1. Originally preferred as a revision application before the Central Government, on transfer to this Tribunal, the matter is being treated as an Appeal. The present. Appeal is directed against the Order No.1563 dated 2-9-1977 passed by Appellate Collector of Central Excise, New Delhi.
2. Briefly stated, the facts of the case are that the appellants are a private limited company engaged in the manufacture, inter alia, or brake-linings and clutch facings, the two ancillaries falling under item 34A of the C.E.T. At the material time, the appellants were manufacturing some 1,000 to 1,500 different varieties of such products and as the specifications of the products were different to meet different requirements, the prices for the different varieties were also different. Accordingly, in terms of Rule 173-C of the Central Excise Rules, 1944, the appellants had filed before the proper officer regular price lists and RT-12s, which were approved and the appellants cleared the goods as per the declared prices. The goods involved in the present proceedings were manufactured by the appellants in their factory located at Ghaziabad but the sales were initiated from their sales office in Delhi. It is the case of the appellants that they were scrupulously and strictly declaring the invoice prices as per the approval accorded by the proper officer. Nevertheless, in some stray transactions the sale office found it necessary to make some marginal adjustments in the net price either on account of the prevailing market conditions or insistence by the particular buyer. However, where the net price was modified slightly upwards or downwards, in all such cases, so far as the duty of excise is concerned, that was credited and paid with reference to the approved price lists. The present proceedings arose out of issue of show cause notice No. 271 dated 6-3-1973 which was superseded by show cause notice No.287-88 dated 12-3-1973. This notice was superseded by show cause notice No.36-37 dated 28-3-1973 which in turn was superseded by the show cause notice dated 3-10-1973. On the same day, yet another show cause notice was issued in modification of notice issued earlier in the day. This notice dated 3-10-1973 alleges that the appellants had removed exciseable goods in contravention of Rule 173-C of the Central Excise Rules, 1944 (hereinafter to be mentioned as the Rules) inasmuch as the trade discount which had been declared in their price list Nos. 1/77 to 58/77 and Nos. 1/72 to 74/72 for the wholesale buyers from April 1972 to January 1973, were not passed on uniformly to all wholesale buyers. It was further alleged that in this way the price-lists referred to above were not factually correct and did not contain correct and true information. The notice further alleged that the intention of the appellants was to evade duty to the tune of Rs. 3,16,099.08. This amount was computed on the basis that no discount was admissible on sales made by the appellants during the period in question. The appellants were further asked why a penalty should not be imposed on them under Rule 173-Q of the Rules and why duty amounting to Rs.3,16,099.08 should not be demanded from them under Rule 10 of the Central Excise Rules. The said show cause notice did not disclose the basis for the allegation that the discount declared by the appellants had not been passed on uniformly to all wholesale buyers. However, the Department had supplied to the appellants in July 1973, i.e. a few months prior to the issue of the notice, a chart marked Chart-A purporting to be a list of cases: (ii) where the trade discount had been allowed at rates lower than 37% and This chart listed particulars of invoices relating to each of the three categories mentioned above issued by the appellants for the period 22-4-72 to 27-7-72. It is pertinent to mention here that simultaneously by issue of another show cause notice dated 3-10-1973, proceedings were initiated against the appellants on the same grounds for an earlier period viz. May 1971 to March 1972. According to this show cause notice the amount of short levy worked out to a figure of Rs. 4,39,520.20. We are however concerned with the present proceeding- covering the period April 1972 to January 1973 involving a duty of Rs. 3,16,099.08.
3. The Assistant Collector of Central Excise, Ghaziabad, after getting the appellant's reply to the show-cause notice and after granting them a personal hearing adjudicated the case. He held that the amount of Rs. 3,16,099.08 as shown in the show cause notice dated 3-10-1973 was payable by the Appellants. The Assistant Collector rejected all the pleas of the appellants including the one where the appellants had pleaded that the same issue had been decided in their favour by order dated 7-11-1974 passed by the Appellate Collector Shri S.N. Mathur and that it was not open to the Assistant Collector to go against the above mentioned orders dated 7-11-1974.
4. Aggrieved with the Assistant Collector's order, the Appellants took up the matter with the Appellate Collector before whom they raised the following grounds:- (1) The proceedings initiated against them were void in view of the order-in-appeal dated 7-11-74 passed by the Appellate Collector Shri S.N. Mathur.
(2) The sales effected by the appellants had been made in accordance with the prices approved by the proper officer which in several cases did not contemplate or provide for any discount.
(3) The trade discount declared in the price lists had been properly passed on to all buyers. If out of hundreds of sales made by the appellants during the period in question, in a stray case the discount was shown not to have been passed on, or to have been allowed at a different rate, their sales per se could not be treated as not conforming to a normal sale practice; and (4) The learned Assistant Collector could at best demand duty from the appellants under the law only on stocks on which the approved discount had not been allowed and not on all stocks on which discount approved had in fact been allowed.
5. After hearing the apellants the Appellate Collector rejected the appeal filed by the appellants vide his order dated 2-9-1977.
6. Several important issues arise for our consideration in coming to a proper decision for disposal of the present appeal. We shall deal with them in the succeeding paragraphs.
