TMI Blog2007 (10) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ory in U.P. and cleared to its various Depots situated all over India including Surat from where the Yarn is sold to dealers. The assessee used to pay duty during the relevant period, at the time of removal of yarn, on the basis of the depot sale price, after claiming permissible deductions under section 4 of the Central Excise Act, 1944 ("1944 Act"). One such deduction was TOT in respect of yarn cleared and despatched to Surat depot from the factory of the assessee in U.P.. In respect of such despatch, the assessee claimed deduction at 2% on account of TOT. This was on the footing that the Government of Gujarat vide Notification dated 19.10.1993 had exempted sale of Yarn of all kinds by a registered dealer to a special manufacturer of processed Yarn or to an eligible unit to the extent to which the rate of TOT exceeded 0.5% of the total turnover. This was provided the specified manufacturer furnished to the selling dealer a certificate in Form 26 and if the processed Yarn stood sold within the State of Gujarat. 4. On 19.3.1999, a show cause notice was issued by the Department to the assessee in which it was alleged that the assessee had filed its price declaration under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the assessee, the assessee has claimed deduction at 2% on account of TOT in respect of the entire clearance and thus, according to the Department, the assessee had claimed wrongfully a larger deduction than what he was entitled to. Therefore, according to the show cause notice, the difference between the amount of TOT actually paid should have formed part of the assessable value and accordingly, the Department called upon the assessee to pay excise duty on the differential value. According to the Department, the assessee had wrongfully claimed deduction on account of TOT; that the assessee had claimed wrongfully deduction on the entire clearances at 2%; that the assessee had claimed in the price declaration deduction on account of TOT at 2% when it had actually paid TOT @ 0.5% in respect of backward area sales and, to that extent, the assessee had evaded excise duty by wrongfully claiming excess amount of deduction on the amount of deduction on account of TOT as compared to what was actually paid by it. The demand has been confirmed by all the authorities. Hence, these civil appeals. 5. Mr. S.K. Bagaria, learned senior counsel, appearing on behalf of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification, particularly at the time when the yarn was cleared at the factory gate of the assessee in U.P. and, therefore, according to the assessee, eligibility of the dealers in Surat, who were liable to pay TOT constituted post-clearance event. According to the learned counsel, such post-clearance events are assumptions; that chargeability of excise duty cannot depend on such assumptions; that liability did not depend on assessment as it is fixed ex-hypothesis and, consequently, according to the learned counsel, the assessee was right in claiming deduction on account of TOT at 2% as that was the only rate which existed on the date when the goods were cleared at the factory gate. According to the learned counsel, at the time of filing the price declaration under Rule 173-C, the assessee had no means of knowing whether ultimately the TOT would be payable at 2% or at 0.5% and, therefore, the assessee was justified in claiming deduction of TOT at 2% being the prescribed tariff rate. According to the learned counsel, 0.5% was the concessional rate which depended upon fulfilment of conditions and eligibility criteria and, therefore, it was not possible for the assessee to visualize w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revalent under the above Notification dated 19.10.1993; that if the amount of TOT paid by the assessee was less than the amount claimed as TOT deduction at the time of ex-factory clearances, the assessee should have paid the differential excise duty but the assessee never disclosed to the Department that there were two types of sales, namely, backward area sales and normal area sales and nor did the assessee inform the Department about the TOT actually paid by it and, therefore, Department was right in confirming the show cause notice dated 19.3.1999 for the period March, 1994 to March, 1997. 7. The question to be answered is the meaning of the word "payable" in section 4(4)(d)(ii). The said word is descriptive. One has to see the context in which the said word finds place in the aforestated section 4(4)(d)(ii). We quote hereinbelow section 4(4)(d)(ii), which reads as under: "4. Valuation of excisable goods for purposes of charging of duty of excise.