1988 (10) TMI 154 - AT - Customs

Court sets aside order, remands for fresh adjudication. Appellants to provide cost statement. Collector to re-determine values.

WINDOW GLASS LTD. Versus COLLECTOR OF CENTRAL EXCISE, CALCUTTA

The court set aside the impugned order and remanded the matter to the Collector for fresh adjudication. The appellants were instructed to provide a cost ... Valuation -Special packing provided at customers request Issues Involved:1. Determination of assessable values of goods for Central Excise duty.2. Limitation under Section 11A of the Central Excises and Salt Act, 1944.3. Violation of principles of natural justice.4. Exclusion of extra charges in determining assessable values.5. Quantification of costs for excludible elements.Detailed Analysis:1. Determination of Assessable Values of Goods for Central Excise Duty:The appellants manufactured figured and wired glass and used two invoices for each sale: an original invoice for the goods' price and a supplementary invoice for extra charges. The main dispute was whether these extra charges should be included in the assessable values for Central Excise duty. The High Court had previously ruled that these extra charges could be excluded if they were only realized from outstation buyers. This principle was to be applied to the later period under consideration (1.4.1979 to 31.3.1983), but no verification had occurred. The authorities suspected undervaluation and issued show cause notices alleging false declarations and suppression of facts.2. Limitation under Section 11A of the Central Excises and Salt Act, 1944:The appellants argued that the normal six-month limitation period should apply, making the duty demands time-barred. However, the court held that since the assessments were provisional under Rule 9B, the limitation period started only from the date of adjustment after finalization. Thus, the demands were not time-barred.3. Violation of Principles of Natural Justice:The appellants contended that they were not given a full opportunity to be heard as the Collector did not provide a further hearing after they requested clarifications. The court found merit in this objection, indicating a denial of a full opportunity for personal hearing, which typically would warrant a remand for fresh decision. However, to avoid prolonged litigation, the court decided to lay down guidelines for the Collector.4. Exclusion of Extra Charges in Determining Assessable Values:The court addressed two broad issues: which extra items should be excluded and the correct amount of these excludible items.- Special Packing Costs: The Collector's decision to include special packing costs in the assessable value was incorrect. The court held that special packing costs are excludible if they are not essential for delivery at the factory gate.- Laffa Charges: These charges for jam-packing during transport are excludible as they are not required for deliveries at the factory gate.- Loading Charges: Charges incurred within the factory are includible, but those incurred beyond the factory gate are excludible.- Transport Costs: The cost of transport and transit insurance is not to be included in the assessable value.- Breakage Insurance: This is on par with transit insurance and hence excludible.- Miscellaneous Charges: These are excludible if incurred after the goods leave the factory gate; otherwise, they are includible.The court emphasized that the principle of essentiality should guide the exclusion of these costs, irrespective of the percentage of local versus outstation sales.5. Quantification of Costs for Excludible Elements:The court noted that the appellants might have inflated the costs of excludible items. The Collector should have ordered a realistic costing of these elements using cost accountancy principles. The court suggested a direct method of costing, verified by receipts and account books, to determine the true cost of excludible items. If the direct method was not feasible, an indirect method via balance sheets and audited accounts could be used, though it was not preferred.The court directed the Collector to re-determine the assessable values by adding the original and supplementary invoice amounts and deducting the approved costs of excludible elements. The differential duty payable should be recalculated accordingly.Conclusion:The court set aside the impugned order and remanded the matter to the Collector for fresh adjudication. The appellants were instructed to provide a cost quantification statement certified by a Cost Accountant within four months. The Collector was to scrutinize this statement, hold a hearing, and re-determine the assessable values and differential duty within six months. The Collector could also adjudge confiscation, fine, and penalty based on his findings. The appeals were disposed of by remand under these terms.