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PETITIONER: MYSORE ROLLING MILLS (P) LTD.

       Vs.

RESPONDENT: COLLECTOR OF CENTRAL EXCISE, BELGAUM

DATE OF JUDGMENT18/02/1987

BENCH: MISRA RANGNATH BENCH: MISRA RANGNATH PATHAK, R.S. (CJ)

CITATION:  1987 AIR 1488            1987 SCR  (2) 318  1987 SCC  (1) 695        JT 1987 (1)   476  1987 SCALE  (1)382

ACT:     Central  Excise and Salt Act 1944/Central Excise  Rules, 1944  Sections  4,  11A  &  35L/Rules  6,  9  &   10--Excise duty--Handling  charges  to  be  added  for  computation  of duty--Manufacturer   suppressing  disclosure   of   handling charges--What is period of limitation applicable.

HEADNOTE:     Between  September 1974 and May 1977 the  appellant  re- ceived  more than 6 lakh rupees from its customers by  issue of  debit  notes over and above the amounts  received  under regular  invoices for manufacturing aluminium wire  rods  on job basis on their behalf.     The Excise Authorities issued notice under Rule 10(i)(c) of the Central Excise Rules, 1944, to the appellant to  show cause why the aforesaid amount called as "handling  charges" should  not be added to the invoice price  and  differential duty recovered. The Assistant Collector confirmed the demand after  cause  was shown which was upheld  by  the  Appellate Collector and confirmed by the Tribunal.     In the appeal to this Court, on behalf of the  appellant it  was contended; (1) that on the basis of Rule 6(b)(i)  of the  Valuation Rules the statutory levy price  of  aluminium should be adopted as being the price of comparable goods and with  effect from 1.10.75 the assessable value  should  have been  fixed under proviso (ii) to s.4(1)(a) or s.4(1)(b)  at the  same  amount,. (2) that Rs.60 which  was  collected  as handling  charges was not to be taken into account for  com- puting  duty and (3) that the notice was barred  by  limita- tion. Dismissing the appeal,     HELD: (1) With effect from 1.10.1975 a new s.4 has  been inserted into the Central Excise & Salt Act, 1944  providing for  the  mode  of valuation. The period  involved  in  this appeal  is  from 27.9.1974 upto  31.5.1977.  Therefore,  the period  upto 30.9.1975 would be covered by the old  s.4  and from 1.10.1975 till 31.5.1977 the provisions of new  section would apply for determining the assessable value. [320E] 319     (2)  As  per arrangement between the appellant  and  its customers, the appellant was permitted to lift the  allotted

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ingots  directly  and after carrying out  the  manufacturing process  it  used  to deliver the  same  to  the  customers. [321C-D]     (3)  There has been no sale of the material between  the appellant  and the customers. The appellant  was  collecting Rs.600  per metric ton as conversion charges and  Rs.60  per metric ton as handling charges. [320G]     (4)  The  handling charges were intended  to  cover  the appellant’s expenses in lifting the ingots. The Tribunal has come  to the right conclusion in holding that  the  handling charges  represented pre-manufacturing cost and became  part of the value for computation of duty. [321D-E]     (5)  Rule 9 which corresponds to s.11-A of the Act  pro- vided  a period of one year for taking of proceedings  while Rule  10 corresponding to the present s. 11 of the Act  pre- scribed  a  period of three months for  such  purpose.  With effect  from 6.8.1977, the period of six months was  substi- tuted for the period of three months and the period of  five years substituted for the period of one year. [321B-C]     (6)  The  rule is intended to relate back  and  cover  a period  of five years from the date jurisdiction  under  the rule is invoked. The provision, is therefore,  retrospective in operation. [321G] (7)  Once  the rule comes into  existence  and  jurisdiction under the rule is invoked, it has got to cover a period upto five years preceding the date of issue of notice. [321H]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4542 (NM)  of 1985.     From the Order dated 10.6.1985 of the Customs Excise and Gold  (Control) Appellate Tribunal, New Delhi in Appeal  No. ED(SB) (T) A. No. 88 of 1980-A. M. Chandrasekharan, V.J. Francis, N.M. Popli for the Appel- lant.     B. Datta, Additional Solicitor General, Ms. S. Relan and Mrs. Indra Sawhney for the Respondent. The Judgment of the Court was delivered by 320     RANGANATH  MISRA, J. This appeal under section  35-L  of the  Central Excises and Salt Act, 1944 is directed  against the  decision  of  the Customs, Excise  and  Gold  (Control) Appellate  Tribunal upholding the decision of the  Appellate Collector of Central Excises, Madras. The short facts  rele- vant  for  disposal of this appeal are  that  the  appellant manufactures aluminium wire rods out of duty paid E.C. grade aluminium  ingots on job basis on behalf of various  custom- ers.  Between September 1974 and May 1977 it received a  sum of more than 6 lakh rupees from customers by issue of  debit notes  over  and above the amounts  received  under  regular invoices. The Excise Authorities came across 966 such  debit notes and on the basis thereof called upon the appellant  to show  cause  why that’amount which was said to  be  handling charges should not be added to the invoice price and differ- ential  duty  thereupon be recovered. The Revenue  took  the stand that there was suppression of information on the  part of  the  appellant  with regard to  collection  of  handling charges  and,  therefore, the notice was issued  under  Rule 10(i)(c)  of the Rules framed under the Act.  The  Assistant Collector  confirmed the demand after cause was  shown.  The Appellate  Collector  upheld the demand  by  dismissing  the appeal. The Tribunal has confirmed the Appellate order.     There  is no dispute that with effect from  1.10.1975  a

