Customs, Excise and Gold Tribunal - Delhi
Indian Oil Corporation vs Collector Of Central Excise on 6 December, 1989
Equivalent citations: 1990(48)ELT80(TRI-DEL)
ORDER I.J. Rao, Member (T)
1. We heard these appeals together and dispose of them by this common order as all the appeals involve common points and questions.
2. All these appeals were originally filed as revision applications before the Central Government and on statutory transfer are being treated as appeals before the Tribunal.
3. The appellants produce in their Refinery at Digboi various petroleum products including lubricants and Lube Base Stock (LBS for short) and sell these products either directly or to other oil marketing companies. With the gradual increase in international price of crude oil, prices of all petroleum products increased correspondingly. The Government of India took a decision to keep prices of some of the petroleum products, which are consumed by the poorer sections of the Community, at lower levels. Two such products were Kerosene and Diesel Oil. To achieve this end, the Government evolved a mechanism by which to compensate under-recovery of prices, a scheme known as "Product Price Adjustment Account Scheme" was devised. Under this Scheme, oil companies are allowed to recover compensatory price increase on certain petroleum products which are not normally consumed by the poorer sections of the Community. The amounts thus recovered as compensatory price increases were to be pooled on an All-India basis and from this pool reimbursements were being made to oil companies for actual short recoveries in prices suffered by them in the sale of kerosene and diesel oil etc. at a price less than their cost of production. The salient features of this Scheme as explained by the appellants are as follows :
(a) Oil Marketing Companies are to account for the over/under recoveries at rates and for the periods as shown in the scheme (para 2 of the Scheme).
(b) M/s. Indian Oil Corporation, M/s. BPCL (formerly Burmah-Shell Oil Storage and Distributing Co. of India Ltd.), M/s. Hindustan Petroleum Corpn. Ltd., M/s. Caltex (India) Ltd. and M/s. Assam Oil Co. Ltd. are participating oil companies in the scheme but they will reflect the recoveries of compensatory price increases on their respective sales to I.B.P.C. and Castrol (Para 3 of the Scheme).
(c) For competing over/under-recoveries, Marketing companies shall take all sales made by it during a quarter EXCEPT quantities sold to any of the participating oil company(s) (Para 4 of the Scheme).
(d) Quarterly audited statements to be submitted to the Ministry and to each other oil company on the basis of which IOC shall intimate quarterly position of the account on INDUSTRY BASIS (Para 5 of the Scheme).
(e) The surplus company shall pay to the deficit company in proportion of the total of its surplus bears to the deficit companies and the balance will be carried over to the next period (Para 6 of the Scheme).
(f) The cumulative surplus, if any, in this account after meeting each company's under-recoveries is to be disposed of in the manner directed by the Government and decision shall be binding on all the participating companies (Para 7 of the Scheme).
4. It is the case of the Department that the compensatory price increase should be included as an element in the assessable value. In this view the Central Excise Department issued 7 show clause notices in respect of various products and pertaining to various periods. The details of these show cause notices are as follows :
________________________________________________________________________ SCN/Appeal No. Date Products Period as per SCN amount SCN ________________________________________________________________________
1. 2. 3. 4. 5.
________________________________________________________________________
1. 11013 531/81- 13-9-76 BOC 400/AG 2-3-74 to 30-9- 1236452.47 A 140/AG (H) 75
2. 11015 527/81- 13-9-76 BOC 250 2-3-74 to 30-9- 1431450.74 A 75
3. 11021 528/81- 13-9-76 BOC 250/BOC 22-8-73 to 1-3- 753706.71 A 400/AG 74 (H)/AG 140
4. 11017 529/81- 13-9-76 AG 140 Oct.75 to July 723757.54 A 76
5. 11019 532/81- 13-9-76 BOC 250 - do - 571217.74 A
6. 866 530/81-A 17-1-80 BOC 250 Aug. 76 to 15 306218.22 Dec. 77
7. 869 1028/81-A 17-1-80 AG 140 -do- 1093887.60 ________________________________________________________________________
5. The appellants resisted the show cause notices and argued that no part of the compensatory price increase belongs to any individual oil marketing company but it merely makes up the losses suffered by them on account of under recoveries as a result of sale of kerosene and diesel at less than the cost of production. They argued that the compensatory price increase is nothing but a surcharge on lubricants and goes entirely to the pool account and no part of it goes to the Company. Therefore, according to them it is neither an element of manufacturing cost nor of manufacturing profit nor does it form part of wholesale cash price and therefore, can never be taken into account for determining the assessable value of the oil in question.
