1. Appellant was engaged in the manufacture of calcium carbide. Because of the explosive nature of the substance, it was supplied in steel drums. While clearing the goods for payment of duty value of the steel drums namely the container was not included. This was on the ground that the steel drums are durable and returnable. Calcium carbide supplied persuant to 4 Purchase Orders dated 5-6-89, 8-2-90, 28-1-91 and 15-10-91 were valued by the manufacture for the purpose of payment of duty without adding the value of the container in which goods were packed. If the value of the drums were added to the value of the calcium carbide, during the financial year 1991-92, the cost of the goods manufactured would exceed Rs. 2 Crores and appellant would not be entitled to the benefit of exemption Notification No. 175/86. For getting the benefit of that Notification the value of the goods manufactured were shown without value of the container.
2. Show cause notice dated 9-7-93 was issued to the appellant calling for their explanation for realising the differential duty of Rs. 10,70,841/- short paid on account of wilful misdeclaration and suppression of material facts. In reply to the show cause notice, the manufacturer raised the contention that their existed arrangement for the return of durable and returnable packing, namely, the steel drums and so its value cannot be included in the assessable value of the goods manufactured as per the Provisions contained in Section 4(4)(d)(ii) of the Act. In support of this contention manufacturer produced copies of the invoices and other material evidence.
Adjudicating authority rejected the contentions of the manufacturer by adjudication order dated 26-3-96. As per this order the amount of duty demanded in the show cause notice was confirmed and the manufacturer was directed to pay a penalty of Rs. 1 lakh under Rule 173Q of the Central Excise Rules. Aggrieved by this order manufacturer has come up in appeal.
3. The main grounds urged by the ld. Counsel representing the appellant were that there existed an arrangement for the return of durable and returnable packing, namely, steel drums; that there was no suppression of any fact from the departmental authorities so as to sustain demand for an extended period and that there was no loss to the Revenue on account of the fact that had they paid duty on value of the container BHEL would have taken additional Modvat credit to that extent. We shall proceed to deal with these points herein below.
4. Argument advanced by the learned Counsel representing the appellant was that the steel drums were durable and returnable. The fact that these steel drums are durable and returnable is not in controversy. The controversy is whether there was any arrangement between the manufacturer and the buyer for the return of this steel drums. Since the steel drums were returnable their value should not have been added to find assessable value. According to the Department, the contract entered into between the manufacturer and BHEL gave no room for raising a contention that these steel drums were returnable. Agreement specifically stated that purchaser, BHEL was to pay for the container.
No provision was incorporated in the contract for the return of the steel drums. According to the ld. Departmental representative the contracts entered into between the manufacturer and BHEL specifically ruled out the return of the steel drums. In the face of the specific terms in the contract there cannot be and there could not be any arrangement between the parties for the return of the container.
Ignoring the Provisions of the Terms of the contract even if an endorsement is made in the invoice that the containers are returnable that will not nullify the Terms of the contract. Obligations between the manufacturer and BHEL the customer, were covered and were governed by the contract and not by the invoice. Ld. D.R. went on to contend that the nature of the container was investigated by the Department and BHEL clarified the position stating that no container was ever returned by them to the manufacturer. Consequently, he submitted that differential duty claimed by the Adjudicating Officer calls for no interference.
5. As stated earlier the 4 purchase contract entered into between the manufacturer and BHEL which are covered by the order of adjudication, impugned in this appeal are of 3-8-89, 8-2-90, 28-1-91 and 15-10-91.
Purchase order No. 3090027 dated 3-8-87 has an annexure attached to it.
Clause 6 of Annexure which forms part of the Purchase Order stated : "Packing in 100 KG new steel drums on non-returnable basis should be done at an extra cost of Rs.1300 PMT." This Provision contained in the Purchase Order negatived the present argument advanced by the manufacturer that there was an arrangement for the return of the containers which were durable. Even if they were durable and returnable the agreement entered into between the parties made it non-returnable. Second Purchase Order No. 3090061 dated 8-2-90 mentioned that the terms and conditions will be as per Purchase Order No. 3090027 dated 3-8-89. The goods namely calcium carbide covered by this Purchase Order was also to be supplied by the manufacturer in steel drums on non-returnable basis. The third Purchase Order No.3000042 dated 28-1-91 provided that packing charges will be payable by BHEL. Annexure to this Purchase Order stated that calcium carbide should be supplied in conformity with safety regulations as laid by Chief Controller of Explosives, Nagpur, Govt, of India and that this should be packed in water tight and air tight metal containers with double lid packing. The terms of this purchase order further shows that there was no agreement for the return of the steel drums. Actually the terms of the purchase order establishes the contrary provisions when it states that the purchaser will pay for the container. The last purchase order is one bearing No. 3010058 dated 15-10-91. That purchase order specifically provided "packing charges Rs. 1500/- only extra". It shows that the purchaser BHEL was paying charges at the rate of Rs. 1500/- per steel drum. The above mentioned 4 purchase orders thus, make it clear that there was no arrangement/agreement between the parties regarding the return of the packing, namely, steel drums. Not only that there was no arrangement/agreement for the return of steel drums, the agreements were bringing out the contrary namely BHEL were purchasing the calcium carbide alongwith the container and that they were paying for the container at the rate of Rs.1500/- per container.
6. In the face of these specific terms of the contract entered into between the appellant and purchaser namely BHEL while the goods were supplied to BHEL an endorsement was made in the invoices to the following terms :- "containers to be returned to the Factory in good and sound condition at buyer's cost where upon the cost of the containers will be refunded to the buyer".
