1988 (7) TMI 192 - AT - Central Excise

Tribunal Decision: Central Excise Duty Assessable Value & Demand Quantification Re-examined

SERAIKELLA GLASS WORKS PVT. LTD. Versus COLLECTOR OF CENTRAL EXCISE, PATNA

The Tribunal upheld the Assistant Collector's inclusion of costs up to the factory gate in the assessable value for Central Excise duty, excluding ... Valuation Issues Involved:1. Determination of post-manufacturing expenses.2. Validity of Show Cause Notices and demand notices under Section 11A.3. Application of limitation period for demanding duty.4. Deductibility of specific cost elements such as special/secondary packing, assurance charges, and contingent liabilities.5. Treatment of price realization as cum-duty price.Detailed Analysis:1. Determination of Post-Manufacturing Expenses:The appellants manufactured sheet glass and contested the inclusion of certain post-manufacturing expenses in the assessable value for Central Excise duty under Section 4 of the Central Excises and Salt Act, 1944. The High Court of Patna had ruled that post-manufacturing expenses should not be included in the assessable value but left the determination of specific elements and costs to the authorities. The Assistant Collector, guided by the Supreme Court's judgment in the case of Bombay Tyres International Ltd., included costs incurred up to the factory gate in the assessable value, excluding only those incurred after removal from the factory gate. The Tribunal upheld this approach, emphasizing that all costs enriching the goods' value up to the factory gate should be included.2. Validity of Show Cause Notices and Demand Notices under Section 11A:The appellants argued that the Show Cause Notice dated 7-3-1983 did not constitute a demand notice under Section 11A of the Act. However, the Tribunal found that a series of notices, starting from 7-7-1979, had been issued, indicating the authorities' intent to determine duty liability. The Tribunal concluded that the notice dated 7-3-1983, along with subsequent communications, was sufficient to constitute a valid demand notice under Section 11A. Nonetheless, the Tribunal acknowledged that the quantification of demand was done without proper hearing and required re-examination by the Assistant Collector.3. Application of Limitation Period for Demanding Duty:The appellants contended that the extended limitation period of five years was not applicable, and the demand should be limited to six months from the date of the Show Cause Notice. The Tribunal disagreed, noting that the initial Show Cause Notice dated 7-7-1979 was timely and that the assessments had been provisional under Rule 9B. As the provisional assessments had not been finalized due to the High Court's interim stay, the limitation period had not commenced. Therefore, the Tribunal held that the demand was not time-barred.4. Deductibility of Specific Cost Elements:The appellants sought the exclusion of several cost elements from the assessable value:- Special/Secondary Packing Charges: The Tribunal agreed that special/secondary packing costs, used over and above normal packing, should be excluded from the assessable value, following the Supreme Court's judgment in Godfrey Phillips (India) Ltd.- Assurance Charges: The Tribunal directed the Assistant Collector to verify if these charges were for transit insurance, which should be excluded from the assessable value if confirmed.- Contingent Liabilities: The Tribunal found the nature of these charges unclear and instructed the Assistant Collector to investigate and decide their admissibility based on the Supreme Court's judgments in Bombay Tyres International Ltd. and MRF Ltd.5. Treatment of Price Realization as Cum-Duty Price:The appellants requested that their price realization be treated as cum-duty price, with duty recalculated accordingly. The Tribunal agreed, directing the Assistant Collector to verify and proceed with calculations in line with the Supreme Court's judgment in MRF Ltd.Conclusion:The Tribunal upheld the Assistant Collector's reliance on the Supreme Court's judgments for determining post-manufacturing expenses and their costs. It remanded the matter for re-determination of duty liability, ensuring compliance with principles of natural justice and proper verification of specific cost elements. The appeals were allowed by way of remand for further proceedings consistent with the Tribunal's observations.