6. The Assistant Collector after due process rejected the appellants' arguments and confirmed the demands. These were upheld by the Appellate Collector. Hence the revision applications which are now appeals before us.
7. Shri Raghavan Iyer assisted by Shri R. Venkataraman submitted that a substantial part of the demand totalling around Rs. 63 lakhs was time-barred, the show cause notices demanding the differential duty having been issued beyond the period of limitation provided in Rule 10. The learned Representative submitted that it is Rule 10 that is applicable to these demands and not Rule 10-A of the Central Excise Rules, as, if at all there was any short recovery, it was due to error, inadvertance or mis-construction and not due to any other reason. He submitted that the appellants obtained proper licences, filed classification lists and price lists, cleared all the goods under gate-passes only, maintained proper accounts and filed the requisite monthly returns, etc., suppressing no information and no mis-statements of any kind. He argued that if the Department desired to do so, they were empowered to enquire into the correctness of the price lists as mentioned in the show cause notices. The price lists were approved and communicated to the appellants.
8. Shri Raghavan Iyer further submitted that only Rule 10 would apply if assessment is completed and a need is felt by the authority for reopening the assessment. He pleaded that in the instant case, the attempt of the Department is for reassessment, after the assessment is completed. He submitted that to apply Rule 10-A, there must be proper material disclosed to show that there was no complete assessment which is not the case here.
9. Shri Raghavan Iyer further argued that Rule 10-A could be resorted to only in the absence of any other provisions in the Central Excise Rules. In the instant matters, according to him, Rule 10 was squarely applicable and Rule 10-A was, therefore, completely irrelevant. In support of his arguments the learned Representative cited the following case law:
(i) N.B. Sanjana v. The Elphinston Spinning and Weaving Mills Co. Ltd. - 1978 ELT J 399(SC)
(ii) Assistant Collector of Central Excise v. National Tobacco Co. of India Ltd. -ECR C 398 SC
(iii) R.K. Audime v. Special Steel Ltd. and Anr. - ECR C 365 SC
(iv) DRK v. Atul Products Ltd. - 1985 (20) ELT 212 SC
(v) Andhra Rolling Works v. Union of India - 1986 (25) ELT 3 SC
10. Shri Raghavan Iyer further submitted that suppression of facts was not at all there and in fact it was not even alleged. In Show Cause Notices 866, 11013,11019, 11015 and 11021 the Department merely alleged that a particular circular issued by the Government of India was not made known to them. In Show Cause Notices 869 and 11017 the Department alleged that the buyers were related persons. Shri Raghavan Iyer further submitted that the predecessor Oil Company (AQC) did not sell the goods at the higher prices mentioned in the circulars. Therefore, there was no necessity to inform the Department of the Government's circular. The higher prices were to be availed by the buyers of the products and not by the appellants who sold them. Denying any suppression of the information in these circumstances, the learned representative relied on the following two judgments:
(i) CC Industries and Ors. v. H.N. Ray and Anr. - 1980 ELT 442 (Bom.)
(ii) Collector of Central Excise v. Chemphar Drugs and Liniments - 1989 (40) ELT 276 SC.
11. Shri Raghavan Iyer, therefore, submitted that the demands to the extent that they were issued beyond the period of limitation under Rule 10 were not sustainable.
