory gate the same would apply even where the bulk of the sales were at the depots at a higher price (Indian Oxygen Ltd. v. CCE) 1988 (36) E.L.T. 723. The demand confirmed on this ground also fails. On the same grounds the demand to the extent of Rs. 6,46,511.46 in the case of sales made through C & F agents also does not survive.
7. When these demands are not upheld, the residual charge that the assessees had exceeded the limits specified in the exemption notification thereby rendering dutiable the goods earlier cleared without payment of duty also fails and the consequential confirmation of duty does not sustain.
8. The last allegation in the show cause notice was that the assessees manufactured certain machines for captive consumption. This information was gained by the audited report. The auditor placed the expenditure on this account under the capital expenditure. Before the Commissioner and before us also the claim made is that the machinery was attached to the earth and could not be called as goods. We find little merit in this plea. The description given in the audit report does not suggest embedded state. Since the financial accounts are not documents required to be submitted to the department the claim of the appellants that there was no suppression also has no merit. It has to be held that the duty amounting to Rs. 68,922.70 was correctly demanded and confirmed.
9. Except for duty amounting to Rs. 68,922.70 the appeal succeeds and is allowed with consequential relief. The penalty imposed upon the appellants is remitted. The orders of confiscation of the plant and machinery etc. are also set aside.