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TMI Blog1981 (5) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended for sale". On the other hand, Tariff Item No. 46 in the aforesaid Schedule provides imposing ad valorem excise duty on "Metal containers not elsewhere specified". The explanation added thereto with regard to containers has the borrowed meaning assigned to it in Explanation to Item No. 27. That explanation provides that "Containers" means "Containers ordinarily intended for packaging of goods for sale, including casks, drums, cans, boxes, gas cylinders and pressure containers, whether in assembled or unassembled condition and containers known commercially as flattened or folded containers. The petitioner-Company manufactures tin containers and employs them for the purpose of filling in them condensed milk so as to produce the net product of prepared and preserved food put up in unit containers (hereinafter shortly referred as P.P. Foods). Both the Tariff Items having attracted imposition of excise duty, the petitioner obtained licences under the Act to manufacture or to produce the said items. The fabricating process of the tin containers as described by the petitioner-Company is through a mechanical automatic process which is given below : (a) Full tinplate, sheets are cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the petitioner-Company were just signed by the Superintendent, but with effect from 1st June, 1970 onwards when the Self Removal Procedure had come to be operative, the Superintendent in all the monthly returns from June 1970 to May 1972, signed the requisite form RT-12 without writing the word "provisionally". On the strength of that conduct, the petitioner claimed that the price-list submitted by it for the year ending on 31-12-1970, had been finally approved. And in consequence thereof, in all the monthly returns on the basis of the said price list, which is Annexure P-1 to C.W.P. 1109 of 1980, the petitioner-Company maintained that the net assessable value was 22 paise per container. This was qualified by a note that these containers are not sold in the market, but are meant for inside use of the factory, which is based on factory cost, which may be considered inclusive of profit. Some correspondence ensued between the petitioner-Company and the Department, as the latter was of the view that suitable addition of profit should be made to the manufacturing cost of the container, but the former expressed its inability to mention any profit since the tin containers were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce as calculated by the petitioner, which was based on the calculation of actual cost of the container plus pro rata profit deemed to have been earned by the petitioner in the petitioner's overall operations. The figure was arrived at by taking the average profit earned during that year. In the year 1975, however, the petitioner claimed an overall loss but instead thereof, the Assistant Collector added a profit of 10 per cent to the cost of metal containers determining its assessable value at 55.26 paise per tin. Similar was the situation qua the year 1977 in increasing the assessable value by adding 10 per cent profit margin to the cost of tins. The matter was stated to be pending in appeal before the Appellate Collector. Likewise, was the case for the financial year 1978. However, for the financial year 1979, the petitioner-Company disclosed pro rata notional-profit, deemingly earned, in the overall operations of the petitioner to the extent of 12.02 per cent. This time, the Assistant Collector accepted the average profit margin of 12.02 per cent and did not employ the method of adding 10 per cent to the cost of tins as in the yester years. 6. C.W.P. No. 466 of 1980 has been fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des for the time and manner of payment of duty, and Rule 49 provides that such duty is chargeable only on the removal of the goods from the factory premises or from an approved place of storage. 10. The principal contention of Mr. Kapil Sibal, learned counsel for the petitioner , was that the tin containers manufactured by the Company, though under a separate licence, was manufacturing of goods in process leading to the end product of P.P. Foods in unit containers. According to him, his case is squarely covered by two decisions of the Delhi High Court in Modi Carpets Limited and another v. Union of India and others, 1980 Excise Law Times 320 and J.K. Cotton Spinning Weaving Mills Co. Ltd. and another v. Union of India and others, 1980 Central Excise and Customs journal 635T and by a judgment of the Bombay High Court in Oudh Sugar Mills Ltd. v. Union of India and another, 1980 Excise Law Times 327. He claimed that on the parity and reasoning given in the aforesaid precedents, no excise duty is leviable at all on the tin containers which come to be employed to make up the end product. 11. In Oudh Sugar Mills' case (supra), of the Bombay High Court, the manufacturing process for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction or if the product is issued out or taken out or consumed if no further processing of that product is to be done." [Emphasis supplied] It is significant that in the manufacturing process, the groundnut had to shed off its oil cake and the residue groundnut oil only remained in the composite plant so as to receive hydrogenation in process as a part of one continuous integrated process. 13. In Modi Carpets' case (supra), the Delhi High Court while considering the scope of Rules 9 and 49 held that no excise duty could be levied and recovered on sliver obtained by the petitioners if it was consumed within the very premises in which it was manufactured for the purposes of making woollen yarn, and as such held that there was no removal from the place of manufacture as envisaged by Rule 9, read with Rule 49, of the Excise Rules. It was also held that in the absence of any place having been specified by the Collector under Rule 9, the place of manufacture had to be deemed to be the entire factory in which the manufacturing process takes place. It was held that the raw wool had to pass through various stages in order to become woollen yarn, and one of those stages was the stage o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applications were made in the statutory forms, known as Form AL-4. In both the applications, the column meant for 'Brief description with boundaries of the premises intended to be used as factory', filling has been made: "As per ground plan attached". Perhaps, the same filling is made to cover the columns, meant for "Description of each main division or sub-division of the factory" and "Store room or other place or storage". Besides that, against these columns, it is mentioned that towards North, there