This endorsement was a self-serving one. It was against the terms of the Contract. It will not bring out an arrangement between the manufacturer on the one hand and the buyer on the other hand for the return of the durable containers.
7. Before issue of show cause notice, the durable and returnable nature of the container was taken up by the Excise authorities with BHEL. BHEL replied by letters dated 6-1-93 and 5-8-93. In the first letter they specifically stated that the firm was supplying calcium carbide duly packed steel drums on non-returnable basis and the cost of the drum was shown in the quotation separately. They further stated that at no point of time they returned any empty drums to the manufacturer. In the second letter dated 5-8-93 it was clarified that the manufacturer included in the invoices a provision that in case the container is returned, its cost will be refunded. But mat was not at the instance of the BHEL. When the manufacturer of calcium carbide wanted to get back the steel drums they could sort out 100 drums from the available lot.
After remitting the required amount towards their costs against sale order No. 192146 dated 6-11-92, 100 drums were taken back by the manufacturer. This was done long subsequent to the period involved in the show cause notice.
8. The evidence discussed above clearly shows that there was no agreement between the appellant on the one hand and BHEL on the other for the return of the steel drums. When the appellant wanted old steel drums they sorted out 100 drums from the lot kept by BHEL and took them away on payment against sale order No. 192146 dated 6-11-92. This sale order shows that a sum of Rs. 14,151/- was paid towards value of 100 empty carbide drums. That sale order of 24-11-92 is outside the period with which we are concerned in this case. The purchase of 100 steel drums from BHEL should be taken as an attempt to create evidence in support of their contention that there was an arrangement for the return of steel drums even during the period namely 19-8-89 to 22-9-92.
In the light of this factual position, decision of the Supreme Court in Mahalakshmi Glass Works (P) Ltd. v. Collector of Central Excise, 1988 (36) E.L.T. 727 on which reliance was placed by ld. Counsel, cannot be of any assistance to the appellant. Ld. Counsel was relying on the observation of their Lordships that the actual return or extent of return is not relevant and what is necessary is that if the buyer chooses to return the packing, the seller should be obliged to accept it and refund the stipulated amount. On the facts of this case, we are clear in our mind that there was no arrangement or agreement between the parties wherein the manufacturer was obliged to accept the returned container and refund its value. Some endorsement made by the manufacturer in this case were self-surviving. They were against the specific terms of the contracts en tered into between the parties. No arrangement or agreement between the seller and the buyer can be spelled out on the facts of this case for the return of steel drums.
The test laid down by their Lordships of the Supreme Court in Government of India v. Madras Rubber Factory [1995 (77) E.L.T. 433] in paragraph 44 of the judgment has not been satisfied in this case. The evidence clearly shows that calcium carbide sold persuant to the 4 purchase orders mentioned earlier were outright sales of calcium carbide and the steel drums. The value of the steel drums could not have been excluded from the valuation under the cover of the provisions contained in Section 4(4)(d)(ii) of the Act.
9. Next argument advanced by the learned Counsel for the appellant was that the Department was not justified in invoking the extended period of 5 years. In support of this contention, it was argued that the manufacturer was regularly filing price lists alongwith the contract and so the excise department was aware of the entire transactions with BHEL. In support of this, it was contended that price-lists in part 2 was filed on 24-10-1991. Alongwith that price-list, it is contended, purchase order was also submitted to the departmental authorities. This statement made by learned Counsel is factually incorrect. Covering letter which accompanied the price-lists in Part II belies this contention. Even if it is taken as filed no purchase order accompanied it. Covering letter dated 24-10-1991 simply stated therein that Price-lists in Part-II is filed. It was not stated therein that the purchase order concluded between the parties was also filed before the authorities. These price-lists, even according to the ld. Counsel, had not been approved by the department by any order. Nor has he got a case that the appellant pursued the matter with the authorities to get the price-lists approved. Falsity of this contention is further brought out from the letter dated 9-2-93 sent by the assessee. That letter was written by the appellant to the Superintendent of Bhopal on 4-2-93. It was candidly admitted therein that no price list was ever filed by them after 29th May, 1989. In view of this categorical admission made by the appellant the contention that price-lists was filed on 24-10-91 alongwith the purchase order cannot be accepted. At no point of time Departmental authorities were made known of the actual terms of the contract under which calcium carbide was sold to BHEL. The self-serving endorsement made by the manufacturer in the invoice could not annul the terms of the contracts. On this factual situation it is crystal clear that there was no arrangement between the parties for the return of the steel drums, in which calcium carbide were packed.
10. The manufacturer was wilfully and intentionally suppressing the terms of the contract from the Departmental authorities with a view to evade payment of duty.
11. Last argument advanced by the ld. Counsel was that, had the manufacturer paid duty on the value of steel drums, BHEL would have taken Modvat credit and thereby Department would not have gained anything., Since, it would have resulted in Revenue neutrality, it was contended, assessee V should not have been attributed with the intention to evade payment of duty and consequently the department could not have invoked the extended period! of limitation. This argument cannot be accepted in view of the decision of the Larger Bench of this Tribunal in J. Yuhshin Ltd. v. CCE, New Delhi [2000 (39) RLT 501]. The argument on this count is also rejected.
12. In view of what has been stated above we find no merit in this appeal. It is accordingly dismissed.