COMMISSIONER OF CENTRAL EXCISE,PUNE Vs HINDUSTAN NATIONAL GLASS & INDS. LTD.
Bench: DIPAK MISRA,N.V. RAMANA
Case number: C.A. No.-001829-001829 / 2008
Diary number: 1670 / 2008
Advocates: B. KRISHNA PRASAD Vs
SUJATA KURDUKAR
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Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1829 OF 2008
Commissioner of Central Excise, Appellant(s) Pune
Versus
Hindustan National Glass and Respondent(s) Industries Limited
O R D E R
Dipak Misra, J.
A show cause notice under F. No.
Prev/CEX/AEI/OBL/ 141/99/797 dated 16th August, 2002,
was issued to M/s. Owens Brockway (I) Pvt. Ltd., the
predecessor-company of the respondent which is presently
known as Hindustan National Glass and Industries Limited,
by the Commissioner of Central Excise, Pune-I, alleging that
the manufacturing company was not adding the additional
consideration received from the customers in the form of
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advance and, therefore, the notional interest accrued
thereon is to be added to the sale price, for such
non-addition had resulted in depression of the assessable
value of the goods, namely, the bottles manufactured by the
respondent-assessee.
2. In the show cause notice, it was mentioned that the
assessee had short paid the duty on its products, that is,
printed glass bottles, by under-valuing the same at the time
of clearance from its factory inasmuch as it did not add
“additional consideration” received from M/s. Coca Cola
India and M/s. Pepsico India Holdings Pvt. Ltd. The show
cause notice referred to the statement of the Manager
(Sales) of the Company from which it was discernible that
the respondent-assessee had received 90% advance from
M/s. Coca Cola India and 100% advance from M/s. Pepsico
India Holdings Pvt. Ltd. for the goods and it was giving 3-4%
discount to the said Companies.
3. After the reply to the show cause was received, the
adjudicating authority passed an order on 28th November,
2003, making a demand of Rs. 33,91,934,00/- under
Section 11A(1) of the Central Excise Act, 1944 (for short
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“the Act”) being the duty payable on the additional
consideration received by the assessee from the customers
in the form of notional interest accrued on advance
payments and also imposed penalty for the same amount
under Section 11AC of the Act. Apart from that, the
adjudicating authority confirmed certain other demands.
4. Being grieved by the aforesaid order of the adjudicating
authority, the respondent-assessee preferred an appeal
before the Customs, Excise and Service Tax Appellate
Tribunal, West Zonal Bench, Mumbai (for short, 'the
tribunal'). Initially, the matter was heard by two Members
consisting of Member (Judicial) and Member (Technical).
The Member (Technical) came to hold that the revenue had
not been able to discharge the onus by adducing cogent
material evidence that the advances obtained from a buyer
had really been instrumental in depression of the price.
Learned Member further opined that there was no nexus of
interest with the price and hence, the demand was not
acceptable and consequently, no penalty could be levied.
5. The Member (Judicial) adverted to the order passed by
the Commissioner wherein the statement of the Manager
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(Sales) had been adumbrated in detail, referred to the other
documents that had been put-forth by the revenue before
the adjudicating authority and in course of discussion
adverted to the principle stated in Commissioner of
Central Excise, New Delhi vs. Hero Honda Motors Ltd.1
and opined as follows:
“In view of the above decision, I am of the opinion that the matter needs to be remanded to the Commissioner for fresh examination in the light of the observation made by the Hon'ble Supreme Court in the case of Hero Honda Motors Ltd. vs. CCE referred supra and after examining the entire aspect of the use of the advances, income generated from the said advances, their contribution of the pricing structure and their reflection in the Balance-sheet or the Annual Reports of the appellants, and the deployment of the funds so received by them, as I agree with the learned brother Shri Sekhon that onus to prove so is on the Revenue. However, the appellants would be at liberty to produce relevant evidences before the adjudicating authority in support of their contention that the interest accrued on such advances have not in any way resulted in depreciation of the price. All other issues are left open for the appellants to address before the adjudicating authority.”
6. As there was difference of opinion, the matter was
referred to the third Member and the third Member, who 1 (2005) 4 SCC 182
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was a Judicial Member, vide order dated 29th August, 2007,
cogitated on the concept of assessable value under the Act,
the concept of two prices and eventually opined that the
decisions in Hero Honda Motors Ltd. (supra) and Metal
Box India Ltd. vs. Collector of Central Excise, Madras2
are not applicable to the case at hand and accordingly
concurred with the opinion expressed by the Member
(Technical). Hence, the revenue is before this Court in
appeal.
7. We have heard Mr. Yashank Adhyaru, learned senior
counsel for the appellant-revenue and Mr. Aarohi Bhalla,
learned counsel for the respondent-assessee.
8. On a scrutiny of the factual score, it is noticeable that
the respondent-assessee had obtained certain advance
sums from some companies/users to supply the bottles and
on that count it had granted 3-4 per cent discount. Though
the quantum had not been stated precisely, yet it has been
found as a matter of fact that M/s. Coca Cola India and
M/s. Pepsico India Holdings Pvt. Ltd. had given advances
for 90% and 100% respectively for their purchases.