12. The learned Representative submitted that even on merits the demands are not sustainable. Referring to the statement of demands (page 29 of the paper book) he stated that after 1-10-75 the sales were only to Burmah Shell and there was no sales to Castrol. He stated that with effect from 24-1-76, Burmah Shell Company was taken over by the Government of India and was vested in Bharat Petrol Corporation (BPC for short). Therefore, it was a Government Company from that date. Pointing out that two Show Cause Notices 11017 and 11019 relating to post period 1-10-75 were not hit by time- bar, Shri Iyer submitted that the arguments on merits were relevant especially to these appeals. He stated that the product BOC 250 was sold during the period 1-10-75 to 24-1-76 to Burmah Shell which became a Government company on 24-1-76. He emphasised that there was no local sales of these goods and the sales were exclusively to the Burmah Shell during the period October 1975 to 24-1-76 and in the subsequent period to BPC who took over the company. Therefore, the appellants had only one buyer in wholesale, and that these sales were by agreements, copies of which have been filed before the authorities and that Burmah Shell or BPC were not the agents of the appellants. There was no profit sharing between the two companies and the prices have to be negotiated in consonance with the Government's order. Referring to the agreement between two companies, Shri Iyer submitted that it was a normal commercial agreement. He also submitted that since August 1973, BOC 250 was sold at only Government's fixed price.
13. In this context, Shri Raghavan Iyer fairly stated that the Assam Oil Company by which sales were made was the subsidiary of the Burmah Oil Company which held shares but not controlling interest in Burmah Shell of UK. Burmah Shell Company of India was a marketing affiliate to the UK Company and was, therefore, not a related person of AOC. In support of this plea, the learned Representative cited the Supreme Court's judgment in TI Miller v. Collector of Central Excise - [1988 (35) ELT 8 SC]. Here the Burmah Oil Company, the holding Company is only a shareholder in the UK Company and the holding Company has no interest in the Indian Company. Therefore, in accordance with the order of the Tribunal in International Computers v. Collector of Central Excise - [1989 (41) ELT 287 (T)] and also in S.M Chemicals & Electronics and Anr. v. R. Farthasarathy and Ors. - [1980 (6) ELT 197 (Bom.] and the Supreme Court's judgment in Union of India and Ors. v. Atic Industries - [1984 (17) ELT 323 SC] the buyer Burmah Oil Company was not a related person of M/s. Assam Oil Company (AOC) the appellants. Shri Raghavan Iyer argued that mutuality of interests under Section 4(4) (c) of the Central Excises and Salt Act (the Act for short) does not say that the mutual interests between the manufactuer and buyer can be established by merely showing that they have business dealings with them. It must be shown for such a purpose, that there is a special interest in the promotion and development of each others - [1979 (4) ELT J 407 Cibalul Limited v. Union of India and Ors.] and Ashok Leyland Ltd. v. Government of India - [1987 (30) ELT 281 SC]. Shri Raghavan Iyer submitted that it is the totality of the terms and conditions which is decisive of whether the concept of related person is invokable or not. He pleaded that the agreements and the relationships between the appellants and the buyers do not show that there is any mutual interest and that they are related persons.
14. Referring to the product AG 140(Pack) sold during the period after October 1975, Shri Raghavan Iyer submitted that out of the two show cause notices (SI. Nos. 4 & 7 of Table in para 4) one is time-barred. He submitted that there were some sales in Assam at the prices fixed by the Ministry of Petroleum (MOP for short) and these prices included surcharge. Outside Assam sales were exclusive to Shell Company till 24-1-76, in the same circumstances as in respect of product BOC 250. Posing the question as to whether the value of local sales should be the assessable value or the value of the sales to Burmah Shell, Shri Raghavan Iyer submitted that the local sales were made at prices prescribed by MOP and the sales to Shell were according to the prices mutually agreed on the basis of import parity. This price was not a controlling price. He submitted that the local sales in Assam were insignificant and further that in any event there were two different classes of buyers (local and Burmah Shell) under proviso (i) to Section 4(i)(a) of the Act. The learned Representative referred to an order of the Central Board of Excise and Customs issued in 1976 about different classes of buyers and submitted that there can be two prices even to the same class of buyers.