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new  Section 4 has been inserted into the Act providing  for the  mode of valuation. In view of the fact that the  period involved  in this appeal is from 27.9.74 upto  31.5.77,  the period upto 30th of September, 1975 would be covered by  the old  Section 4 and from 1.10.75 till 31.5.1977,  the  provi- sions of new Section would apply in the matter of  determin- ing  the  assessable  value. It is not  disputed  that  from 15.7.75  the  levy price of aluminium had  been  statutorily fixed at Rs.7062 per metric ton. It is the contention of the appellant that on the basis of Rule 6(b)(i) of the Valuation Rules  the price of Rs.7062 should be adopted as  being  the price of comparable goods and with effect from 1.10.1975 the assessable  value should have been fixed under proviso  (ii) to Section 4(i)(a) or Section 4(1)(b) of the Act at the same amount. The admitted position is that there has been no sale between the appellant and the customers of the material. The appellant was collecting Rs.600 per metric ton as conversion charges  and Rs.60 per metric ton as handling  charges.  The dispute  in  the appeal is confined to the  question  as  to whether  Rs.60 per metric ton collected as handling  charges could be added for computation of duty.     Two  contentions are advanced in support of the  appeal; firstly,  Rs.60 which was collected as handling charges  was not to be taken into 321 account  for computing duty and secondly, the  notice  dated 13th of October, 1978 had been issued more than a year after the  last date of the period in question and was  barred  by limitation. Prior to 6.8. 1977, Rule 9 which corresponds  to Section  11-A of the Act provided a period of one  year  for taking  of  proceedings while Rule 10 corresponding  to  the present  section  11  of the Act prescribed a  period  of  3 months for such purpose. With effect from 6.8.1977, when the rules were amended, the period of six months was substituted for the period of three months and the period of five  years substituted  for  the period of one year. The  Tribunal  has held  that  the period of five years was applicable  to  the facts of the case on the basis that it is a case of suppres- sion.  It is the case of the appellant that for  convenience the arrangement between the appellant and its customers  was that  instead of the customers collecting the ingots on  the basis  of allotment at their respective factories  and  then transporting  the same to the appellant situated at  Belgaum in the State of Karnataka, the appellant was being permitted to lift the allotted ingots directly and after carrying  out the manufacturing process it used to deliver the same to the customers.  The handling charges were intended to cover  the appellant’s  expenses  in lifting the ingots.  The  Tribunal has, therefore, come to the right conclusion in holding that the handling charges represented pre-manufacturing cost.  We agree  that the Tribunal came to the appropriate  conclusion in  holding that the handling charges became a part  of  the value for computation of duty.     The  Tribunal has recorded a finding that the  appellant had suppressed the disclosure of receipt of handling charges and, therefore, the longer period of limitation applied. The same view had been taken by the departmental authorities. We see no justification to take a different view on the facts.     The only other submission of the appellant which remains for  consideration is the tenability of the contention  that the  period  of limitation under the  old  provision  having expired  the five year rule which has been applied  was  not available  to be applied. Undoubtedly, the rule is  intended to  relate  back and cover a period of five years  from  the date  jurisdiction under the rule is invoked. The  provision

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is,  therefore,  retrospective in operation. It is  not  the stand  of  the learned counsel for the appellant  that  only when  a  period of five years has elapsed from the  date  of introduction of the rule, jurisdiction under the rule can be exercised in respect of that preceding period of five years. Once  the rule comes into existence and  jurisdiction  under the  rule is invoked it has got to cover a period upto  five years preceding 322 the date of issue of notice. The Tribunal has endorsed  such action of the departmental authorities. The plea of  limita- tion has no force.     Both  the contentions in support of the appeal fail.  We dismiss the appeal but without costs. A.P.J.                                          Appeal  dis- missed. 323