2 (1995) 2 SCC 90
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9. In Metal Box India Ltd. (supra), the Court while
dealing with the transaction between the appellant therein
and M/s. Ponds (I) Ltd., who was a whole-sale buyer of the
appellant's goods, had accepted the view of the tribunal and
expressed thus:
“On the facts on record, therefore, it must be held that the Tribunal was perfectly justified in taking the view that charging a separate price for the metal containers supplied to M/s Ponds (I) Limited could not stand justified under Section 4(1)(a) proviso and, therefore, to that separate price charged from the Ponds (I) Limited, the extent of benefit obtained by the assessee on interest-free loan was required to be reloaded by hiking the price charged from M/s. Ponds (I) Limited to that extent. Contention 2 also, therefore, fails and is rejected.”
10. In Hero Honda Motors Ltd. (supra), the question that
arose for determination is whether receipt of advance and
the income accruing thereon, had gone towards the
depreciation of the sale price. In that context, the Court
opined that there is conspectus of decisions which clearly
establish that inclusion of notional interest in the
assessable value or wholesale price will depend upon the
facts of each case. The three-Judge Bench adverted to the
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facts of the case, the agreement existing between the parties
and the lower price at which the respondent-assessee
therein had sold the motor-cycles and after analysing the
factual matrix opined as follows:
“For the above reasons, we hold that the tribunal has disposed of the appeal before it in a most perfunctory manner without going into any figures at all but by merely on the statement made by counsel and on the basis of material which appears to have been produced first time before the tribunal. We, therefore, set aside the order of the tribunal and remand the matter back to the tribunal. The tribunal will consider in detail, if necessary, by taking the help of a Cost Accountant and after looking into the accounts of the respondent whether or not the advances or any part thereof have been used in the working capital and whether or not the advances received by the respondent and/or the interest earned thereon have been used in the working capital and/or whether it has the effect of reducing the price of the motorcycle. The tribunal to so decide on the material which was placed before the Commissioner and not to allow any additional documents/materials to be filed before it. None of our observations made herein shall bind the tribunal to which this case is remitted.”
11. In the case at hand, the Member (Judicial) has
remitted the matter to the competent authority to deal with
it afresh in the light of the decision rendered in Hero
Honda Motors Ltd. (supra).
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12. Mr. Aarohi Bhalla, learned counsel for the
respondent-assessee would submit that when no evidence
was adduced by the revenue at any point of time and the
law is settled that the onus is on the revenue to establish
that there has been depression of assessable value, the
majority view of the tribunal cannot be found fault with.
13. Mr. Yashank Adhyaru, learned senior counsel
appearing for the appellant-revenue would submit that the
documents were produced before the adjudicating authority
as well as the tribunal to show the nature of advance and
the manner of transaction from which it is demonstrable
that there has been depression of the assessable value.
14. On a perusal of the order passed by the Commissioner,
it is seen that observations have been made on certain
aspects and inferences have been drawn. It cannot be said
that no material was produced by the revenue. The
concerned Commissioner has taken note of the statement
made by the Manager (Sales) of the assessee-Company. An
aspect raised relates to percentage of total sales made to
two companies, but the core issue is whether there was a
depression of the sale price on account of receipt of
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advance. In the case of Metal Box India Ltd. (supra), the
facts were extremely clear as there was an agreement that
M/s. Ponds (I) Ltd. had given 50% advance with a
stipulation that it would purchase 90% of the manufactured
goods. It was a case where a separate price was charged.
In the case of Hero Honda Motors Ltd. (supra), the facts,
as we perceive, were not clear and, therefore, there was a
remit. Be it noted, sale price agreed between two competing
parties may get depressed, when substantial and huge
advances are periodically extended and given with the
objective and purpose that the sale price paid or charged
would be lowered, to set off the consideration paid by grant
of advances. There should be a connect and link between
the two i.e. the money advanced it should be established
was a consideration paid which could form the basis for
depression of sale price. Evidence and material to establish
the said factual matrix has to be uncovered and brought on
record to connect and link the sale price paid on paper and
the “other” consideration, not gratis, but by way of interest
free advances.
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15. In our considered opinion, in the present case, there
has to be application of mind by the tribunal regard being
had to the amount of money paid by purchasers, namely,
M/s. Coca Cola India and M/s. Pepsico India Holdings Pvt.
Ltd. and what is the effect of the sales made to the two
companies in percentile terms, whether this had the effect
of depressing the sale price. The onus would be on the
revenue. That being the thrust of the matter, liberty is
granted to the revenue to produce the documents in this
regard to discharge the onus. As we are remitting the
matter, we may note one submission of the
respondent-assessee. It is urged by the learned counsel
that when the entire activities were within the knowledge of
the excise authorities, penalty is not leviable. Needless to
emphasize, the tribunal shall advert to the said submission,
if required, in the ultimate eventuate, in proper perspective.
16. In the result, the appeal is allowed, the order passed
by the tribunal is set aside and the matter is remitted to the
tribunal for fresh disposal keeping in view the observations
made herein-above. We may hasten to clarify that we have
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not expressed any opinion on any of the aspects. There
shall be no order as to costs.
......................J. (Dipak Misra)
......................J. (N.V. Ramana)
New Delhi; January 14, 2016.