S.V. Maruthi, Member (J)

1. These two appeals are disposed of by a common order as the appeals arose out of a common order of the Collector (Appeals).

2. The dispute relates to the allowability of certain deductions claimed by the appellants.

3. The appellants M/s Tungbhadra Industries Ltd. entered into an agreement with M/s. Indexport Ltd., a wholly owned subsidiary of Hindustan Lever Ltd., Bombay for manufacture on its behalf two brands of Soaps, namely Sunlight and Lifebuoy. Indexport issued an authorisation under Notification No. 305/77 dtd. 5-11-1977. All the materials required for manufacture of the said soaps were supplied to the appellants by Indexport and the appellants received processing charges for conversion of raw materials into finished goods at a specified rate per unit of production. In terms of the agreement entered into between the appellant and Indexport, the price at which the goods will be sold by Indexport is the basis for the determination of the assessable value for the levy of excise duty.

4. The appellants filed price lists claiming the following deductions :

1. Turnover tax;

2. Cost of special secondary packing;

3. Freight incurred in movement of finished goods from factory to wholesale dealers (on an equalised basis);

4. Handling expenses incurred in the movement of finished goods to wholesalers;

5. Remuneration to clearing and forwarding agents for search of goods in transit and other incidental services;

6. Discount for damages.

5. On 6-6-1989, a show cause notice was issued by the Asstt. Collector proposing to disallow the deductions claimed in the price list. On receipt of reply, the Asstt. Collector disallowed the deductions. On appeal, the Collector (Appeals) allowed deduction on account of freight from the factory to the depots for the wholesale trade, turnover tax after scrutiny of proof on payment of such turnover tax and since turnover tax cannot be quantified at the time of removal, the appellant, the Collector directed should pay duty on the element of turnover tax at the time of clearance and claim refund at a later date. The deduction in respect of special secondary packing and discount for damages are not allowed. As regards handling expenses and remuneration to clearing and forwarding agents, the Collector allowed them provided they are incurred outside the factory-gate.

6. The appellants have come up in appeal against the order disallowing their claim in respect of special secondary packing and discount for damages and also in respect of turnover tax to the extent that the Collector directed them to pay and claim refund and the freight from the wholesale depots to various other areas to which the supplier of the raw material sent the goods.

7. The department has come up in appeal against the order of the Collector allowing the claim of the appellants regarding the handling expenses and the remuneration paid to the clearing agents and the forwarding agents.

8. At the outset, we may make it clear that the issue is actually covered by the judgment of the Supreme Court in Ujagar Prints case 1988 (38) E.L.T 535 (SC) as the supplier of raw material is Indexport, and therefore, the price declared by the Indexport plus the profit of the appellant and the job work charges should be the assessable value. However, the appellants have not claimed assessment on the basis of the said judgment in their reply to the show cause notice though a reference is made in the grounds of appeal before this Tribunal. It is not clear why the appellants have not claimed the assessment on the basis of Ujagar Prints case. Therefore, we are considering the claims of the appellants on the basis of the price of the supplier i.e. M/s Indexport, as it is open to the assessee to claim assessment as long as it is not contrary to law and not to their disadvantage.

9. Taking up the appeal of the Department, the main contention of the appellants is that the Collector ought not to have allowed handling expenses and the remuneration