Judgment
1. The appellants manufacture Iron Wire nails. As there is no market or demand for the said nails at Nandigama they were disposing of the same through their sales depot at Vijayawada. The goods were transported under gate-passes to their sales depots at Vijayawada and selling them in retail. The appellants arrived at the value of the goods during the year 1979-80 at Rs. 14,96,769/- while the value of the nails sold at their depot was arrived Rs. 17,09,770/- by the departmental officer.Under Notification No. 89/79, dated 1-3-1979 the first clearance of goods falling under Tariff Item 68 for home consumption upto a value of 15 lakhs were exempt from payment of duty. The deptt. had taken out the retail sale price of Rs. 17,09,770/- and demanded a duty on the value of Rs. 2,09,770/- (17,09,770 -15,00,000) at 4% ad valorem. On receipt of the reply to the show cause notice issued by the department the Asstt. Collector confirmed the demand. On appeal the Collector (Appeals) confirmed the demand against which the present appeal is filed.
2. The main contention of the appellants is that the value for the purpose of calculation of exemption limit under the notification is the value excluding the sales tax paid on part of the goods during the relevant financial year. The Asstt. Collector penalised the appellants on the ground that they have violated Rule 173F. They submitted that there is no violation of Rule 173F as they have correctly calculated the assessable value for the purpose of exemption limit. The appellants paid Rs. 11,878.75 as sales tax and they had to pay another amount of Rs...towards the sales tax which was not paid due to stay order of the Andhra Pradesh High Court. If these two amounts are excluded the assessable value will be Rs. 16,31,830.45. He also submitted that for the purpose of exemption limit the value should be the value as per their sales from Nandigama to sales depot. If the said value is taken it would be Rs. 14,96,769/- only. Therefore, the lower authorities are not justified in imposing the penalty.
3. Shri Ganu, appearing on behalf of the department reiterated the order of the Collector.
4. The Asstt. Collector had only imposed a penalty of Rs. 8,000/- and he has not demanded any duty on the alleged excess amount of clearances. In other words the Asstt. Collector by his order has not demanded any duty and the department has not filed any appeal against the said order. Therefore, the duty is not involved in this case. The only question for consideration is whether the penalty levied by the lower authorities is justified. The department's case is that the value for the purpose of calculating the exemption limit should be the value of the clearances from the sales depot whereas the appellants contends that the value should be the value from the factory. The issue involved is the interpretation of the notification and how to calculate the value for the purpose of exemption limit. Therefore, it is not a case warranting levy of penalty on the ground that there is violation of rules. It is true, under rule 173F the assessee has to determine the duty on the goods and to remove them on payment of the said duty. In this case the appellants have paid the duty according to their calculation and there is no violation of Rule 173F. The only dispute here is as to the method of calculating the value for the purpose of determining the exemption limit. Therefore, there is no justification for imposing the penalty. We, therefore allow the appeal and set aside the orders of the lower authorities.