Customs, Excise and Gold Tribunal - Delhi
D.C.W. Ltd. vs Collector Of Central Excise on 31 March, 1992
Equivalent citations: 1993ECR47(TRI.-DELHI), 1992(62)ELT153(TRI-DEL)
ORDER S.V. Maruthi, Member (J)
1. These three appeals are disposed of by a common order as the issue involved is common to all the appeals. The appeal arises out of an order-in-original of the Collector dtd. 13-12-1988, confirming a demand of duty of Rs. 17,95,580.19 and imposing a penalty of Rs. 1 lakh on DCW Ltd. and Rs. 50,000/- each on Shri A. Ramaswami and Shri G. Srinivasan, Administrative Vice President and Manager (Accounts) of the Company.
2. The facts in brief are that the appellants manufacture heavy chemicals namely, Caustic Soda, Trichloroethylene and PVC Resins. They have manufacturing units at Arumuganeri & Chidambaranar District. The pattern of sales of the goods manufactured by them is:
(1) Sales at the factory gate in wholesale; (2) sales to wholesalers, Govt. departments, industrial establishments etc. against specific contracts; and (3) Sales through appellants' depots and consignment agents situated at various places in the country.
The dispute relates to the assessable value of PVC resin. In respect of PVC resin, the appellants filed price lists under Part II, which was approved. While so, a show case notice was issued proposing to recover the duty of Rs. 7,99,792.2 and Rs. 10,021118.12 and proposing to impose penalty on the ground that the appellants have not disclosed the excess realisation over and above the commission paid to the consignment agents. According to the Department, the excess realisation is includible in the assessable value of the PVC resin. The appellants in their reply stated inter alia that:
"In this regard, we would also like to point out that even though we are effecting sales through our consignment agents we also have sales to direct consumers at the factory gate at more or less the same price at which the goods have been cleared for sale by the consignment agents. You will appreciate that under Section 4(1)(a) of the Act, the value on which excise duty will have to be paid will be deemed to be the normal price thereof i.e. the price at which such goods are ordinarily sold by an assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal where the buyer is not a related person and price is the sole consideration for the same. In such circumstances, we submit that as we have a normal price at the factory at which we sell goods at arm's length in the course of wholesale trade to buyers, it is only that price that will have to be deemed to be the assessable value and duty paid thereof. The fact that even though we clear the goods at that price for sale through consignment agents; the consignment agents realise something more than the said price for taking care of their expenses, their commission etc, cannot justify your statement that it is only the amount which the commission agents realise that will have to be taken as assessable value. Courts have uniformally held that in cases where there is a sale at the factory gate to a buyer at arm's length in wholesale trade, it is only the price that will be taken note of as assessable value."
3. On a consideration of the reply, the Collector confirmed the demand. Holding that during the material time, there was no price approved under Section 4(1)(a) of the Central Excises & Salt Act, 1944. Therefore, he rejected the argument of the appellant that there was an approved price under Section 4(1)(a). He further held that since the appellants were clearing the goods under Part II price list, Part II prices cannot be treated as ex-factory price under Section 4(1)(a), against which the present appeal has been filed.
4. Shri M. Chandrasekhran, appearing for the appellants submitted that they have filed a price list under Part I originally and under the instructions of the Department . . . under Part VII and again on the instructions of the Department, they started filing price list under Part II. The price list filed under Part II is in relation to industrial consumers. They have wholesale sales at the factory gate to industrial consumers and in respect of the said sales, they filed a price list under Part II. He submitted that since they are also selling to the industrial consumers, through their depots and consignment agents, and the price approved in respect of sales to industrial consumers under Part II at the factory gate in wholesale, should be the determining factor. While determining the assessable value in respect of sales through consignment agents. He pointed out that during June, 1985 to November, 1987 they have manufactured and cleared 51028 MT of PVC resin out of which 18365 MT, constituting 26.19% were cleared by direct sales to industrial consumers under Part II price list. About 22,270 tonnes constituting 43.64% of the production was sold through depots under Part II price list. Another quantity of 15,393 MT was sold through consignment agents and that constitutes about 30.1%. Therefore, as long as there are wholesale sales at the factory gate to the industrial consumers that should be the basis for determining the assessable value under Section 4(1)(a). Industrial consumers being a class of buyers the wholesale price at the factory gate to the industrial consumers is the price under Section 4(1) (a) of the Act and it shall have the representative character of the normal price. In support of the contention he relied upon the following judgments:
U.O.I. v. Indian Oxygen [1988 (36) E.L.T. 723 (SC)] Fewer India v. C.C.E. [1991 (52) E.L.T. 460 (Tri.) ] I.D.L. Chemicals v. C.C.E. [1989 (40) E.L.T. 147 (Tri.) ]
5. Shri Satish Kumar reiterated the order of the Collector.
6. The question under the above circumstances that arises for consideration is whether the price at which goods are sold through consignment agents to industrial consumers can be determined on the basis of wholesale price approved under Part II at the factory gate to the industrial consumers.
