1. The appeal has been filed by the department against the order of the Collector of Central Excise (Appeals), New Delhi dated 22-11-1982.
2. The respondents are manufacturers of oxygen gas falling under TI 14H of the First Schedule of the Central Excises and Salt Act, 1944. Among others the Respondents had entered into a contract with M/s. Grey Iron Foundry, Jabalpur. The rates for the sale were fixed by the DGS&D and contracts were entered into between the parties. The terms of the contract were revised from time to time and one of the clauses provided for "delivery and collection charges at the rate of Rs. 45/-per 100 cubic Mtrs. to be paid extra as per terms of the rate contract." The respondents filed the price lists on the basis of the revised contract.
They did not include this sum of Rs. 45/- in the sales to M/s. Grey Iron Foundry, Jabalpur.
3. Two show cause notices were issued on 1-9-1980 one for the period from 1-3-1973 to 29-2-1980 for Rs. 6,126.85 P. and the other for the period from 1-3-1980 to 30-6-1980 for Rs. 960.04 P. It was alleged that the delivery and collection charges should also be included in the assessable value and that there was a short levy. The respondents sent a reply stating that the prices were ex-factory and were exclusive of post-manufacturing expenses. They also submitted that delivery and collection charges did not have any bearing on manufacturing Costs and that no excise duty was payable. The Assistant Collector, Central Excise, Jabalpur held that the question of post-manufacturing charges would arise only after the goods had entered in the stream of trade and sale to M/s. Grey Iron Foundry, Jabalpur and hence whatever amount was received by the respondents would constitute assessable value. He also observed that the party had failed to declare the excess amount.
Thereupon the respondents preferred an appeal to the Collector of Central Excise (Appeals), New Delhi. In the impugned order the Collector of Central Excise (Appeals), New Delhi held that the charges collected were in lieu of expenses incurred after removal of the goods at the factory gate. He stated that they included an element of cost of collection of empty cylinders which prima facie Was the subject matter of the assessment. He allowed the party's appeal. Hence the appeal by the department.
4. Shri A.K. Jain, SDR who appeared for the department submitted that the assessable value for the sale to M/s. Grey Iron Foundry, Jabalpur should be at the price at which such goods are sold by the respondents to the buyers in the course of the wholesale trade. He stated that there should be no deduction for delivery and distribution charges and that they should be considered part of the price under Section 4(4)(d)(i). He further stated that the collection of Rs. 45/- per 100 cubic Mtrs. was at a flat rate and not the actual cost of transportation.
5. Shri D.N. Kohli, the learned Consultant for the respondents pleaded that the sum of Rs. 45/- represented the distribution charges and that the gas was filled up in cylinders either brought by the buyers or in durable and returnable containers supplied by the respondents. He stated that inasmuch as the distribution and collection charges arose after the manufacture of the products the same could not be included in the assessable value.
6. We have carefully considered the contentions of both the parties.
Section 3 of the Act is the charging Section and determines the taxable event for excise levy. It cannot be denied that the taxable event is the manufacture of the goods. The duty liability is determined under Section 4 of the Act. Section 4(1 )(a) proviso (i) specifies that where there are sales at different prices to different classes of buyers in the normal course of wholesale trade, each such price shall be deemed to be the normal price. In this case admittedly Rs. 45/- is being collected for delivery and collection charges from the buyers. But it must be seen that these delivery and collection charges do not relate to the manufacturing process but for the supply of gas in containers either belonging to the respondents or belonging to the buyers after the manufacture of the product. As rightly observed by the Collector of Central Excise (Appeals) these charges are in lieu of the expenses incurred after the removal of the goods from; the factory gate. The gas has necessarily to be filled up in cylinders and the delivery and collection charges arise after the manufacture of the product. We also notice that the collection charges include the compensation for bringing back empty cylinders already supplied to the buyers. These factors go to show that the delivery and collection charges cannot be included in the assessable value. We do not agree that it should be treated as a case of equalised freight.
7. The learned consultant for the respondents also argued that the show cause notices dated 1-9-1980 were issued beyond the period of 6 months and were time barred. It is important to note that the show cause notices did not set out any ground of suppression of facts. Further the Assistant Collector has mentioned that the show cause notices were amended to read Section 11A in the place of Section 10(1) wherever it occurred. The show cause notices should not have been amended as under Section 11A which came into force only on 17-11-1980. The show cause notices also mention Rule 10(1) of the Central Excise Rules. Rule 10 of the Central Excise Rules was omitted on and from 17-11-1980. Section 11A became operative thereafter. The infirmity in the show cause notices cannot be sought to be rectified by a mere statement in the order as attempted by the Assistant Collector. Further the respondents have also set out in the price list filed by them particulars of these charges. So there was no wilful suppression of facts or mis-declaration.
8. We also notice that under notification No. 313 of 1977 dated 8-11-1977 oxygen is one of the items for which an exemption has been granted qua the cost of packing. As per that notification, the value of the cost of packing is exempted provided such packing is of a durable nature and is supplied by the buyer to the assessee and is returnable by the assessee to the buyer. In any event this notification would be applicable to the present case and the respondents can claim the benefit of the notification.
9. For the reasons stated above, we dismiss this appeal and affirm the order of the Collector of Central Excise (Appeals), New Delhi.