LexCOLLECTOR OF CENTRAL EXCISE, MADRAS versus INDIAN OXYGEN LTD.
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... COLLECTOR OF CENTRAL EXCISJ;:, MADRAS v. INDIAN OXYOEN LTD. AUGUST 2, 1988 [SAB:YASACHI MUKHARJI AND L.M. SHARMA, JJ.) Central Excises And Salt Act, 1944: Section 4( 1)( a) and 35L(b )- Manufacturer of dissolved acetylene gas and compressed oxygen gas= For purposes of supply-Rental Charged for cylinders-Interest paitf on· deposits taken from customers-Charges pn account of rent.a! af!if interest on deposits-Whether relatable to ~ost of'manufacture'. The respondent firm are manufacturers of dissolv!'d acetylene gas and compressed oxygen gas. They were supplying these gase~ iy cylinders at their factory gate. For t.aklng delivery some consumers/ customers used to bring their own cylinders and take the delivery. Others, used to have the delivery in the cylinders supplied by the · respondent firm. For the purpose of such supply of cylinders certain rentals were charged by the firm, and also to ensure that these cylinders are returned, a certain amount as deposit used to be taken from the customers. On these deposits notional interest at 18 percent per annum w.as calculated. The Central Excise Authorities issued show-cause notices to the ·respondent on the ground that the -notional income on the deposit of cylinders .an!! the rental are part of the assessable-".a.lue, and he.nee should he included in comp\lting the assessable value .. fo their ,repJy :the respondent stated that the deposits from the buyers ,were ,only to .ens\l,re B c D E return of the gas cylinders from the customers. F The Assistant Collector by his order dated 3rd June, !1965 held that the respondent had to pay excise duty on the inte•est ear1,1ed at l8% during the -relevant period, and :that as the respondent had suppressed this fact from the rev.enue during the past 5 years, the amount was ·indudible .and .recoverable ·under Rule 8 read with Section 1 IA of -the G l:entrai Excises and Salt Ac.I. He also included the rentals of the .cylinders in the value. In .appeaHhe :(;ollec.tor Jlp_held t.he •or!li>r ,of1t\l.e Assista_nt <Ct,11lec.t11.r .but,with-certai1,1·mo.cli.t'ications . A B c 762 SUPREME COURT REPORTS \ [1988) Supp. 1 S.C.R. The respondent appealed to the Central Excise and Gold Control Appellate Tribunal, which allowed the appeal, and held that the charge on account of rentals for the cylinders and the interest which accrued on the deposit for the cylinder are not relatable to the cost of manufacture of the goods, and therefore under Section 4 deleted from the value, rentals for the cylinders and the interest on the deposit. In the appeals to this Court it was contended on behalf of the Revenue that there are two different classes of buyers, one class who brings their own cylinders, and the others who get their supply through the cylinders of the suppliers, and that different rates for these two classes of buyers constitute two different markets and are contemplated and permissible, under the first proviso to Section 4(l)(a) of the Act. Dismissing the Appeals, HELD: I. Section 4(l)(a) proviso can be of no avail to the Revenue. There may be different classes of buyers for different classes D of goods. In the instant case, if the respondent company sold the gases to different classes of buyers then different prices may be charged. If the gases had been sold to different classes of buyers at different rates, it is possible that there might be different markets for the same. The charges like rental for the cylinders and the notional interest income are for ancillary or allied services and that is not an activity of manu- E facture. [766A-BJ Union of India & Ors. v. Bombay Tyre International Ltd., [1984) I SCR 347 and Asstt. Collector of Central Excise v. Madras Rubber Factory Ltd., [1986) Supp SCC 751, referred to. F 2. It is well settled that levy under the Central Excises Salt Act is on manufacture. In the instant case, the sale is of gases. The levy is on the manufacture of gases and the excisable goods are these gases. [764G, H] 3. Gas being a commodity of peculiar nature, has to be delivered by cylinders, but these cylinders might be supplied either by the sup- G plier as an ancillary activity or brought by the consumers or purchasers at their own risk and cost. For purchasers taking it in their own cylinders supplied hy them, there was no charge for them. This is not an activity for the manufacture of gases. This is ancillary to it but not ' incidental
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