MYSORE ROLLING MILLS (P) LTD.versusCOLLECTOR OF CENTRAL EXCISE, BELGAUM

A              MYSORE ROLLING MILLS (P) LTD.
                            v.
           COLLECTOR OF CENTRAL EXCISE, BELGAUM

                            FEBRUARY 18, 1987
                                                                                 ~
B         [R.S. PATHAK, CJ AND RANGANATH MISRA, J.]

          Central Excise and Salt Act 1944/Central Excise Rules, 1944--
    Sections 4, JJA & 35L/Rules 6, 9 & JO-Excise duty-Handling
    charges to be added for computation of duty-Manufacturer suppres-           ~-

c
    sing disclosure of handling charges-What is period of limitation
    applicable.                                                                 ,...,
          Between September 1974 and May 1977 the appellant received
    more than 6 lakh rupees from its customers by issue of debit notes over
    and above the amounts received under regular invoices for manufactur-       }-
    in~ aluminium wire rods on job basis on their behalf.
D
          The Excise Authorities issued notice under Rule lO(i)(c) of the
    Central Excise Rules, Jl944, 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 Col-
    lector confirmed the demand after cause was shown which was upheld
E   by the Appellate Collector and confirmed by the Tribunal.

          In the appeal to this Court, on behalf of the appellant it was
                                                                                >t
    contended; (I) 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 g'"Jds and with effect from 1.10.75 the assessable
F   value should have been fixed under proviso (ii) to s.4(1)(a) or s.4(l)(b)   ~
    at the same amount, (2) that Rs.60 which was collected as handling
    charges was not to be taken into account for computing duty and (3)
    that the notice was barred by limitation.
                                                                                +
          Dismissing the appeal,
G
        HELD: (1) With effect from 1.10.1975 a new s.4 has been in-
  serted 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
                                                                                !':
H section would apply for determining the assessable value. [320E]

                                      318
               MYSORE ROLLING MILLS v. CENTRAL EXCISE                 319

      (2) As per arrangement between the appellant and its customers,
                                                                             A
the appellant was permitted to lift the allotted 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     B
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 con-
clusion in holding that the handling charges represented pre-manufactur-
ing cost and became part of the value for computation ~f duty. [321D-E I
                                                                             c
      (5) Rule 9 which corresponds to s.11-A of the Act provided a
period of one year for taking of proceedings while Rule 10 correspond-
ing to the present s.11 of the Act prescribed a period of three months for
such purpose. With effect from 6.8.1977, the period of six months was
substituted for the period of three months and the period of live years      D
substituted for the period ofone year. [321B-C)

       (6) The rule is intended to relate back and cover a period of live
years from the date jurisdiction under the rule is invoked. The provi-
sion, is therefore, retrospective in operation. [321G)
                                                                             E
(7) Once the rule comes into existence and jurisdiction under the rule is
invoked, it has got to cover. a period upto live years preceding the date
of issue of notice. [321H]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4542 (NM)
of 1985.                                                                     P

     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-          G
!ant.

     B. Datta, Additional Solicitor General, Ms. S. Relan and Mrs.
Indra Sawhney for the Respondent.

        The Judgment of the Court was delivered by                           H
    320                   SUPREME COURT REPORTS             [1987] 2 S.C.R.

A
          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 up-
    holding the decision of the Appellate Collector of Central Excises,
    Madras. The short facts relevant for disposal of this appeal are that the
    appellant manufactures aluminium wire rods out of duty paid E.C.
B   grade aluminium ingots on job basis on behalf of various customers.
    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 differen-
c
    tial 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 IO(i)(c) of the Rules framed under the Act. The
    Assistant Collector cimfirmed the demand after cause was shown. The
D   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 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
E   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
    provisions of new Section would apply in the matter of determining 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
F   Valuation Rules the price of Rs.7062 should be adopted as being the
    price of comparable goodti and with effect from 1.10.1975 the assess-
    able 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 posi-
    tion is that there has been no sale between the appellant and the
    customers of the material. The appellant was collecting Rs.600 per
G   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,
H   Rs.60 which was collected as handling charges was not to be taken into
             MYSORE ROLLING MILLS v. CENTRAL EXCISE [MISRA, J.]               321

      account for computing duty and secondly, the notice dated 13th of               A


"
      October, 1978 had been issued more than a year after the last date of
I     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 6.8.1n77, when the rules were amen-              B
      ded, 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 suppression. It is
      the case of the appellant that for convenience the arrangement bet-
      ween the appellant and its customers was that instead of the customers          c
      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 manu-
      facturing process it used to deliver the same to the customers. The
    · handling charges were intended to cover the appellant's expenses in             D
      lifting the ingots. The Tribunal has, therefore, come to the right con-
      clusion in holding that the handling charges represented pre-manu-
      facturing 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.
                                                                                      E
           The Tribunal has recorded a finding that the appellant had
     suppressed the disclosure of receipt of Iiandling charges and, there-
     fore, 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.
                                                                                      F
           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 tinder the rule is invoked. The provision is, there-       G
     fore, 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
                                                                                      H
     rule is invoked it has got to cover a period upto five years preceding
    322                  SUPREME COURT REPORTS           [1987] 2 S.C.R.

A   the date of issue of notice. The Tribunal has endorsed such action of
    the departmental authorities. The plea of limitation bas no force.      '1
          Both the contentions in support of the appeal fail, We dismiss
    the appeal but without costs.
B
    A.P.J.                                             Appeal di' aissed.




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