INDIAN EXPLOSIVES LTD Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS appeal is directed against the order dated 22 -8 -1983 passed by the Collector of Central Excise (Appeals), New Delhi. The appellants herein manufactured Chemical Fertilisers excisable at the relevant time under the old Central Excise Tariff Item 14HH. The appellants submitted price list during the period June 1974 to September, 1975 which is material to this appeal. They claimed deduction of various post -manufacturing expenses including exemption permissible under Notification No. 108/74 on Fertiliser Pool Equalisation Charge (FPEC). The jurisdictional Assistant Collector initially approved the price list without granting any deduction on account of post -manufacturing charge as also trade discount and the FPEC. The appellants went in appeal against this order. The Appellate Collector in his Order No. 2226 to 2228/76, dated 25 -10 -1976 passed a common order in which inter alia on the issue of FPEC exemption, the Appellate Collector agreed with the method adopted by the appellants and further explained in his order the manner in which it was to be operated. He also remanded the case back to the Assistant Collector on certain other issue regarding deduction from the assessable value. In the de novo proceedings, the Assistant Collector passed order on 6 -7 -1978 in which with regard to the FPEC exemption, the Assistant Collector allowed the abatment of the full amount of FPEC from the wholesale cash price and then calculated the duty payable. The appellants again went in appeal before the Collector (Appeals) against this order of the Assistant Collector. The Collector (Appeals) passed the impugned order thereafter, wherein in regard to FPEC he agreed that the method adopted by the Assistant Collector was without authority of law because the exemption granted under the notification was equivalent to the duty on the amount of FPEC and did not permit a deduction of the FPEC itself. The Collector (Appeals) at the same time held that the appellants' claim based on the earlier orders of the Appellate Collector was also wrong and the Collector (Appeals) observed that what had to be reduced from the wholesale price inclusive of duty was not the FPEC paid by the appellants but the duty of such FPEC and that the net duty payable to the Department plus the assessable value should be equal to the wholesale price inclusive of the FPEC and duty. The present appeal is against this decision of the Collector (Appeals).

(2.) THE learned Chartered Accountant Shri S. Madhavan appearing for the appellants submitted that the Collector (Appeals) has gone wrong in failing to appreciate that neither the Assistant Collector nor the Collector (Appeals) was competent to assume jurisdiction to pass any fresh order on an aspect on which the previous Appellate Collector had already passed specific and final order in the matter to allowing the exemption on the value of FPEC in his Order No. 2226 to 2228/76, dated 25 -10 -1976. In this order, the learned Chartered Accountant pointed out that the Appellate Collector had remanded only the matter of admissible deduction back to the Assistant Collector for de novo exemption and the Appellate Collector had given no such direction to the Assistant Collector with regard to the exemption of duty claimed under Notification No. 108/74. The Appellate Collector in fact had agreed with the contention of the appellant and had passed clear order illustrated by an example. The learned Counsel urged that such an order of the Appellate Collector in the absence of any appeal from the Department had become final and binding on the authority and in such a context, the Assistant Collector in readjudicating the matter relating to FPEC exemption acted beyond jurisdiction. It was contended that the Collector (Appeals) should also have refrained from passing any order himself on the price list on a question relating to an issue where a competent authority of equal rank had passed final order which has not been appealed against, annulled or modified by a higher authority. The learned Counsel, in this context, cited and relied upon the series of case law including Himachal Steel Kandrori v. Collector of Central Excise, Chandigarh, reported in 1988 (37) E.L.T. 291 (Tribunal) and Union of India v. Kamlakshi Finance Corporation Ltd., reported in 1991 (55) E.L.T. 433 (S.C.). On the merits of the claim for exemption under Notification No. 108/74, the learned Counsel contended that the case pertaining for the period earlier to October, 1975 and was governed by old Section 4 of the Central Excises and Salt Act, 1944 prior to its amendment. The learned Chartered Accountant submitted that the Collector (Appeals) went wrong in relying on the Explanation below Section 4(4)(d)(ii) as inserted by the Finance Act, 1982. The Collector (Appeals) should have first determined the assessable value and appropriate duty payable and should have then reduced this duty by the amount equivalent to duty of FPEC as prescribed in Central Excise Tariff Schedule. The learned Chartered Accountant pointed out that there is a decision of Government of India on this very notification in its Order in Review No. 248 of 1978 dated 30 -3 -1979 a copy of which is in the paper book. In this order, the Government of India has held in the same manner as has been done by the Appellate Collector earlier in his order dated 25 -10 -1976 in working out the exemption under the Notification No. 108/74. The learned Counsel further relied upon the Delhi High Court decision in the case of I.T.C. Ltd. and Anr. v. Union of India and Ors., reported in 1987 (30) E.L.T. 321 (Delhi) wherein the High Court had gone into various aspects of valuation under Section 4 of Central Excise Act and had held that Section 4 of the Act and exemption notification had to be given effect separately one after the other. First under Section 4, the Excise duty payable had to be determined with reference to the rates of duty prescribed in Schedule which necessitated the determination of the assessable value. After this, as a second step the exemption notification was to be applied. The learned Chartered Accountant in this regard also drew support from the Supreme Court decision in the case of Bata Shoe Company (P) Ltd. v. Collector of Central Excise, reported in 1985 (21) E.L.T. 9, wherein the Supreme Court held, Excise duty leviable is not taken into account while determining the value of goods under an exemption notification.

(3.) SHRI A.K. Singhal, the learned Departmental Representative submitted that a perusal of the earlier orders of the Assistant Collector approving the assessable value and the earlier order of the Appellate Collector dated 25 -10 -1976 read together would show that the Appellate Collector order is not final in respect of FPEC exemption also. It mainly dealt with the various claims for deduction from the assessable value and on this issue it has been remanded to the Assistant Collector. Therefore, there was no infirmity in the Assistant Collector's order once again going into the aspect of FPEC exemption. In such a situation, the present impugned order of the Collector (Appeals) does not suffer from any infirmity according to the learned Departmental Representative. The issue here, pointed out the learned Departmental Representative, is not one of applying the tariff rate or effective rate of duty but a method of arriving at the assessable value from cum -duty price or wholesale price. In this context, the formula laid down by Collector (Appeals) in the present impugned order correctly sets out the position in law. The learned Departmental Representative further contended that the issue now stands settled by the recent decision of the Supreme Court in the case of Union of India v. M.R.F. Ltd. reported in 1995 {77) E.L.T. 433. The learned Departmental Representative relied upon the observation of the Supreme Court in para -67 of that order. The Supreme Court had held that permissible deductions are to be first reduced from the cum -duty price while arriving at the assessable value. The case law on the subject cited by the appellants does not cover the present situation.