7. The facts disclosed are that the appellants filed price lists under Part II in respect of sales at the factory direct to the industrial consumers. They have sales through depots and consignment agents to the industrial consumers. The percentage of sales is 26.19%, 43.64% and 30.1% respectively. The price under Part II in wholesale at the factory gate to industrial consumers is approved. It is also not disputed that all sales in respect of which price lists under Part II were filed are to industrial consumers. The Collector says that since the appellants have filed price list under Part II, it cannot be called an ex-factory price under Section 4(1)(a). Therefore, it does not represent the price under Section 4(1)(a).
8. The question, therefore, is whether the price list under Part II can be treated as the normal price under Section 4(1)(a). In this context, we may refer to Section 4(1)(a) which reads as follows :
"Section 4(1) (a):
Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be-
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for sale :"
A reading of the provision indicates that assessable value under Section 4(1)(a) is the price at which goods are sold to a buyer in the course of wholesale trade. The expression used is 'buyer' and not the 'wholesale dealer' and the sale should be in the wholesale trade. As long as it is a sale to a buyer whoever it may be and as long as it is in the wholesale trade subject to the other conditions being satisfied namely, that the price is for delivery at the time and place of removal where the buyer is not a related person and price is the sole consideration for the sale, it represents the normal price for determining the aissessable value.
9. The expression 'wholesale trade' is defined under Section 4(e) which reads as follows:
Section 4(e). - "Wholesale trade" means sales to dealers, industrial consumers, Government, local authorities and other buyers, who or which purchase their requirements otherwise than in retail."
The expression contemplates different classes of buyers namely, dealers, industrial consumers, Government, local bodies and other buyers. Therefore, industrial consumers are a class of buyers.
10. The next provision which is relevant is the first proviso to Section 4(1)(a) which reads as follows :
"Provided that--
(i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (a) be deemed to be the normal price of such goods in relation to each such class of buyers".
It follows from the above, that if goods are sold at different prices to different classes of buyers each such price shall be deemed to be the normal price of such goods in relation to each such class of buyers. Therefore, the price at which the goods are sold at the factory gate to the industrial consumers who are a class of buyers under the proviso (i) to Section 4(1)(a) shall be the normal price under Section 4(1)(a).
11. From a reading of Section 4(1)(a) and the proviso (i), it emerges that the assessable value shall be deemed to be the normal price at which goods are ordinarily sold to a buyer in the course of wholesale trade for delivery at the time and place of removal where the buyer and the seller are not related persons and the price is the sole consideration for sale and in case, where the goods are sold to different classes of buyers, the price at which such goods are sold to different classes of buyers shall be the normal price in respect of those different classes of buyers. The buyer can be either a wholesale dealer, industrial consumer, Government, local bodies and other buyers and the price should be the price at the time and place of removal and according to the definition of 'place of removal' it is a factory or any other place or premises of production or manufacture of excisable goods or a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty from where such goods are removed. In other words, sale at the factory gate at which goods are sold to industrial consumers in wholesale shall be deemed to be the normal price under Section 4(1)(a). It is not disputed that the goods are sold at the factory gate in wholesale trade to the industrial consumers. Therefore, the price approved under Part II in respect of industrial consumers shall be deemed to be the normal price for the purposes of Section 4(1)(a).
12. The Collector's reasoning is that since the appellants have filed the price lists under Part II it does not represent the price under Section 4(1)(a) and since there is no Part I price approved, the assessable value of the goods sold through consignment agents to industrial consumers cannot be determined on the basis of the Part II price.
13. We may point out that Rule 173C provides for filing of the price lists. According to which, every assessee has to file price lists of goods assessable ad valorem and the price lists are prescribed by the Central Board of Excise & Customs. These price lists are under Part I to Part VII. Part I is a proforma for excisable goods for sale by the assessee to the buyers [not being related persons in the course of wholesale trade under Section 4(1) (a)]; Part II is a proforma for excisable goods for sale to class of buyers under the proviso (i) of Section 4(1)(a); Part III is the proforma for excisable goods for sale on the basis of the price or the maximum price fixed under any law. It is a price list under Section 4(1)(a), proviso (ii); Part IV is the proforma of the price list for excisable goods for sale through or to a related person; Part V is the proforma for excisable goods for sale in retail; Part VI is the proforma of the price list for the goods consumed captively; Part VII is the proforma for excisable goods not covered by any of the above price lists.
14. The price lists are filed for the purpose of making assessment and for the convenience of the Department as well as the assessee to ascertain the price of the manufacture, clearance, deductions claimed etc. The filing of a price list under a particular part, say in Part I, II, III may not entirely be relevant in determining whether the price list represents the price under Section 4(1)(a) in view of the various provisos provided under Section 4(1). In other words, as long as it is a sale to a class of buyers indicated in the earlier paragraphs in the course of wholesale trade at the factory gate and as long as the buyer is not a related person and the price is the sole consideration for the sale, it represents the price under Section 4(1)(a). Therefore, the reasoning of the Collector that since there was no Part-I price approved, the price approved under Part II cannot be treated as the price under Section 4(1)(a) of the Act is based on a misconception of the provisions of the Act.
