Judgment:
1. M/s. Amis Oxygen Pvt. Ltd., Baroda have filed an appeal being aggrieved from the order-in-original No. 17/MP/85, dated 29-6-1985 passed by the Collector of Central Excise, Baroda. The appellants are engaged in the manufacture of Industrial Gases namely Oxygen, Acetylene, Nitrogen gas etc. falling under tariff items 14H and 68 of the first schedule to the Central Excises and Salt Act, 1944, under the Central Excise licence in form L-4 held by them for such manufacture.
The Unit was selling their product, from the factory gate and through their depots situated at Ahmedabad, Rajkot and Udhna as well and they had filed price list in Part-I except for M/s. I.P.C.L., Baroda in which case price list had been filed in Part-II as they had entered into contract with them. Scrutiny of the records/documents revealed that the Unit had issued invoices covering the sales of their products 'as aforementioned and had also issued separate invoices (debit notes) representing the "handling charges" and "cylinder detention charges".
The appellants had filed price lists under Rule 173C of the Central Excise Rules, 1944 for their products and the invoices issued by them reflected prices mentioned in the price lists and duty was paid on the basis of these approved prices. The amount representing "handling charges" and "cylinder detention charges" recovered by issuing separate invoice (debit notes) as mentioned above were not included by them in the prices declared by them to the Central Excise authorities nor had they declared the recovery of said charges before the authorities while filing the price lists. The scrutiny of "General ledger" maintained by the Unit during the year 1979 to 1984 further revealed that the extra charges by way of issuing separate invoices (debit notes) were recovered by them mainly under the following heads :- The appellants had received the following amounts during the period April 1979 to February 1984.(2) Loading & unloading charges ...
Rs. 4,41,001.60(3) Cylinder detention charges ...
Rs. 13,92,114.00 ----------------- It was further found that the freight charges actually incurred by the appellants were found to have been debited in the head "Freight and Transport" and that the Unit did not incur any such expenses on extra charges recovered as above. The authorities felt that all these charges were required to be included in the prices as per the provisions of Section 4 of the Central Excises and Salt Act, 1944 read with Rule' 5 of the Central Excise (Valuation) Rules, 1975. The statements of S/Shri Siddarthbhai A. Patel, Director of the Unit and Prakashbhai H. Shah, Chief Accountant of the Unit were recorded. In his statement Shri Siddarthbhai A. Patel had stated that the invoices were prepared on the basis of approved price lists and they were issuing debit notes on the same day when the invoices were issued for the extra services rendered to the buyers such as loading/ unloading charges, handling charges, transportation charges, octroi and such cost of transportation. He stated that those debit notes were not issued in all cases but are issued when such services of extra cost were availed of by the buyers.
The debit notes were issued at a consolidated rate of charges per cylinder which were not bifurcated in the debit notes and the same were not declared in the price lists filed before the Central Excise authorities. The goods were transported from their factory in their vehicles as well as through the vehicles of transport company. The prices declared before the Central Excise authorities were not inclusive of transportation charges and the prices were ex-factory. A Show Cause Notice was issued for contravention of the provisions of Rule 173C of the Central Excise Rules, 1944 read with Rule 5 of the Central Excise (Valuation) Rules, 1975, Rule 173F read with Rule 9(1) of the Central Excise Rules, 1944 inasmuch as they failed to file correct price list, as they did not take into account extra charges as referred to above in their prices, failed to determine their liability to duty correctly in respect of the gases manufactured and removed by them during the period April 1979 to February 1984 and to show cause why duty should not be recovered from them on the goods valued at Rs. 64,49,512.35 under the proviso to Sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944 (corresponding to provisos (a) and (b) of Sub-rule (1) of Rule 10 of the Central Excise Rules, 1944, as it stood before being omitted vide Notification No. 177/80, dated 12-11-1980) read with Rule 9(2) of the Central Excise Rules, 1944. In reply to the Show Cause Notice the appellants stated as under :- "(i) The past proceedings of the year 1981 regarding inclusion of handling charges, transport charges etc. which were ultimately dropped are deliberately and purposefully ignored by the officers.
(ii) The cylinder detention charges had no relation or connection with the sale prices of gases. They were charged for delay in return of empty containers of gases by the buyers which are not charged with empty containers of gases or cylinders are returned within the time schedule and accepted.
(iii) Handling charges had also nothing to do with the sale prices of gases, as they were charges for services rendered to the buyers subsequent to and after clearances of goods.