- (1) to (3) xxx xxx xxx (4) For the purposes of this section, - (a) to (c) xxx xxx xxx (d) "value", in relation to any excisable goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty has to be a part of the assessable value. Similarly, refund of excise duty cannot be treated as net profit and added on to the value of clearances. There is no provision in section 4 of the 1944 Act to treat refund as part of assessable value. If excise duty paid to the Government is collected at actuals from the customers and if, subsequently, exemption becomes available, such excise duty which is not passed on to the assessee, would become part of assessable value under section 4(4)(d)(ii). 8. In the case of TOMCO v. Union of India reported in 1980 ELT 768 (Bom.) the assessees were manufacturers of vegetable product known as 'Pakav'. The prices were fixed by the Controller, who fixed the prices statutorily under the Vegetable Control Order, 1947. These prices were fixed by the Controller, net of any tax during the period March, 1969 to December, 1969. The prices so fixed by the Controller included the element of excise duty payable thereon. TOMCO contended that it was entitled to claim rebate of duty by virtue of Notification No. 6/62-CE dated 10.2.1962. TOMCO further contended that, it was declaring the assessable value after deducting the element of duty at 5% fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the use of cotton seed oil in the manufacture of Pakav. 9. At this stage, we may note that there was a conflict of views at the relevant time when TOMCO case was decided by Bombay High Court on 24.7.1980. It is precisely in order to avoid the conflict that the Legislature inserted the above Explanation in section 4(4)(d)(ii) of the 1944 Act by using the words "the effective duty of excise payable on goods under this Act." 10. In the case of B.K. Paper Mills Pvt. Ltd. v. Union of India and ors. Reported in 1984 (18) ELT 701 (Bom.) the assessee was the manufacturer of various types of papers at their factory in Bombay. The papers manufactured by the assessee was liable to excise duty under Tariff Item 17 of the First Schedule to the 1944 Act (as it then stood) at the rate specified therein. Under Notification No. 45/73 dated 1.3.1973 an exemption from excise duty to the extent mentioned in the Notification was given in respect of certain types of papers cleared by the assessee (manufacturer). In preparing the invoices, the assessees did not give the benefit of exemption Notification to their customers. The assessees contended that the exempted duty of excise w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This alone is excluded from the normal price under section 4(4)(d)(ii). 12. It is true that the Explanation to section 4(4)(d)(ii) only refers to the amount of duty of excise payable on excisable goods, however, as held by the Bombay High Court in the case of B.K. Paper Mills (supra), the Explanation expressly sets out what is implicit in section 4(4)(d)(ii) which states that "value" in relation to excisable goods does not include the amount of duty of excise, sales tax and other taxes if payable on such goods. Therefore, the test to be applied is that of the "actual value of the duty payable" and, therefore, there is no merit in the argument advanced on behalf of the assessee that the Explanation is restricted to the duty of excise. This principle can therefore apply also to actual value of any other tax including TOT payable. Even without the Explanation, the scheme of section 4(4)(d)(ii) shows that in computing the assessable value, one has to go by the actual value of the duty payable and, therefore, only the reduced duty was deductible from the value of the goods. 13. To the same effect is the judgment of the Division Bench of the Bombay High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is called as Order Book. A manufacturer who is prudent would ordinarily worked out on estimation, the extent of exemption which he is likely to get, in which event, the uncertainty to which the learned counsel has made reference would in fact hardly arise. In the present case, we are concerned with the amount of deduction. That deduction has been claimed by the assessee-manufacturer (appellant). The burden is on such manufacturer to maintain proper records, as the burden is on it to file a proper price declaration under Rule 173-C. The burden to claim deduction is on the manufacturer. In the present case, the assessee has filed a declaration under the said Rule 173-C without disclosing to the Department any of the aforestated details. We are, therefore, of the view that the Department was right not only in raising the demand for differential duty but also for invoking the extended period of limitation. 16. For the aforestated reasons, we find no merit in these civil appeals and the same are accordingly dismissed with no order as to costs. Civil Appeal Nos. 2008-2010 of 2002 17. This batch of civil appeals have been filed by the Department against order date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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