CASTROL INDIA LTD Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) APPELLANTS are manufacturers of lubricating oils falling under sub -heading 2710.90 of the Schedule to the Central Excise Tariff Act, 1985. They were removing manufactured products in tankers to their depots/packing stations. From there, the oil was repacked in smaller packings and sold to dealers. Duty under the Central Excise Act, 1944 was being paid at the time of removal from the factory taking the price of 205 litres pack. They filed price declaration under Rule 173C of the Central Excise Rules, 1944 in respect of their sales from the depot. Department took the view that duty on goods sold from depot in smaller packings is not being paid as was required. On this basis, show cause notice was issued as to why the oil should not be assessed on the basis of the assessable value of half a litre packings done at the depot/packing station. Accordingly, differential duty amounting to Rs. 1,19,42,063.00 was claimed for the period from 1 -10 -1996 to 31 -3 -1997. Appellant filed detailed objection to the show cause notice. After considering the objection, the adjudicating authority by Order No. 111/Dum/97 dated 28 -11 -1997 confirmed the demand made in the show cause notice under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944. Penalty of Rs. 20 lakhs was also imposed under Rule 173Q of the Rules. Aggrieved by this order, appeal was taken to the appellate authority. That authority by Order -in -Appeal No. 567 -CE/DLH/98, dated 26 -11 -1998 remanded the issue observing :

(2.) LEARNED counsel representing the appellant submitted before us that while assessing the oils to duty, where the same are sold in 205 litre barrels, the bulk oil in tankers should be assessed at the same price of 205 litre barrels minus the cost of barrels and where the blended oils are not sold in 205 litre barrels but sold in smaller packings, the bulk clearances in tankers should be assessed at the price of the largest of the small packings like 20 litres minus the cost of packing and the cost of transportation from the factory gate to the depot.

(3.) APPELLANTS clear blended lubricating oils from their factory to packing stations in tankers. Excise duty on bulk clearance in tankers was being paid on the basis of the list price of 205 litre barrels. At the packing stations, oil is packed in barrels of 205 litres as also in retail packings of 20 litres, 10 litres, 5 litres and 0.5 litres. Department took the view that assessable item is oil in the smaller packings which are sold to wholesale buyers. Accordingly, they want Central Excise duty to be levied on the price at which the oil was sold from the depot in the smaller packings. This is sought to be done on the premises that depot is the place from where oil is removed and the price of the oil at the place of removal should be the normal price. This stand of the department is presumably on the basis of the amendment which came into force on 28 -9 -1996 whereby Clause (4)(b)(iii) was added to Section 4 of the Act. By this amendment, depot from where the excisable goods are sold after clearance from the factory became "a place of removal". As per Section 4(1)(a), normal price should be the price at which goods are ordinarily sold in the course of wholesale trade for delivery at the time and place of removal. It appears that the department thinks that when goods are sold from a depot which by the definition became place of removal price at the depot is the normal price. Is this approach made by the department correct ?