1. The above appeal arises out of the order of the Collector of Central Excise, Aurangabad confirming a duty demand of Rs. 1,15,647/- on the appellants herein who are manufacturers of pharamaceutical machinery and spare parts thereof, and imposing a penalty of Rs. 10,000/-. The demand has been confirmned for the reasons that the value of investment on plant and machinery by the appellants exceeded Rs. 20 lakhs and, therefore, they were not entitled to the benefit of small scale exemption in terms of Notification 77/83 (sic), that they had not included packing and forwarding charges in their assessable value although they had recovered the amount from their customers and that they cleared the goods without the cover of gate pass and without accountal in statutory records during the period 1984-85 to 1988-89.
2. We have heard Shri J.P. Kaushik, learned Counsel and Shri D.S. Negi, learned SDR. According to the Department, the value of plant and machinery as seen from the balance sheet for the year 1985-86 was Rs. 21,22,725/- as on 25-12-1985. Since the exemption limit of Rs. 20 lakhs contained in Notification 77/85 was crossed on 20-12-1985 therefore, the clearance of goods during the period 20-12-1985 to 31-3-1986 should have been only on payment of duty. The appellants' submission is that the value of plant and machinery upto 31-12-1983 was Rs. 15,60,893/- and additional investment of Rs. 21,772/- was made from 1-1-1984 to 31-3-1984 totalling Rs. 15,82,665/-. They contend that the inclusion of a figure of Rs. 1.50 lakhs as value of additional machinery installed between 1-1-1984 to 31-3-1984 is not correct because this figure does not appear either in their balance sheet or in the Chartered Accountant's certificate. However, we find that the figure of Rs. 1.50 lakhs has been taken from the work sheet furnished by the appellants vide their letter dated 16-2-1989 and their plea that this figure has been added by the excise authorities and is not in the handwriting of any of their employees cannot be entertained at this stage when such a claim was not made before the adjudicating authority. Further, the work sheet (which we have perused) does not contain any details of break-up which is the case regarding other items shown in the list reproduced as Annexure C to the show cause notice. We have also gone through the certificate dated 12-12-1989 of the Chartered Accountant stating that the total cost of plant and machinery is Rs. 21,22,725/- which has been arrived at after debiting the plant and machinery account with a sum of Rs. 88,867/- on account of pre-operative expenses and Rs. 62,022/- on account of expenditure incurred on electric installation. This shows that while on the one hand, the Chartered Accountant confirms that there was an investment of Rs. 1,50,889/- (Rs. 88,867/- + 62,022/-), the appellants are trying to contend, on the other hand, that there was no such investment. Since the balance sheet which is a reliable document for the purpose of arriving at the value of investment on plant and machinery shows the figure of Rs. 21,22,725/- and this is further supported by the Chartered Accountant's certificate dated 12-12-1989, we cannot accept the appellants' contention that the value of plant and machinery was only Rs. 19,18,691/-. Since the investment limit of Rs. 20 lakhs on plant and machinery was exceeded, the appellants are held ineligible to the benefit of exemption under Notification 77/85. However, as highlighted by the appellants' Counsel, the above Notification was amended by Notification 118/75 revising the slabs of exemption.
Therefore, while confirming the duty liability, we direct that the duty amount shall be reworked in accordance with the amended Notification.
(ii) Inclusion of cost of packing and forwarding charges in the assessable value of the goods manufactured by the appellants The cost of packing and forwarding charges has been included on the assumption that the pharmaceutical goods and machinery are generally sold in packed condition. Firstly, there is no basis for such a finding and it is a very vague observation, unsupported by any evidence. Secondly, there is no finding that the appellants brought their goods to the factory gate in a packed condition. They have specifically pleaded that their products did not require any packing, goods were delivered to customers without any type of packing whenever the customers wanted packing, packing was done in wooden boxes which was in the nature of a special packing and, therefore, the cost thereof could not be form part of assessable value, that their sales invoice would clearly establish that they had cleared most of their goods without any packing and no charges were recovered on this account in their invoices. The adjudicating authority has not disputed that some of the machinery was sold without packing. This being the position, viz., that the goods were capable of being brought to the market without any packing, we hold that the cost of packing and forwarding charges cannot be included in the assessable value and, therefore, set aside the finding of the Collector on this issue.
(iii) Clearance of goods without cover of gate passes and without accountal in statutory records during the years 1984-1985 to 1988-1989 The defence of the appellants is that these were goods which were originally cleared after payment of duty but received back from customers for repairs/reconditioning, etc. This argument is not tenable, since the appellants have not followed any procedure for bringing back excisable goods cleared from the factory, as required under Rule 173H of the Central Excise Rules, 1944. The delivery challans-cum-gate passes shown to us only shown that certain machines were sent to the appellants for the purpose of repairing; however, there is no co-relation between these documents and the goods found to have been cleared without payment of duty during the relevant period. In the absence of any such co-relation, we do not agree that no duty liability is to be fastened on goods removed without cover of duty paying documents. We, therefore, hold that the finding of the Collector on this issue requires to be sustained and accordingly do so.
The appellants' contention that the assessable value has to be redetermined and the duty element recomputed is accepted since the appellants collected only the price and did not separately collect duty element although duty was payable. Therefore, following the ratio of the Tribunal's order reported in 1998 (25) RLT 19, in the case of Metro International v. CCE, New Delhi, we hold that the total price realised must be regarded as cum-duty price and duty element has to be deducted.
(i) The value of investment on plant and machinery having exceeded Rs. 20 lakhs ceiling limit, the appellants are liable to pay duty.
(ii) Duty has to be redetermined by the jurisdictional adjudicating authority by applying slab rates prescribed in Notification 77/85 as amended by Notification 118/85.
(iii) Cost of packing and forwarding charges are not includible in the assessable value of the appellant's goods.
(iv) Duty is payable on clearances reflected in the delivery challan book maintained for clearance without cover of gate passes.
(v) The sale price has to be treated as cum-duty price and, therefore, the assessable value and duty demand has to be redetermined and the demand requantified by the jurisdictional adjudicating authority to whom the matter is remanded for this purpose.