(iv) The debits shown in general ledgers on "freight and transport account" related only to the expenditure paid to outsiders on contracted vehicles. There were further expenditures incurred and debited to Motor Vehicle expenses and transport salaries and wages, which represented the expenditure incurred for the use of their own vehicles for the purpose of transport activity and if they are taken into account, the actual expenditure would exceed the recovery mode.
The expenditure on "freight and transport charges" is not less than the recovery on account of Handling/loading-unloading charges etc.
On the contrary, the expenditure incurred will be more than the recovery of such charges.
(v) It is not true that they have declared incorrect prices of gases and there was never any suppression, wilful or otherwise of any recovery of extra charges. The officers as well as audit party have off and on checked their records and nothing of the record is unknown to them. There has been no fraud, mis-statement and no suppression of facts and no evasion of duty at all as all the relative assessments are also finalised and completed long-back and so no levy or recovery of any further duty can be made.
(vi) There has been never any fraud or mis-statement by them and so Section 11A of the Central Excises Act would not be applicable and the levy beyond the period of six months prior to the date of demand of duty would be time barred." The learned Collector of Central Excise did not accept the contention of the appellants and had levied duty of excise amounting to Rs. 9,67,426.85ps Basic duty + Rs. 48,371.34ps. Special Excise duty = Total Rs. 10,15,798.19ps which had not been paid by them on the value totally amounting to Rs. 64,49,512.55ps. recovered as extra charges on the goods manufactured and removed by them during the period from April 1979 to February 1984. He had also imposed a penalty of Rs. 1,00,000/- (Rupees One lakh only) under Sub-rule (1) of Rule 173Q of the Central Excise Rules, 1944. Being aggrieved from the aforesaid order the appellants have come in appeal before the Tribunal.
2. Shri Dushyant Dave, the learned Advocate with Shri Hardeep Anand, Advocate had appeared on behalf of the appellants. He had reiterated the contentions made in the appeal memo. He had stated that there was no suppression of facts on the part of the appellants and in 1981 an enquiry was conducted by the revenue authorities and on 28th July, 1981 the appellants had submitted a clarification to the Superintendent regarding handling charges and had stated that the "Handling Charges" were recovered for loading operation and their reply to enquiry appear as Annexure II to the appeal memo. He stated that the Assistant Collector of Central Excise, Baroda vide letter dated 22nd October, 1981 had intimated that necessary instructions regarding transporting and Handling charges of the goods had already been issued to the concerned Assistant Collector which appears as Annexure I to the appeal memo. In 1982 Preventive Department carried out an investigation and had checked the appellants RG1, GP1 Classification List, price list, private records like ledger sales and miscellaneous journal all series of bills like gas bills, handling bills, loading and unloading and other miscellaneous bills for the year 1978" to 1982 and the same were found to be in order. A copy of the remarks made by the Inspector, Central Excise, Preventive Branch Baroda appears as Annexure III to the appeal memo. Shri Dave had argued that the handling charges recovered "by the appellants pertain to the handling charges incurred beyond the factory gate after the clearance of the goods and the cylinder detention charges were on account of delayed return of empty cylinders at the rate of Re. I/- per cylinder per day of delay after the lapse of 15 days. Shri Dave had relied on a judgment of the Tribunal in the case of Collector of Central Excise, Indore v. Premier Oxygen and Acetylene Co. (P) Ltd., Gwalior where the Tribunal had held that rental charges for retention or holding of gas cylinders beyond the free period were not includible in assessable value and the charges are not directly relatable to cost of manufacture or integral part of selling price but post-manufacture. He had pleaded for the acceptance of the appeal.