7. The first point urged by Shri Lachman Dev relates to what he termed as 'arbitrary manner' of issuing the show cause notice dated 3-10-1973.
He pointed out that while confronting the appellants with serious allegation of evasion of payment of duty, the lower authorities superseded the show cause notice a number of times and even the show cause notice issued on 3-10-1973 was modified on the same day. This showed that the perception of the lower authorities of the basic issue involved was totally confused. The need for modifying a show cause notice under exceptional circumstances could be understood and appreciated. However, here was a case where a show cause notice was superseded/modified on a number of occasions. It was pleaded that such action on the part of the lower authorities had created a lot of inconvenience and harassment to the appellants. In any event Shri Lachman Dev urged that for the purposes of limitations, should the need arise, the computation of the time limit could run backwards only from 3-10-1973, the date on which the final show cause notice was issued, and not from any earlier date.
8. Shri Jain, the learned SDR, submitted that he was not aware of the full facts as to why need arose to supersede/modify the show cause notice in the present case. It was possible, Shri Jain submitted, that the department was collecting evidence piece-meal which resulted in the modification of the show cause notice.
9. We have heard both sides on this point. We feel very unhappy and somewhat concerned that in vital matters like the issuing of the show cause notices, the lower authorities should not be able to make up their mind firmly. In the present case certainly the lower authorities' action in superseding the show cause notice on more than one occasion and modifying it even on the day of its issue lend weight to the pleas made by Shri Lachman Dev in this behalf. We accept the contention of the learned Consultant that for purposes of limitation, should the need arise, the relevant date would be 3-10-1973 on which date the 'final' show cause notice was issued to the appellants.
10. Another point on which lot of emphasis was laid by Shri Lachman dev pertains to the propriety and legality of the present proceedings pursued against the appellants when the same issue between the appellants and the Department stood finally decided by the order dated 7-11-1974 passed by the Appellate Collector of Central Excise, New Delhi. According to Shri Lachman Dev, the show cause notice leading to the issue of the above mentioned order of the Appellate Collector and the impugned appellate order were issued on the same date, namely, 3-10-1973. The allegation in both the show cause notices was also similar, namely, that the appellants were not entitled to claim the benefit of deduction of the trade discount from the selling price as such a discount was not being allowed on an uniform basis. The only difference was that the appellate order covered the period from May 1971 to March 1972, whereas the impugned order of the appellate Collector was for a subsequent period, namely April 1972 to January 1973. Shri Lachman Dev contended forcefully that once an issue stood concluded between the two parties, it was highly improper and illegal on the part of the lower authorities to start another cycle of litigation against the appellants causing them expense and harassment.
Such an action also shook the confidence of the appellants in the finality to the decisions taken by the officers of the rank of Appellate Collector. It was also pointed out by Shri Lachman Dev that the Department accepted the findings of the Appellate Collector's order dated 7-11-1974 whereas with regard to the impugned order, covering a subsequent period, they had gone ahead with the present proceedings.
Such a course of action lacked logic and legality. If the present proceedings were justified according to the Department, in fairness, the respondent Collector should have approached the Central Government for seeking revision of the Appellate order dated 7-11-1974 under Section 36 of the Central Excises &. Salt Act, 1944, as it stood at the relevant time. Shri Lachman Dev pleaded that on this ground of discriminatory treatment alone for two different periods on the same issue, the impugned order deserved to be set aside.
11. Shri Jain submitted that the order dated 7-11-1974 passed by the Appellate Collector covered an earlier period whereas the impugned order related to a subsequent period. In this connection he invited our attention to Order No. 588/83-A dated 30.11.1983 in Appeal No.ED(SB)(T).120/76A in the case of Saurashtra Chemicals v. Collector of Customs & Central Excise,, Bombay. The point taken there was that the order of the Government of India affording consequential relief for a particular period and in respect of certain revision petitions could not be extended for all times and for all buyers. Shri Jain submitted that no doubt the party in the present proceedings was the same but the period was different. Further, in the present proceedings, the lower authorities had discovered and relied upon several discrepancies in a number of invoices issued by the appellants. It could not, therefore, be assumed, as Shri Lachman Dev had pleaded, that the proceedings concluded by the order dated 7-11-1974 passed by the Appellate Collector, New Delhi, was fully applicable to the facts and circumstances of the present case.
12. We have heard both sides. Though there is some merit, in the submissions of Shri Lachman Dev that it is not desirable to re-open issues once concluded between the two parties, yet there can always be exceptions. When a particular issue is once concluded through certain proceedings, the fact of fresh material emerging and giving a new dimension to the matter cannot be Ruled out. This was precisely the stand taken by Shri Jain and on this point we are inclined to agree with the learned SDR.13. The real basic issue in these proceedings relates to the fact whether the appellants were entitled to claim deduction of 37% discount for working out the assessable value of their products. From the facts of the case, we observe that at the relevant time the arrangement of sale of their products by the appellants was to transport the same from their factory at Ghaziabad to their godown at New Delhi. Shri Lachman Dev has contended that no wholesale price existed at the factory gate and, therefore, for the purposes of Section 4 of the Act, the sale price could be the one at which the goods were delivered to wholesale dealers from the appellant's godown. It had not been seriously disputed by the respondent that in fact the selling point was the godown of the appellants at New Delhi and not the factory gate. It was also not the Department's case that the discount, whatever its quantum, was retained by the appellants. The case of the lower authorities was that the discount was not being allowed to various parties on an uniform basis.