15. Referring to the period prior to October 1975, Shri Raghavan Iyer submitted that in respect of the product BOC 400, it was sold only to Castrol and there was no local sales. He fairly admitted that the goods were sold at the higher prices and the excise duty on surcharge was collected from Castrol and was kept in suspense account. He offerd that if the Tribunal so ordered, this amount would be paid to the Government without invoking the question of limitation.
16. In respect of AG(H), he submitted that this was sold only to Shell and to local dealers, the bulk of the sales being to Shell only.
17. In respect of BOC 250, Shri Iyer submitted that there was no local sales at all but only to Shell at Government fixed prices which were to operate between the Refinery and Marketing Company. In so far as the sales to Castrol, Shri Iyer fairly accepted that the price was inclusive of excise duty on surcharge and made the same offer to deposit the amount without claiming the limitation. In respect of product AG140 also there was a small quantity of local sales and there were sales to Shell and to Castrol. Here too, Shri Iyer offered to deposit the excise duty on surcharge collected from Castrol, without claiming limitation.
18. Referring to these circumstances, Shri Iyer submitted that there was one price at which they sold to Castrol and one price at which they sold to Shell. He submitted that the assessable value should be fixed not on the basis of what the product is capable of being sold at, but on the actual price when such a price is available. He submitted that a few sales at a higher price is not a basis for determination of assessable value if majority of the sales is at a lower price, and if such a wholesale price is as per agreement and is at arms-length. The learned Representative relied on State of Karnataka v. Union of India reported in 1978 ELT J 546 SC and in paragraph 29 of the Supreme Court's judgment in Union of India v. Bombay Tyre International- [1983 ELT 1896 SC].
19. In brief, Shri Iyer submitted that all the show cause notices for the periods prior to 1-10-1975 are not valid. Show Cause Notice No. 11021 (Appeal No. 528/81-A) was totally time-barred and Show Cause Notices No. 11013 and 11015 (Appeal No. 531/81-A and 527/81-A are within limitation for the periods 13-9-1975 to 30-9-1975. But even these notices cannot stand on merits. He reiterated that whatever amount was collected by the appellants from Castrol as excise duty on surcharge relating to the clearances of the products BOC 400, AG 140 and BOC 250 would be paid without any contest on time-bar.
20. Concluding his arguments Shri Iyer submitted that the impugned order of the Appellate Collector was not sustainable for the following reasons :
1. The order erroneously held that Shell are favoured buyers of AOC and they were mutually related persons merely because bulk of the goods were sold to them by AOC under an agreement.
2. The Appellate Collector did not apply the statutory test under Section 4(4)(d) of the Act to decide the question of mutual relationship nor did he examine the agreement to decide whether Shell is a favoured buyer and agreement is not at arms-length.
3. The Appellate Collector's reason that Shell is a favoured buyer merely because bulk of the sales were made to them under an agreement is negatived by the decision of the Supreme Court in Voltas - [1977 ELT J 177]. The reasoning of the Appellate Collector was taken from very old case law in NTC v. Collector of Central Excise - [AIR 1961 and AIR 1967] and Amco Batteries v. Asstt. Collector of Central Excise - [AIR 1983 Madras 215] and other judgments which were overruled by Voltas judgment.
4. The Appellate Collector misread the decision of the Supreme Court in the first ATIC's case - [1978 ELT J 444] in that he held that on the sales by AOC to Shell they do not first enter into stream of wholesale sales. Shri Iyer submitted that the judgment refers to several tiers of wholesale transactions and held that the first tier of wholesale by which the goods are passed on to a buyer from a manufacturer in the course of wholesale trade is to be construed as basis for assessable value.
