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TMI Blog1992 (7) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... y them in the assessable value of their said final product. He had also imposed a penalty of Rs. 35,000 on them under Rule 173Q of the Central Excise Rules, 1944. 2. Shri B.K. Mohanty, learned Counsel assisted by learned Counsels S/Shri Sekhar Mukhopadyay and Madhusudan Dey appeared on behalf of the appellants. He referred to the contentions raised in the appeal and contended that the Additional Collector fell in error in coming to the conclusion that they had suppressed the fact that the cost of the bottles in which they sold this product had not been included in its assessable value. The show cause notice was issued nearly two years after they had availed the credit. They had finished the required declaration under Rule 57G in which they had included bottles as packing material. They had declared in their price lists that the cost of the packing was not included in the price of their product. It was thus in the knowledge of the department and was not being suppressed. No wilful mis-statement was also involved. It is a case of their interpreting the provisions differently from the view taken by the department. Their view may be correct or not but that is not a case of suppre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terials, the cost of which is not included in the assessable value of the final product. He, therefore, pleaded that the appeal be dismissed. 4. We have considered the submission made. We have perused the record. We have gone through the judgment of the Hon'ble High Court of Orissa made available by the learned Counsel for the appellants. The said judgment which is dated 27-1-1992 relates to modvat credit on bottles used in aerated waters chargeable to specific rate of duty. That is not relevant in the present case where the goods are chargeable to duty on ad valorem basis. It is this ad valorem basis of assessment which would attract not only the provisions of Section 4(4)(d)(i) of the Central Excises and Salt Act for the purpose of exclusion of the cost of durable and returnable packing in determining the assessable value of the product packed, but also the Explanation Clause under Rule 57A which excludes packaging materials, the cost of which is not included in the assessable value of the final product. A curious plea has been advanced about the status of the bottle in relation to the contents packed therein for sale. No doubt the Tariff definition covering the fruit drink ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If that were correct, then the case for exemption under Section 4 as durable and returnable containers will fall flat. This fragile argument is to be rejected outright. Getting the beneficial treatment under Section 4(4)(d)(i) of Central Excises and Salt Act, 1944, they cannot commit a volte face when confronted with the provisions of Rule 57A. 5. Though we have thus not accepted the appellants' plea and held that these bottles are not entitled to the benefit of modvat in view of the Explanation Clause, we find considerable merit in their other submission that they did not commit any wilful mis-statement of suppression which had led to the department wrongly allowing them the benefit of modvat on such bottles. We find on a perusal of their price lists, which were submitted in the course of the hearing that in the printed proforma, under columns 5 and 6 reading - "If price in Col. 3 does not include the cost of packing" they have furnished data regarding the nature of such packing and the cost of such packing. The cost is shown as Rs. 42 for 24 bottles. There is also a remark subscribed by them at the bottom of the proforma that the packing in glass bottles is returnable b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds chargeable to specific rates of duty, the benefit was held to be applicable for bottles used for filing aerated waters chargeable to specific rate of duty. The judgment of the Honourable High Court of Orissa in the case of Mamta Drinks & Industries also related to the same issue of modvat credit on such aerated waters. This is the judgment, the copy of which was handed over by the learned Counsel during the hearing. With this background, in regard to modvat credit for aerated waters in respect of duty paid on the bottles, the department should have been alert while dealing with a claim for such benefit for products where assessment is not at specific rate but on ad valorem basis and where the conventional and well known trade practice is to supply them in returnable bottles. Even if this well known trade practice was not taken note of by the officers, the specific declaration in the price list should have alerted them. While the claim for modvat credit on bottles used for filling their product was not admissible, the fact is that they made the claim which was also admitted by the Department. There being no suppression of facts or wilful mis-statement, the longer period upto five ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, it is the wrong availment of modvat credit to which they were not entitled which is relevant in the present context. Such a situation is covered by Rule 173Q(1)(bb). This provides that where a manufacturer takes credit of duty in respect of inputs for being used in the manufacture of final products wrongly or takes credit of duty which he knows or which he has reason to believe is not permissible under these Rules or contravenes any of the provisions contained in Section AA of Chapter V of the Central Excise Rules shall be liable to a penalty not exceeding three times the value of the excisable goods or Rs. 5,000 whichever is greater. In this case, there is no doubt about the wrong taking of the credit which is the part of sub-rule 1(bb) of Rule 173Q. Penalty is justified on that score itself. But we shall go further. The conduct of the appellants in taking modvat credit points to their doing so which they knew they were not entitled to. Firstly, they had been getting the benefit of exclusion of the value of the bottles in the determination of assessable value of their product, under Section 4(4)(d)(i) of Central Excises and Salt Act, 1944. Secondly, they had filed a declara ..... X X X X Extracts X X X X X X X X Extracts X X X X
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