3. Shri G.V. Naik, the learned Jt. Chief Departmental Representative who had appeared on behalf the respondent stated that there was a clear suppression of' facts on the part of the appellants. The appellants had not declared the handling charges and loading and unloading charges in the price list filed by them in part I and part II. He had referred to the order-in-original and the Show Cause Notice. The appellants have not filed the copies of the invoices and the registers also bear no name or signatures." He stated that through the debit notes/in voices the money recovered by the appellants in this system could not be co-related. The letter of the Assistant Collector mentioned by the appellants' advocate in his arguments which is Annexure I to the appeal memo does not state what sort of handling charges. Shri Naik stated that it is a clear case of suppression of facts as separate invoices/vouchers have been raised. He had referred to para 8 of the Show Cause Notice and stated that extended period of limitation of five years is applicable in appellant's case. On merits he argued that the cylinder detention/handling charges do not find any place in the invoices. The Bills and invoices also do not contain any details and the second invoices/debit notes were not shown to the excise authorities. Shri Naik further argued that loading charges which were incurred at the factory gate before the clearance of the goods were part of the assessable value in terms of the judgment of the Hon'ble Supreme Court in the case of Union of India v. Bombay Tyre International Ltd. 4. We have heard both the sides and have gone through the facts and circumstances of the case.. The appellants had been filing price lists in part I and part II in terms of the provisions of Rule 173C of the Central Excise Rules, 1944. In the price lists filed by the appellants the appellants did not declare the handling charges/loading and unloading charges and cylinder detention charges in the price lists filed by them rather the appellants were charging the same after issuing separate invoices. The appellant's arguments that the Excise Authorities were very much aware of the recovery of handling charges and the reference of letter dated 22nd October, 1981 written by the Assistant Collector of Central -Excise, Baroda and the appellant's intimation dated 28th July, 1981 does not help the appellants. Filing of price lists is a statutory requirement. Accordingly, we hold that there was suppression of facts on the part of the appellants and the extended period of limitation in terms of provisions of Sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944 is applicable in this case. Consequently penalty on the appellants is also justified but in view of the fact that in the succeeding paragraphs we are allowing deduction of some of the elements, we consider it fair to reduce the penalty to Rs. 50,000/- (Rupees fifty thousand only).
5. On the issue of the recovery of amounts from their customers in the form of debit notes by the appellants we would like to observe that the appellant's contention that the cylinder detention charges are not includible in the assessable value are fully covered in the earlier judgment of the Tribunal in the case of Collector of Central Excise, Indore v. Premier Oxygen and Acetylene Co. Pvt. Ltd., Gwalior reported in 1985 (22) ELT 61 (Tribunal) where the Tribunal had held that "Rental charges for retention or holding of gas cylinders beyond the free period not includible in assessable value - Charges not directly relatable to cost of manufacture or integral part of selling price but post-manufacture". In the matter before us the appellants have charged Re. 1/- per cylinder where the purchasers have kept the cylinder beyond 15 days. Accordingly, we hold that cylinder detention charges recovered by the appellants are not includible in the assessable value.
6. Handling charges recovered by the appellants for the sales at duty paid depots are also not includible in the assessable value. The Hon'ble Supreme Court in the case of Assistant Collector of Central Excise and Ors. v. Madras Rubber Factory and Ors. reported in 1987 (27) ELT 553 had held that the cost of distribution is not includible in the case the wholesale dealers take delivery of the goods from the outside duty-paid godowns. Accordingly, the findings by the Collector that the handling charges incurred after the factory gate stage and recovered by the appellants are includible, are set aside. However, the handling charges, if any, incurred up to the factory gate stage would be includible in the assessable value.
7. In respect of loading and unloading charges we would like to observe that loading charges are incurred in the factory before the clearance of the goods and the same are to be included in the assessable value in the light of the Hon'ble Supreme Court's judgment in the case of Union of India v. Bombay Tyre International Ltd., reported in 1983 ELT 1896 and Assistant Collector of Central Excise and Ors. v. Madras Rubber Factory Ltd. and Ors.
8. The appellants have not given any details as to the expenses incurred by them for loading and amount recovered for loading from their customers. During the course of arguments the learned Jt. C.D.R.had argued that the amounts recovered from the customers under various heads were far in excess of the expenses actually incurred by the appellants on handling and unloading charges. We hold that the expenses actually incurred by the appellants on permissible deductions alone would be excludible and any excess recoveries from customers would be considered as part of the appellant's price realisation.
9. Accordingly, we set aside the impugned order and remand the matter to the Collector of Central Excise, Baroda to readjudicate the matter in the light of the observations made by us in terms of the Hon'ble Supreme Court's judgments referred above. Regarding unloading charges recovered by the appellants we would like to observe that the same are not includible as the same were incurred by the appellants outside the factory gate after the clearance of the goods. Accordingly, we set aside the order of the adjudicating authority in this regard and order that the unloading expenses are not includible in the assessable value While re-adjudicating the matter the learned Collector should consider the following points :- (i) The handling charges and loading charges incurred upto the factory gate stage.
(ii) Amounts recovered from customers under various heads held to be permissible and which are not in excess of the expenses actually incurred by the appellants on those heads should be allowed to that extent, and any expenses recovered in excess from the customers should be considered as part of the price realised by the appellants.