5. There was no question of abatement of surcharge or claim for such purpose in this case as the price to Shell/Castrol/BPC was not inclusive of surcharge and excise duty on surcharge. Therefore, the resort to explanation to Old Section 4 of the Act in the Assistant Collector's and the Collector's order did not arise at all. Even in the case of sales to Castrol, invoices were raised without including surcharge and excise duty on surcharge, but Castrol, not being a participating marketing company, passed on the amounts to AOC who did not retain the surcharge and credited the same to pool accounts. The appellants were prepared to pay this amount to the Revenue when a final order is passed.
21. Shri Krishnamurthy, the learned SDR submitted that as can be seen from Para 3C of the Appellate order the differential duty was correctly demanded under Rule 10-A of the Central Excise Rules. He submitted that the extra amounts were collected and were not disclosed to the Department and duty on such amounts could be demanded under the said Rule. He argued that 95% of the sales of the appellants were to Burmah shell and there was, therefore, on free wholesale market. He argued that the agreements between the appellants and Burmah Shell, etc., were not at arms-length. Shri Krishnamurthy argued that the first stream of sales was by Burmah Shell to their customers and it is that price that should be taken as the basis for assessment.
22. Answering the arguments that the show cause notices having been issued after 7-8-1977 (when Rule 10-A was deleted) and, therefore, the said rule is not applicable, Shri Krishnamurthy argued that though the show cause notice was issued later, the period of demand was one when the Rule was available. Referring to explanation to Section 4 the learned SDR argued that there could be no abatement of the amount paid into the account.
23. Shri Iyer in his rejoinder argued that the question of abatement arises only when cum-duty price is there. In these matters, the net price is known and duty is calculated on the same. He pointed out that the price of the appellants' products was exclusive of surcharge except in respect of sales to Castrol. He reiterated that there was no need on the part of the appellants to disclose the circular issued by the Ministry of Petroleum as the provisions of the same apply to marketing and the appellants sold their product at a lower price. In conclusion Shri Iyer repeated that there was no active concealment by the appellants.
24. We have considered the submissions made by both sides. We propose to decide these matters in 3 parts viz. (i) time-bar, (ii) clearance of products (BOC 250/AG 140 (packed) for the period 1-10-1975 till 15-12-1977) and (iii) demands related to clearance of products (BOC 400, BOC 250, AG 140 and AG(H) prior to 1-10-1975.
25. We have taken note of the arguments of both sides on the question of timebar. It was not denied by the Revenue that the appellants held a Central Excise Licence, filed classification lists and price lists which were approved that there was no provisional assessments and approval of price lists were communicated. A perusal of the show cause notices shows that it could have been only due to inadvertance, error or mis-construction of law as a result of which the alleged short-levy occurred. Further RT 12 returns are filed and finalised and removals were made under proper documents. Therefore, for the show cause notices dated 13-9-1976 (Appeals No. 527/81-A, 528/81-A, 531/81-A and 532/81-A) it can be only Rule 10 and not Rule 10-A which is applicable. Therefore, demands made by these show cause notices exceeding a period of one year are held to be time-barred.
26. In respect of the two show cause notices dated 17-1-1980 (Appeal Nos. 530/81-A and 1028/81-A) we note that there was no allegation of suppression of facts. What is alleged is only an omission to furnish the pricing circular issued by the Ministry of Petroleum which were "made known to office at a later date". The show cause notices in Appeal Nos. 1028/81 and 529/81 do not refer to any requirements to furnish information nor there is any allegation of suppression of the same. All the show cause notices demanded duty on the supposition that the appellants were required to declare the price at which the products sold to Burmah Shell were resold by the said company. We take note of the submission that suppression of facts to be proved should involve active concealment and not mere omission. The learned Representative of the Appellants cited the Supreme Court's decision in Collector of Central Excise v. Chemphar Drugs and Liniments [1989 (40) ELT 276 SC]. Following the ratio we accept the submissions of the appellants with regard to time-bar and hold that the demands made beyond the normal period of limitation are invalid.
