TMI Blog1988 (10) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 4 of the Central Excises Salt Act, 1944, which deals with the question of valuation of the excisable goods, came into force w.e.f. 1.10.1975. The appellants followed rather an unusual method of billing their customers. They issued two invoices for each sale, one called the original invoice for that portion of the value which they claimed as the price of the goods themselves and the other called the supplementary invoice for the extra charges on account of special packing, laffa (jam-packing) charges, forwarding charges, cost of transport, breakage risk and miscellaneous charges. In the price-lists, which the appellants filed before the department for approval, they indicated the various heads of the extra charges but not the amounts charged for them. The dispute whether the charges for the extras were includible in the assessable values of the goods or not, relating to the period from 1.10.1975 to July, 1979 went up to the Calcutta High Court in a writ petition filed by the appellants. By the time the Hon ble High Court delivered its judgment on the writ petition on 10.7.1985 [1988 (37) E.L.T. 544 (Cal.)], the judgment of the Hon ble Supreme Court in the case of Bombay Tyre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creased considerably, the raw material price of glass as well as labour charges and overhead expenditures have increased and market price of glass has also increased considerably during the same period. (c) The Company has been giving a most un-realistic picture of the market showing Basic Glass Value to be much less than the incidental charges like, packing, handling and transporting, etc. The former being shown as around 60% to 70% only of the latter. Taking into account the Rule 5 and Rule 7 of valuation rules as discussed above, the Audited Accounts of the Company for the year 1980-81 and 1981-82 were studied and the total cost of sales of goods were arrived at as per annexure A and B after necessary adjustment and deduction made from expenditure side of the Audited Accounts. Since the Company has another product manufactured by them apart from glass viz. Packing Box - necessary apportionment on expenditure on that side was made on the basis of cost accountancy principle (wage apportionable principle) as well as deduction on the basis of actual expenditure figures on account of packing box section submitted by the party. Net assessable value (arrived at on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppression of facts, wilful mis-statement etc. As per the normal time limit, all the three duty demands were time-barred. We do not agree with the appellants. They appear to be losing sight of the fact that the assessments had been made provisionally under Rule 9B of the Central Excise Rules, 1944 at their own request and on the strength of the provisional duty bond executed by them. The assessments continued to be made on provisional basis till as late as 2/9.1.1986. The appellants admitted before us during the hearing that the price-lists filed by them had not so far been finally approved. As per Rule 9B, the assessments made on provisional basis have to be finalised eventually and adjustments of duty made. Under Section 11A of the Act, the limitation starts running only from the date of adjustment of duty after finalisation of the provisional assessments. The demands issued as per the show cause notices on 6.11.1984, 10.12.1984 and 4.3.1985 were, therefore, not time-barred, even if the normal time limit of six months were to be applied. 5. The second preliminary objection of the appellants is on the ground of violation of principles of natural justice. We do find some substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g was the normal mode of delivery for the appellants goods, that such packing was necessiated by the fragile nature of the glass-sheets and that in the circumstances the cost of special packing could not be excluded from the assessable value. We find that in arriving at his calculation, the Collector has fallen in error on two counts, first he relied on the minority judgment of the Hon ble Supreme Court in the case of Godfrey Phillips (India) Limited [1985 (22) E.L.T. 306 (SC)] and ignored the majority judgment therein. Second, he went by the simple arithmatic of majority sales versus minority sales. This is wrong. The correct position regarding packing charges has been enunciated by the Hon ble Supreme Court in their judgments in Bombay Tyres International Limited and Godfrey Phillips (India) Limited cases aforesaid and further in their judgment in the case of M/s. MRF Limited -1987 (27) E.L.T. 553 (SC). In regard to special packing, the criterion to judge is whether it is essential for delivery of the goods in wholesale at the factory gate. Secondly, it is not the relative figures of percentages of deliveries in ordinary packing and special packing which determine the issue but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are, in principle, not includible. [1988 (36) E.L.T. 723 (SC) Indian Oxygen Limited v. Collector of Central Excise]. 10. It is now well settled, vide the Supreme Court judgment in the case of Bombay Tyres International Limited aforesaid, that the cost of transport, including the cost of transit insurance for the goods, is not to be included in the assessable value. 11. We were told during the hearing that breakage insurance for the glass-sheets during transit was resorted to in addition to the normal transit insurance of the goods. In principle, such breakage insurance would be on par with transit insurance and hence excludible. 12. The nature of miscellaneous charges , which is the last items of the extras, is not clear. However, if such charges were incurred for some service performed in relation to the goods after their removal from the factory gate, such cost would not, in principle, be includible. But if such charges were essential even for giving delivery of the goods at the factory gate, they have to be included, vide the settled principle in Supreme Court judgments in the cases of Bombay Tyres International Limited and MRF Limited aforesaid. 13. As already stated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally there was no transit risk insurance for glass-ware but if any customer requested for it, the same was accepted and the insurance premium usually charged for it varied from 6% to 10%. However, it was noticed by the authorities that the appellants had charged in the supplementary invoices a fixed sum which worked out to 10-30% as transit risk. Again, the insurance company told the authorities that it was not responsible for breakage in transit. The appellants had, however, charged their customers for breakage risk in the supplementary invoices. But they failed to produce any evidence before the Collector that they had actually incurred such expenses towards breakage risk insurance during transit of the goods. During the hearing, the appellants vaguely stated that they themselves bore the breakage risk and charged the customers in some cases. We asked them to tell us whether the appellants were authorised to undertake insurance business. There was no answer from the appellants. Lastly, we find from the impugned order of the Collector that the appellants collected sales-tax from their customers on that component of the price which was represented by the supplementary invoice but w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the indirect method is illegal or bad. Resort could certainly be had to it if the direct method is not feasible. In the case before us, however, there is no evidence that the direct method was tried and given up because of some difficulties. The appellants stated before us that for the material period of the present appeals no one asked them to give the costing for the excludible items. We are of the view that in the first instance the straight-forward and direct method of quantification of costs, which is easily verifiable by the officers of the department with the actual receipts of expenditure and account books should be preferred. The appellants were willing for it and stated that, given about three months time, they would be able to furnish the quantification of costs, as certified by a Chartered Accountant/Cost Accountant. The Collector could have the said quantification checked by his officers or by another Chartered Accountant/Cost Accountant appointed by him and thereafter the matter could be finalised in another three months or so. We agree that this would be the right approach to follow. 17. After the quantification of costs is done, the assessable values should ..... 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