TMI Blog1997 (1) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... ransmitted on to the cylinders. The process involves a high degree of precision, expertise and artistry. Cylinders are manufactured to suit the needs of individual customers and thereafter P.P. films and pouches are manufactured and delivered to customers. Cylinder is covered by tariff sub-heading 5442.00. The prices of cylinders and films and pouches are fixed separately and a part of the price of cylinders (sets of four or five) is collected in advance by way of security as they are custom-made and price of end-product is collected finally as usual, by separate records. Appellant commenced manufacture in September 1977. Under Notification No. 64/86, dated 10-12-1986, printed cylinders, captively used or consumed in the factory for printing are wholly exempt from Central Excise duty. Appellant was clearing the finished products on payment of duty on their value without taking into consideration the value of printed cylinders. On an inspection by Central Excise Officers, it was found that appellant was recovering from customers Rs. 4500.00 as cost of cylinder on debit notes which included expenditure on art-work, design and development. Different sets of purchase orders were being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pheld by the Collector (Appeals). These orders are challenged in Appeal E/436/96. 5. The main and common contention raised in the three appeals is that a part of the price collected for cylinders cannot be included in the assessable value of the finished product. Manufacture of printed pouches for each customer requires four to five cylinders. The material to be printed differs from customer to customer which means that cylinders are custom-made and cylinders made for one customer cannot be used for another customer. The Collector has noted that each set of cylinders can be used to print ten lakh pouches. This means that cylinders made in a particular period or year can be used to print 10 lakh pouches and this work may be spread over several periods or years. This would mean that price of cylinders received during a period covered by one show cause notice may be used even beyond the period covered by the notice but according to the impugned orders, the entire cost of cylinder realized during the period covered by one notice has to be added to the assessable value of finished goods manufactured and cleared during the period which is not rational or reasonable. Learned Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a single printed pouch and this fractional value has to be added to the value of printed pouch. However, during a particular period, the use of the set of cylinder may not be exhausted as only 4 lakh printed pouches are manufactured during the period. If so, it has to be regarded that Rs. (x 10 Lakhs) x 4 Lakhs is the proportionate value of cylinder utilized in the manufacture of finished products during the period and only this value can be added to the value of printed pouches. This rational principle of proportional value addition has been approved by the Board and we are of the opinion that Board was right in doing so. This has to be arrived at after making a realistic estimate of the expected life and capability of the cylinders and determining the appropriate proportion of the value of cylinders to be added to the value of printed pouches. The conclusion arrived at by the lower authorities that entire value of the cylinders is to be added to the value of printed pouches manufactured during the relevant period without reference to the expected life and capability of the cylinders has to be set aside and the matter has to be considered afresh by the respective adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontainers ranged between Rs. 20,000 to Rs. 25,000, a part of which was received as advance and retained for about a month. Though the total amount of advance collected during four years ranged from Rs. six and odd crores to Rs. ten and odd crores, they were received not from a single or a few buyers, but proportionately from all buyers. The Department did not marshal any evidence to show that a part of the price being received as an advance and being retained for a short period had been or would have been taken into consideration in fixing the uniform price for all buyers. In the circumstances, it does not appear probable that this factor had, to any extent, depressed or otherwise affected the price charged. That being so, there was no extra consideration received, over and above the declared price. The lower authorities failed to consider any one of these aspects while finding that the price has to be loaded to the extent of the notional interest. The finding is accordingly set aside. 9. The question of limitation arises for consideration only in Appeal E/1047/94-A. Show cause notice dated 1-10-1992 was issued in respect of period from September 1987 to March 1992. Larger period ..... X X X X Extracts X X X X X X X X Extracts X X X X
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