Final Order Nos. 575 & 576/2001, arsing from Appeal No. E/2407-2408/97. Case: Commissioner Of C. Ex., Chennai Vs Zeneca Ici Agro Chemicals Ltd.. CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal)

Order:

V.K. Agrawal, Member (T), (South Zonal Bench, Chennai)

1. The Issue Involved In These Two Appeals Filed By The Revenue, Is The Determination Of Assessable Value Under Section 4 Of The Central Excise Act For The Purpose Of Levying Excise Duty On The Pesticides Manufactured By M/S. Zeneca Ici Agro Chemicals Limited.

    2. Briefly Stated The Facts Are That M/S. Zeneca Ici Agro Chemicals Ltd. Ennanore, Respondents, Manufacture Pesticides Which Are Cleared By Them In Bulk Form To Their Own Packing Units At Velachery And Ambattur For Repacking Into Smaller Packings Such As 50 Ml., 100 Ml, 200 Ml, 1 Ltr. And 5 Ltr. Under Their Own Material Transfer Notes: That Since The Impugned Goods Were Sold In Small Packings, Two Show Cause Notices Dated 5-3-1996 And 12-3-1996 Were Issued To Them For Demanding Duty For The Period From 1-9-1995 To 31-10-1995 And 1-11-1995 To 31-1-1996 Respectively On The Ground That The Price At Which Small Packages Were Sold By Them From Depot Should Be Adopted For The Purpose Of Charging Duty: That The Assistant Commissioner, Under Adjudication Order No. 21/96, Dated 18-6-1996, Confirmed The Demand Of Duty Of Excise Amounting To Rs. 51,24,716.90p., Holding That The Pesticides Are Generally Sold In Packings Of 50 Ml, 100 Ml, 500 Ml, 1 Ltr. & 50 Ltr And The Cost Of This Packing Is Includible In The Assessable Value Of The Goods As Per Judgments Of The Supreme Court In Uoi V. Bombay Tyre International Ltd., 1983 (14) ELT 1896 (SC) And Mrf Ltd., 1995 (77) ELT 433 (SC); That A Wholesale Price At The Depot Is Very Much Available; That The Argument That The Goods Could Be Marketed In Bulk Is Only Theoretical As The Goods Are Marketed Only In Small Packs. He Relied Upon The Decision In Hindustan Polymers V. C.C.E., 1989 (43) ELT 165 (SC). The Assistant Commissioner Also Rejected The Contention Of The Appellants That Goods In Bulk Form Were Not The Same Those In Small Packs Holding That By Packing No New Products Emerge With A Distinct Name, Character Or Use. He Relied Upon The Decision In The Case Of Bharat Packaging Corporation V. C.C.E., 1990 (47) ELT 102 (Tribunal). The Assistant Collector, Therefore, Ascertained The Assessable Value Adopting The Depot Prices Under Section 4(1)(B) Of The Central Excise Act Read With Rule 4 Of The Central Excise (Valuation) Rules.

   2.1 On Appeal, However, The Commissioner (Appeals) Set Aside The Adjudication Order, Holding That The Value Shall Be Determined Under Section 4(1)(A) Of The Act. He Relied Upon The Decision In The Case Of Ioc Ltd. V. C.C.E., 1987 (27) ELT 482 (Tribunal) Wherein It Was Held That Since Section 4 Of The Act Requires The Goods To Be Valued At The Time And Place Of Removal, It Would Not Be Correct To Say That The Duty Of Excise Is Leviable At The Time And Place Of Actual Sale Of Goods; That The Goods Have To Be Valued And Assessed In The Condition In Which They Are At The Time And Place Of Removal. He Also Gave His Findings That The Activity Of The Appellants In Packing At Velachery And Ambattur Was Not Incidental Or Ancillary To The Completion Of The Manufacturing Of Pesticides And That The Depot Price Could Be Adopted From 1996 Only.

3. Shri Kannan, Learned Dr, Submitted That The Impugned Goods Are Sold Only In Small Packs And That Price Is The Only Normal Price Available Under Section 4(1)(A) Of The Act; That The Goods In Bulk Are Only Cleared Under Stock Transfer Notes To Their Own Repacking Units; That The Pesticides In Bulk Were Originally Cleared Under Rule 57f(3) Of The Central Excise Rules; That The Goods Were Being Returned To The Factory At Ennanore; That The Findings Of The Commissioner (Appeals) To The Effect That If The Price For Goods Is Available At The Factory All The Removals From The Factory Shall Be At That Price, Is Not Correct As There Is No Sale At The Factory Gate Whether In Bulk Or In Retail; That The Sales Are Made To The Independent Buyers Only At The Depots In Repacked Condition; That The Ratio Of The Decision In The Case Of Ioc Ltd., Supra, Is Not Applicable Inasmuch As In That Case The Price To Independent Buyers Was Available At The Factory Gate Whereas In The Instant Case, No Sale Price At The Factory Gate Is Available For Goods Cleared In Bulk At Factory Gate; That The Cost Of Packing In Which The Article Is Contained And In Which It Is Made Marketable Falls Within Section 4(4)(D)(I) Of The Act As Per The Decision In C.C.E. V. Ponds India Ltd. - 1989 (44) ELT 185 (SC). Finally The Learned Dr Relied Upon The Decision In Sidhartha Tubes Ltd. V. C.C.E., 2000 (115) ELT 32 (SC) Wherein It Was Held That "When The Assessable Value Is To Be Calculated Of The Galvanised Black Pipe Made By The Appellants, The Element Of The Cost Of Galvanisation Must Form A Part Thereof".

