Commnr. Of Central Excise, Delhi vs M/S. Pearl Drinks Ltd

2. The respondent-company is engaged in the manufacture and sale of aerated water falling under heading 22.01 and 22.02 of Chapter 22 of the Schedule to the Central Excise Tariff Act, 1985. In the course of scrutiny of records the excise authorities noticed that the respondent- company had not affected any sale of aerated water to any wholesale buyer at its factory gate. It had instead been clearing the manufactured product in glass bottles after making payment of the duty and removing them to a duty 3 paid godown situated at B-42, Lawrence Road Industrial Area, Delhi, adjacent to the factory. The duty paid stocks so removed were then sent to the customers in lorries owned by the respondent or taken on hire by them on long term basis from other parties. The driver-cum-salesman employed for that purpose would deliver the goods to the customers/dealers at a higher price and issue cash memos to them, while unsold stocks and empties were brought back to the company's duty paid godown.

3. In the declarations filed by the respondent-company from time to time it had while disclosing the wholesale price/assessable value for various sizes and flavours claimed deductions towards excise duty, sales tax, transportation charges, container service charges and other service charges including trade discounts etc. before arriving at the assessable value under Section 4 of the Central Excise & Salt Act, 1944. Being of the view that such deductions were not legally admissible, the adjudicating authority issued a notice dated 3rd November, 1995 calling upon the 4 respondents to show cause why the deductions claimed under the following eight heads be not denied to them:

4. The respondent filed a reply to the notice aforementioned upon consideration whereof the Principal Commissioner of Central Excise, Delhi passed an order in 5 original dated 14th March, 2001 disallowing deductions to the extent of Rs.13,42,924/- on account of loss of beverages in the duty paid godown and a sum of Rs.27,50,072/- on account of loss in transit from the said godown to the customers and discount made on account of free supply of bottles of aerated water. Insofar as the remaining six heads under which deductions were claimed by the company the order in original accepted the said claim.

5. Aggrieved by the order aforementioned the respondent-company filed an appeal under Section 35(E)(1) of the Central Excise before the CEGAT who by a reasoned order dismissed the same, holding that the disallowance of deductions under the two heads referred to above was perfectly in order. A further appeal filed by the assessee before this Court was also dismissed on 23rd September, 2002 thereby finally settling in favour of the Revenue the controversy as regards the admissibility of deductions under the two heads referred to above are concerned. 6

8. In compliance with the order passed by the CBEC the Commissioner of Central Excise preferred an appeal under Section 35E(4) of the Act which was dismissed by the CEGAT by its order dated 22nd of July, 2002 holding that the order under challenge had merged in the earlier order dated 24th 8 January, 2002 passed by the Tribunal in the company's appeal whereby disallowance of two of the eight deductions in dispute had been upheld. The present appeal questions the correctness of the said order as noticed earlier.

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13. There is in the light of the above pronouncements no gainsaying that the doctrine of merger will depend largely on the nature of the jurisdiction exercised by the superior court and the content or the subject matter of challenge laid or capable of being laid before it.

15. We have in the light of the above no hesitation in holding that the order passed by the Tribunal dismissing the appeal by the Revenue on the doctrine of merger is erroneous and unsustainable. We accordingly allow these appeals, set aside the impugned order and remand the matter back to the Tribunal for a fresh disposal in accordance with law. The parties to appear before the Tribunal on 6th September, 2010.