There was no allegation that sales between the appellants and their customers were not at arms' length. Shri Lachman Dev stated that it is open to an assessee to show in the invoice the gross price, the rate of discount and the net price. It is also open to an assessee to work out the net price vis-a-vis the rate of discount and show it so in the invoice. What is really important from the point of view of the Department is that the assessable value should be worked out with reference to the approved rate of discount; it is immaterial whether at the time of issuing invoices the selling price is shown as gross price reduced by the approved rate of discount or net price worked out with reference to the approved rate of discount. Shri Lachman Dev conceded that these complications would not have arisen had the appellants taken proper care to have followed an uniform practice. However, the scrutiny of 51 invoices, which form the basis of the show cause notice, carried out at the direction of the Bench, had revealed no significant irregularity on the part of the appellants. Shri Lachman Dev invited our attention to the various invoices and connected them to the approved price lists and gate passes to prove his point. Thereafter, he prepared a synopsis of the analysis of 51 invoices with the relevant gate passes. Shri lachman Dev submitted that the exercise had revealed that in respect of 43 invoices the appellants had actually paid duty of Rs.183.23 in excess of the duty payable. With regard to the remaining 8 invoices, admittedly the duty was short paid to the extent of Rs.159.81. On the whole, therefore, the duty excess paid was more than the duty short paid. How could the Department in such circumstances, allege that the appellants were liable to pay duty to the tune of Rs. 3,16,099.08 14. Shri Lachman Dev also urged that during the relevant period the appellants had issued more than 1,000 invoices but the Department had relied only on 51 invoices. What was the basis on which these invoices were picked up by the Department Further, these 51 invoices pertained to a period of 4 months only while the alleged short levy had been worked out for a period of 10 months or so. What was the rationale or legal basis in picking up only 51 out of more than 1,000 invoices and that too only for a period of 4 months of the entire period covered by the present proceedings Shri Lachman Dev stated that it was not known as to how the Department had satisfied itself about the representative character of these invoices qua the total short levy determined. These were vital lapses on the part of the lower authorities and since no satisfactory explanation was evident: from the orders passed by them, it could be taken that the whole process of selection of the so-called, representative invoices was purely ad hoc and without any cogent basis.
The learned consultant further submitted that lapse on the part of the appellants with regard to the preparation of the invoices could be treated as a technical lapse. He pleaded that no loss to revenue had actually taken place on the goods removed by the appellants and that the appellants had paid the full amount of duty payable on the goods removed from their factory during the period covered by the show cause notice. He, therefore, prayed that the appeal deserved to be allowed.
15. Shri Jain contended that for admissibility for abatement of duty, a discount should be allowed on an uniform basis to all buyers. In this connection he referred to 1982 ELT 734-A(Govt. of India) in the case of M/s Vaniba Products. According to Shri Jain the test laid down by the Bombay High Court , 1984 (17)39 (BOM)=1984(17) ELT 39 (Bom.) in the case of Sathe Biscuits & Chocolates Co. Ltd. and another v. Union of India & others was also not satisfied by the appellants. The ratio of the High Court judgment is that the nature and quantum of discount must be known at or prior to the removal of the goods. In the case of the appellants when the goods were removed 'from the factory there was no clear preception on the part of the appellants as to the nature and quantum of discount which they would be passing on to their different wholesale dealers. A reference was also made by Shri Jain to the case reported as 1979 ELT J-460 in the High Court of Judicature at Allahabad in the case of Shyam Glass v. Inspector of Central Excise, Sasni and Ors.... He submitted that the Hon'ble High Court had held that for the purposes of determination of assessable value under Section 4, deduction for trade discount is permissible only when it is allowed uniformly to all.
16. We have heard both sides. The real dispute relates to the manner of discounts being allowed by the appellants. The impugned order more or less exclusively deals with this issue. The other issues which we have discussed earlier were raised at the time of the arguments. It is a matter of common experience that normally an invoice is drawn by showing the gross price, the rate of discount and the net price.
However, there is nothing sacrosanct about this conventional way of drawing up of an invoice. It is also open to a seller to draw an invoice on a net price basis so long as there is understanding, contractual or otherwise, between the buyer and the seller about the quantum of trade discount. One could find several flaws with the manner in which the appellants went about their task in preparing invoices to different parties. It is this lack of uniformity in preparing their invoices on different bases which led to the initiation to the present proceedings.
17. From the discussion of the case contained in the preceding paragraphs we come to the conclusion that the charge of evasion of duty, as contained in the show cause notice dated 3-10-1973 and resulting in the issue of the impugned order passed by the Appellate Collector of Central Excise, New Delhi is not sustainable in Law.
Accordingly, we accept the various contentions made by Shri Lachman Dev, set aside the impugned order dated 2-9-1977 and allow the apeal.