27. With regard to clearance of the products viz. BOC 250/AG 140 (packed) between the period 1-10-1975 and 15-12-1977, the position is that there was no local sales on BOC 250 within Assam Territory. All the sales were made exclusively to Burmah Shell between the period 1-10-1975 and 24-1-1976 on which date Burmah Shell were taken over by the Government of India. We note the submission made by Shri Iyer that sales of the product by AOC to Shell/BPC were sales in the name of wholesale trade within the meaning of Section 4(4) (e) of the Act. Shell and BPC had commercial interest in the resale of the product. Sales were of substantial quantities of BOC Lube 250 and sales were made under an agreement between AOC and Shell. We perused the copy of the agreement in Appeal No. 530/81-A. The agreement in its prefactory part, and in Clauses 8, 10 and 16 shows that Shell were only buyers and nothing in the agreement makes them the legal agents of AOC nor gives them any Partnership or profit sharing agreement. This agreement was amended when Shell was taken over by the Government of India when Clause 10 of the agreement was substituted so that prices of oil were to be determined in the manner prescribed by the Ministry of Petroleum. From Shri Iyer's arguments we note that supplies of BOC 250 between 1-10-1975 and 24-1-1976 were in favour of the sellers and not the buyers and, therefore, Shell cannot be held to be favoured -buyers during this period.
28. In this context, we examined the connection between AOC and Shell. AOC was a subsidiary company of BOC which had share holding interest in Burmah Shell, a UK company registered in London. The Burmah Shell Oil Storage and Distributing Company Ltd. (India) was an affiliated Marketing Company of Burmah Shell, UK. Therefore, as submitted by Shri Iyer, AOC and Burmah Shell India did have very remote connection but no mutuality of interest. This view is further supported by Clause 16 of the agreement by which Shell was neither an agent nor a Partner in profits, the connection being too remote to establish any such relationship. We have taken note of the case laws cited by the learned Representative which included the Supreme Court's judgment in ATIC - [1984 (17) ELT 323 S.C.] as also the Supreme Court's judgment in T.I. Millers case - [1988 (35) ELT 8 S.C.]. The ratio of these judgments is that where there is a common distributor for the holding company and a subsidiary of the holding company, the distributor company and the manufacturing subsidiary company were not to be considered as related persons. The Tribunal in International Computer Manufacturing Company v. Collector of Central Excise [ 1989 (41) ELT 287 (Tribunal)] held that when buyers and sellers are both subsidiaries of the same holding company they cannot be said to be related persons. In view of this case law, there can be no relationship established between AOC and BPC which was a Government Company.
29. The prices for BOC 250 having been fixed by Ministry of Petroleum which regulated the prices of petroleum products the seller and the buyer could not negotiate the prices independently. It was stated during the hearing that these prices are fixed by the Ministry on the basis of Cabinet Resolutions accepting the recommendations of the Oil Pricing Committee Report from time to time. Therefore, such prices can be said to have been fixed under the authority of Law in force.
30. With regard to AG140 we note that there was sale locally by AOC in Assam to dealers and to Shell between 1-10-1975 and 24-1-1976 and after that date to BPC, the successor Government company. There was no sale to Castrol between 1-10-1975 and 15-12-1977. The sale of the product in Assam was regulated by the Ministry's circulars according to which surcharges were realised from the buyers. The appellants collected excise duty on the surcharge.
31. Nearly 95% of AG 140 was sold to Shell/BPC under an agreement at negotiated prices. Therefore, in the peculiar facts and circumstances of this case we hold that there were two categories of wholesale buyers one being the participating marketing companies (Burmah Shell and BPC) and the other being the wholesale dealers in Assam Territory'. The assessable values, therefore, could be different between the two classes.