15. Let us examine the facts of the present case. The allegation in the show cause notice reads as follows :
"From the sale notes of consignment agents received by the assessee it appears that the sales are either to industrial consumers or to other trading corporations who in turn sell in retail."
In other words, the appellants sell PVC resin through consignment agents to industrial consumers as well as trading corporations. This fact has not been denied by the appellants.
16. We have already stated that ex-factory price of goods sold to industrial consumers is ascertainable. Therefore, applying the judgment of the Supreme Court in Indian Oxygen reported in 1988 (36) E.L.T. 723 (SC), we hold that the price of goods sold through consignment agents to industrial consumers should be on the basis of the ex-factory price of the goods sold to industrial consumers under Part II.
17. However, the said price cannot be treated as the price for determining the assessable value in relation to sales through consignment agents to buyers other than industrial consumers.
18. We may also refer to an order of this Tribunal in Fenner India v. CCE -1991 (52) E.L.T. 460 (Tri.)
- where this Tribunal rejected the argument of the department that buyers at the factory gate and buyers at depots are different classes of buyers. While holding as above, this Tribunal following the judgment of the Supreme Court in Indian Oxygen held that the assessable value of goods sold through depots should be determined on the basis of the value approved at the factory gate price. This Tribunal in I.D.L. Chemical Ltd. v. CCE [1989 (40) E.L.T. 147 (Tri.)] held that the goods cleared at the factory gate for consignment agents are subject to the levy of Central Excise duty at the normal price.
19. It is not clear whether the demand relates to duty payable on sales through consignment agents to industrial consumers alone or includes duty payable on sales through consignment agents to buyers other than industrial consumers. We, therefore, remand the matter to the Collector to re-determine the assessable value in the light of the above observations. As regards the penalty the Collector may consider whether there is any justification in levying the penalty after re-determining the assessable value having regard to the fact that the issue involved is the pure question of law.
20. Hence, the appeals are thus remanded to the Collector for de novo consideration.
Sd/- Sd/-
(S.V.Maruthi) (P.C.Jain)
Member (J) Member (T)
Dt. 25-3-1992
P.C. Jain, Member (T)
21. I have carefully perused the order proposed by the learned Sister Ms. S.V. Maruthi, Judicial Member and I agree with her observations in paras 16 and 17 of the proposed order. I would, however, like to add a few words in support of the conclusions reached in paras 16 and 17 as aforesaid :
21.1 Short point raised by the learned advocate, Shri M. Chandrasekhran was that the goods were sold to industrial consumers at the factory gate at a certain price and therefore, the wholesale price to a buyer at the time and place of removal of the goods where price is the sole consideration for sale is established and therefore, this price should be applicable to all other removals from the factory gate. It is not for the department to discard that price in respect of removals to the appellants' consignment agents on the ground that what was approved by the departmental officers was a price under Part II of the proforma of the price list and not under Part I of the said proforma. He has urged that Section 4(1)(a) does not refer at all to various proformae of the price list prescribed by the department.
21.2 On a query from the Bench as to what effect will be given to the 1st proviso in Section 4(1)(a) which stipulates that if such goods are sold by the assessee at different prices to different classes of buyers (not being 'related persons') each such price shall, subject to the existence of the other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such class of such buyers, the learned advocate submitted that effect of the proviso is to recognise different prices for different classes of buyers for the same excisable goods sold by the assessee but it does not necessarily mean that the same price cannot hold good for different classes of buyers. Prima facie there is force in what the learned advocate has stated but on deeper consideration of the facts and circumstances of this case we do not find force in the said submission. Removal to the consignment agents who are admittedly storing the goods on behalf of the appellants herein and are merely their agents and the property in the goods still continues to vest in the appellants while they are in the custody of the consignment agents, it cannot be said that the goods have been sold by the assessee/appellants herein to the consignment agents. Sale of the goods has been effected for the first time by the consignment agents on behalf of the appellants herein when they have sold to different buyers. If the price charged by the consignment agents to their different buyers had been the same as the price charged on sale by the appellants to their buyers at the factory gate, the proposition put forward by the learned advocate would have been acceptable but the fact remains that the prices charged by the consignment agents from their different buyers are at a higher level that what has been charged in respect of sales to industrial consumers; the latter price cannot form the basis of charging duty in respect of removals to the consignment agents. It is only the price in respect of industrial consumers alone that is established at the factory gate under Section 4(1)(a) by virtue of sales by the appellants to the industrial consumers. The price to other classes of buyers was not established and the sales to such other classes of buyers has been made for the first time by the consignment agents at a higher level. Therefore, the 1st proviso to Section 4 comes into play at once inasmuch as there are different prices of the assessee for different classes of buyers. Hence, the prices charged by the consignment agents of the appellants to Trading Corporations, which form a class different from that of industrial consumers, would form the basis of value in respect of sales to such Trading Corporations/Concerns.
21.3 As observed by the learned sister in para 19 that since the position is not clear, the matter is remanded to the Collector to redetermine the assessable value in the light of the above observations.