is G.T. Road, towards South-Railway Line, towards East - residences/green fields and towards West-Kingwah Canal. For the columns meant for "Distinguishing letter or number or letter and number of each", "Detailed description of each" and "Purpose of each", no relevant filling seems to have been made. This is the position in both the applications. The entries totally tally. Both the licences are stated to have been granted on 25-5-1970 and renewed from time to time. Two plans countersigned by the Assistant Collector, Central Excise Customs, Chandigarh, signifying his approval, dated 25-5-1970, were also placed before us. These two plans on the general lay-out of the factory tally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of storage on his premises for depositing goods made on the same premises without payment of duty. That is the mandate of Rule 47. The removal of goods from such warehouse would obviously attract the mischief of Rule 9. Ex facie the area cross-sectioned in red in the plan meant for prepared or preserved foods, does not appear to be the factory itself but a warehouse, the premises of which were found safe and secure by the authorities to be used as a warehouse in terms of Rule 47. It is nobody's case that any manufacturing process was being conducted in this portion of the factory. The dispute relates to the Tin shop which has been cross-sectioned in the plan meant for the metal containers. Now .here the parties are at variance. The petitioner-Company contended that the area so earmarked only signified that this was the place where the tins were manufactured and not for the purpose of earmarking it as a separate plant, or for the purpose of mentioning it as a separate factory, for manufacturing metal containers. The respondents, on the other hand, vehemently contend that the area so earmarked is the only place where the tin containers were being produced or manufactured and those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduct, or otherwise spending it out. No such process is involved for what happens to the metal containers in being transferred to the Filling-room as receptacles. 18. To revert again to the columns in the applications for obtaining licences, it would be interesting to note that against column No. 12 meant for "Particulars of each kind of raw material to be used in such manufacture" Tinplate has been mentioned for the manufacture of metal containers and "Tins and Cartons" have been mentioned as one of the raw materials to be used for the manufacture of P.P. Foods. Thus, two different kinds of raw materials were conceived by the petitioner-Company to manufacture two excisable goods covered by the two respective licences. Had it been one integrated process, the raw material in the manufacture of P.P. Foods should have been mentioned as Tinplate and not 'Tins and Cartons'. It seems to us that there was no doubt entertained ever on that behalf by the petitioner-Company. 19. Adverting to Rules 9 and 49 of the Rules, it is the removal of the goods which attracts payment of duty. Primarily, it is the removal of the goods from any place where they are produced, cured or manufactured or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Weaving Mills case (supra) and Oudh Sugar Mills' case (supra) and we can find no fault with the respondents levying excise duty on the petitioner on the removal of metal containers from their specified place of production or manufacture, to be used for manufacturing the commodity known as P.P. Foods outside the place meant for the production and manufacture of the first commodity. 20. This brings us to the second question, with regard to the method adopted by the respondents in determining the value for the purposes of charging the excise duty. Under the unamended Section 4 of the Act, the value of the article chargeable with duty was deemed either to be the wholesale cash price for such an article and where such price was not ascertainable, the price at which the article of the like kind or quality was capable of being sold at the time of removal of the article as detailed in that section. Under amended Section 4, the valuation of the excisable goods for the purposes of charging the excise duty is seemingly to be the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A certain element of discretion in the nature of the Rule does come to be employed. Here the assessee did not submit the price list after the year 1970. The respondents chose to add a notional profit of 10 per cent for the years in question involved in C.W.P. No. 1109 of 1980. The Assistant Collector finalised the price list in terms of Section 173C in view of the well settled position of law that the real value of the goods include the cost of manufacture and profit margin. He added the margin of profit at the rate of 10 per cent because the petitioner-Company did not furnish the exact pro-rata profit margin or loss on the final product. This was by no means difficult. The overall profit derived from P.P. Foods could have been split on the ratio of the cost of manufacturing of tin containers and the cost of preparing/preserving the condensed milk. At least a workable hypothesis could have been given to the Assistant Collector for finalising the price list of the metal containers. The element of discretion having been made to enter due to the conduct of the petitioner-Company and having attracted the orders of the Assistant Collector, the authority in Appeal, and the Revisional A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Rule 10A. It is significant that under Rule 10(3), the relevant date from which the period of limitation is to be computed in the case of excisable goods, on which the value or the rate of duty has been provisionally determined under the Rules, is to be the date on which the duty is to be adjusted after final determination of the value or the rate of duty, as the case may be. Here the parties are at dispute as to whether the assessment was provisional. All the departmental authorities, on the strength of the office copy, have maintained that the assessment was not final but was provisional. We cannot go into this disputed question of fact and have to treat the fact as determined by the authorities below final for our purpose, and if that is so, the relevant date "would be the date on which the final determination of the value was made". That was made simultaneous with the confirming of the provisional demand. Final determination of the value of the goods had not been made in accordance with the rules and hence the period prescribed in Rule 10 for the service of the notice would not come to bar the proceedings. Everything being in the fluid stage, Rule 10A of the Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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