32. In these circumstances we hold that for the periods after 1-10-1975 show cause notices No. 11017 (Appeal No. 529/81-A) and 11019 (Appeal No. 532/81-A) dated 13-9-1976 and show cause notices No. 866 (Appeal No. 530/81-A) and 869 (Appeal No. 1028/81-A) dated 17-1-1980 are not sustainable on merits. The demands in Appeal Nos. 529/81-A (Show cause notice No. 11017) and No. 532/81-A (Show cause notice No. 11019) are not hit by time-bar, but are vacated on merits. The demands in Appeals No. 530/81-A (SCN No. 866) and No. 1028/81-A (SCN No. 869) are set aside both on merits and on time-bar.
33. The next item to be examined are the demands relating to clearance of BOC 400, BOC 250, AG 140 and AG(H) prior to 1-10-1975. The position with regard to these products during this period is that BOC 400 was sold exclusively to Castrol, and there was no local sales or sales to Burmah Shell. BOC 250 was sold exclusively to Shell and Castrol and not locally. AG 140 was sold to Shell and Castrol and also locally. AG(H) was sold to Shell and locally but not to Castrol. Where invoices were raised on Castrol for sales of BOC 250 and BOC 400 and AG 140, Castrol, not being a participating marketing company passed on to AOC surcharge and excise duty realised by them on further sales of products as the said company could not directly tender such surcharge and excise duty on surcharge in the Pool/Block Control account. AOC passed on the surcharge amount to the Pool Account but retained the excise duty element in a suspense account. But Shri Iyer stated that AOC is agreeable to pay to the Revenue the excise duty on surcharge relating to the impugned periods in respect of sales of BOC 400, BOC 250 and AG 140, without raising the question of time-bar.
34. In so far as the sales of the product to Shell are concerned surcharge plus excise duty were realised on the further sales and were surrendered to the Block Control account. We note Shri Iyer's submissions that as the appellants are prepared to pay the excise duty element on surcharge on sales to Castrol, there shall be no loss of Revenue as Shell had already paid excise duty on surcharge to the Block Control Account of the Government and the balance of the demands related only to sales to Shell. Shell, who as a marketing company did not retain the surcharge and passed into Block Control Account. We note with favour the submission of Shri Iyer that any realisation of duty in respect of sales by AOC to Shell in respect of these products would amount to double collection of duty on the contribution towards excise duty on surcharge which is already with Government, in the Block Control Account. This position seems to have been accepted by the Government of India in their order-in-revision dated 12-6-1981 relating to sales of BOC 250 during the period 2-3-1974 to 31-3-1979.
35. We have already held in the peculiar circumstances of these matters, there were two different wholesale prices. If a product is capable of being sold at a higher price by the buyer, the assessable value cannot be increased unless the transaction is not at arms length and unless it is held that there was deliberate manipulation. In these matters no such findings can be arrived at. The Supreme Court in Bombay Tyres International - [1983 ELT 1896] (para 39) laid down that what is contained in the new Section 4 is only a more comprehensive and precise statement of what the law has always been under the old Section and, therefore, the first proviso to the new Section 4(1)(c) must be read into old Section 4(a). In 1978 ELT J 564, the Karnataka High Court held that the assessable value in major sales should not be disturbed by prices for small minority sales.
36. In this view we hold that the show cause notices for periods prior to 1-10-1975 are not valid. Appeal Nos. 527, 528 and 531/81-A (Show Cause Notice Nos. 11015, 11021 and 11013) are accordingly allowed on merits also. (Appeal No. 528/81-A is allowed on time-bar also and the two other appeals were given the benefit of time-bar to the relevant extent). The decision on the remaining appeals is contained in paras 25 and 26 supra.
37. As a result all the 7 appeals are allowed. The appellants are, however, directed to credit to the Central Excise Department whatever amounts were collected by AOC from Castrol as excise duty on surcharge relating to the clearances of the products BOC 400, AG 140 and BOC 250 without contesting the same on limitation.