4. On The Other Hand, Shri R. Raghavan, Learned Advocate, Submitted That The Pesticides Are Being Marketed In Bulk Quantities And Market Exists In Bulk Quantities For Pesticides; That Repacking Of Pesticides Does Not Amount To Manufacture; That The Repacked Pesticides Had Not Been Brought Back To The Factory At Ennanore And These Had Been Sold From Velachery And Ambattur; That Value Has To Be Determined For The Goods In The Form In Which They Are Cleared From The Factory And As There Is An Admission That Goods Are Cleared In Bulk, The Value Has To Be Determined Only For Bulk Goods; That As There Is No Sale Of Impugned Goods At The Factory Gate, The Determination Of Value Under Section 4(1)(B) Of The Act Read With Rule 6(B)(Ii) And Rule 7 Of The Valuation Rules Is In Order. The Learned Advocate, Further, Mentioned That The Issue Involved In The Present Matters Is Squarely Covered By The Decision Of The Tribunal In The Case Of Savita Chemicals Ltd. V. C.C.E., Mumbai-Vi, 2000 (119) ELT 394 (Tribunal) = 1999 (34) R.L.T. 573 (Cegat). He Mentioned That It Was Held In That Case That Repacking Or Packing Would Not Amount To A Process Of Manufacture; Before Amendment Made On 28-9-1996 Whereby Clause (Iii) Was Inserted In Section 4(4)(B) Of The Act, The Factory Gate Was The Place Of Removal For The Determination Of Normal Price. It Was Held By The Tribunal As Under:-

   "...That The Goods Which Are Defined To Be Sold From The Depots Would Be Leviable To The Duty At Price Charged At Such Depots When Assessed At The Factory Gate. Where The Goods So Moved From The Factory Gate Are The Same Which Were Sold At The Depot Gate, This Judgment Cannot Be Faulted. But In The Present Case What Was Removed From The Factory Gate Was Oil In Bulk In Tankers And What Was Sold At The Depots Was Oil Packed In Tins".

5. The Learned Advocate Contended That Goods Cleared From The Factory Were In Bulk Whereas The Goods Sold From Depots Were In Small Packs And As Such The Goods Were Different Goods And Accordingly The Value Of The Goods Is To Be Determined Under Rule 6 (B) (Ii) Of The Valuation Rules.

6. We Have Considered The Submissions Of Both The Sides. The Apex Court In The Landmark Decision In The Case Of Government Of India V. Madras Rubber Factory Ltd., 1995 (77) ELT 433 (SC) Held That Reading Of Section 4 Lends To The Following Analysis:

   Where The Duty Of Excise Is Chargeable On Excisable Goods With Reference To Their Value, The Normal Price At Which Such Goods Are Sold Shall Be Deemed To Be The Value Of Such Goods Subject To Other Provisions Of Section 4.

   "Normal Price" Means The Price At Which Such Goods Are Ordinarily Sold By The Assessee To A Buyer In The Course Of Wholesale Trade For Delivery At The Time And Place Of Removal.

   If The Normal Price Of Excisable Goods Is Not Ascertainable For The Reason That The Goods Are Not Sold Or For Any Other Reason, The Value Of Such Excisable Goods (I.E., The Nearest Ascertainable Equivalent) Shall Be Determined In The Manner Prescribed By Rules (Valuation Rules).

7. The Facts Which Are Not In Dispute In The Present Matter Are That Pesticides In Bulk Is Not Sold At Factory Gate. Pesticides In 200 Ltr Containers Are Cleared To The Repacking Units Of The Appellants And After Repacking In Small Packs, These Are Sold In Wholesale. It Is Also Not Disputed Fact That Repacking Into Smaller Packs Does Not Amount To Manufacture. In View Of These Facts It Is Apparent That There Is No Factory Gate Price Available For Pesticides Either In 200 Ltr Packings Or In Smaller Packings. Accordingly, The Ratio Of The Decision In The Case Of Indian Oil Corporation Ltd., Supra, Is Not Applicable As In That Case The Goods Were Sold In Bulk From Factory And Normal Price Was Ascertainable At The Factory Gate Which Is Not So In The Present Matter. Similar Is The Position In The Case Of Savita Chemicals Ltd., Supra, As The Automotive Oil Manufactured By Them Were Sold In Bulk In Tankers To Buyers At The Factory Gate. The Other Differential Factor In Savita Chemical''s Case Is That The Bulk Oil Was Sent To M/S. Unique Packers, A Third Party, And Not To The Repacking Units Of The Manufacturer As Is The Case In The Present Matter. In View Of These Facts The Tribunal Held In Savita Chemicals That Factory Gate Price, Being Available In Respect Of Oil Sold In Bulk, Has To Be Adopted. The Goods Are Ordinarily Sold By The Assessee To A Buyer In The Course Of Wholesale Trade Only In Small Packs. The Apex Court, In Mrf Case, Held That "So Far As Depot Sales Are Concerned, They Are To A Different Class Or Classes Of Buyers And In Respect Of Each Of Such Class Of Buyers Would Be The Normal Price". The Supreme Court Did Not Apply The Price At Which Mrf Sold The Goods To The Government. Following The Ratio Of Mrf Decision, The Value For The Purpose Of Levying Excise Duty Will Be The Price At Which Impugned Goods Are Sold In Smaller Packs. The Appellate Tribunal Also In The Case Of Adonia India Ltd. V. C.C.E., Meerut [2000 (119) ELT 68 (Tribunal) = 2000 (39) Rlt 1035 (Cegat)] Held That Assessable Value Is To Be Determined On The Basis Of Sale Price Of Sole Buyer To His Dealers After Allowing Permissible Deductions. In The Present Matter, The Learned Advocate For...