Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Ashok Leyland Limited on 17 February, 1987
Equivalent citations: 1987(12)ECR247(TRI.-DELHI), 1987(29)ELT530(TRI-DEL)
ORDER K.L. Rekhi, Member (T)
1. These six appeals have been filed by the department. They are inter-connected and deal with a common issue. They are, therefore, being disposed of by this combined order.
2. The common issue involved is regarding valuation of the motor vehicles manufactured by the respondents for the purposes of assessment of central excise duty and determination of consequential refund due to the respondents as a result of the Madras High Court judgment. This judgment was in favour of the respondents and had declared that main dealers of the respondents were not their related persons.
3. The present controversy started with the coming into force of the new Section 4 of the Central Excises and Salt Act, 1944 on 1-10-1975. In accordance with the requirements of the new section, the respondents, by their letter dated 23-9-1975, disclosed their marketing pattern in the following terms :-
"2. DISTRIBUTION PATTERN Our products in Clause 1 above manufactured at our works at Ennora, Madras are distributed to our various customers all over India through dealers net-work covering all the States. At the moment there are 13 independent Main Dealers, all non-related to us. The list of the dealers is given below:-
1. to 13. XXX XXX XXX The distribution is effected through the above main dealers who in turn have their own arrangement for sub-dealership. The Main Dealer appoints Sub-dealers who do not come into contact directly with us except as per the instructions from the Main-dealer. Our discounting pattern remains unaffected by any arrangement of Sub-dealership.
3. CLASS OF BUYERS We have the following classes of buyers:
a) Nationalised State Transport Undertaking.
b) Government Projects/Departments/Local Bodies.
c) Private Sector customers.
d) Defence.
Direct Demanding Officers should route their orders through the DGS&D for purchases under Rate Contract for comet goods chassis only. We are also exporting our product as chassis and also as buses trucks etc. with bodies built by the following firms.
1) "Jay Coach", Bombay
2) "Sundaram Industries", Madurai.
4. REGIONAL SALES OFFICES We have Regional Sales Offices at Poona, Bangalore, Vijayawada and Ahmedabad at present.
The function of the sales office is to give more prompt and timely service to our customers in all the spheres of sales activities, i.e. Customer contact, Marketing Intelligence, processing of documentation connected with orders, invoices etc.
5. DISCOUNTING PATTERN Discount pattern is uniform for all dealers. In respect of other customers belonging to the different classes listed in 3 above, the discount pattern varies from one class to another. The details of the different discount stipulated are given in the price list proforma.
We follow a uniform pattern for all buyers within a class and no favours are shown to any particular individual buyer.
We also have a quantity discount scheme as detailed in the Price List proforma.
Such quantity discounts are allowed only on firm commitments and that too on a uniform basis.
It would be observed from the Price List proforma that the net inflow as price to us as the manufacturer remains unchanged, irrespective of our sales to the various classes of buyers."
According to the data made available to us, percentage-wise clearances of motor vehicles of the respondents during the material period were as under :-
S.No. Category Percentage
(%)
1. Sales to distributors, main dealers etc. 19.45
at the factory gate.
2. Sales to Government Departments etc., 16.85
at the factory gate.
3. Removals for captive consumption. 0.21
4. Stock transfers to Regional Sales 61.67
Offices.
5. Other sales to private parties etc. 1.82
4. The Assistant Collector held in his order-in-original dated 29-11-1975 that main dealers as well as sub-dealers of the respondents were related persons. He ordered assessment to be made on the basis of the retail sales price charged by the. sub-dealers. In appeal, the Appellate Collector, agreed that the main dealers were related persons but directed the Assistant Collector to re-examine whether sub(sic) persons. In remand, the Assistant Collector passed another order on 12-4-1977 in which he accepted the uniform discount of Rs. 1500/- given by main dealers to sub-dealers but disallowed the over-riding commission given by the respondents to their main dealers in the case of supplies made by the respondents directly to Government Departments etc. Not satisfied with the Appellate Collector's order, the respondents filed a revision application to the Central Government. The Central Government confirmed that main dealers were related persons but accepted the price charged by the main dealers to sub-dealers. All the clearances were consequently assessed uniformly on the price charged by the main dealers to sub-dealers, irrespective of the category of sales. The respondents persisted in their point that their main dealers were not related persons and took the matter to the High Court of Madras by way of a writ petition and sought the writ of certiorari. A learned Single Judge of the Madras High Court allowed the writ in favour of the respondents on 28-9-1981. The department filed an appeal before the Division Bench of the High Court, which was dismissed on 7-12-1982 1983 E.L.T. 2168 (Madras). The Union of India filed a Special Leave Petition before the Supreme Court, which was also dismissed on 25-11-1983.
5. Pursuant to the High Court's judgments, as confirmed by the Supreme Court, the Assistant Collector sanctioned four refund claims of the respondents during January to February 1984. While dealing with the 5th refund claim, he found that he had over-paid the respondents earlier. Without issuing a show cause notice to the respondents, the Assistant Collector adjusted the over-payment from the 5th refund claim on 19-6-1984. The Assistant Collector took the view that the valuation dispute taken to the High Court was only in respect of the sales made to main dealers and hence no refund was due for other categories of clearances. Against this 5th refund order of the Assistant Collector, the respondents appealed to the Collector (Appeals). The Department, in terms of the directions issued by the Appellate Collector Under Section 35E of the Act, also filed five appeals to the Collector (Appeals), claiming still further deductions from the consequential refunds granted to the respondents on account of :-
(1) exclusion of the commission which was not passed on to the actual buyers; and (2) rejection of A part of the 5th refund claim on the ground of time-bar since inspite of the High Court's favourable judgment on 28-9-1981, the respondents had gone on paying duty under protest.
The Collector (Appeals) passed his main order in the impugned order-in-appeal No. 210/84(M) dated 17-12-1984 which disposed of the appeal filed before him by the respondents. Following this main order-in-appeal, the Collector (Appeals) dismissed the other appeals of the department. He held:
(1) Since normal price Under Section 4(1)(a) of the Act was ascertain-able at the factory gate, the same should apply to other removals also.
(2) If the respondents had recovered a higher amount of duty from the customers but paid a lesser amount of duty to the Government, the portion of the duty retained by them should be treated as their price realisation and the assessable value re-determined accordingly.
Not satisfied with the orders of the Collector (Appeals), the jurisdic-(sic)
6. We have heard both sides at length. The hearings began on 16-12-1985 and ended on 30-1-1987. At one stage, the respondents challenged the Assistant Collector's competence to review his own. refund sanction orders, and that too without issuing a show cause notice. They also challenged the maintainability of the department's present appeals stating that no further appeal lay Under Section 35B(1) against the orders passed Under Section 35E of the Act. The learned representative of the department countered it saying that the department had a right of appeal Under Section 35B(1) against the main order-in-appeal No. 210 of 1984 which had been passed by the Collector (Appeals) on the respondents' appeal before him and thus the department's appeals were filed Under Section 35E as well as 35B(1). Later, on instructions from the respondents, their learned advocate stated that the respondents realised the fact that their protest all along had been against approvals on price lists in part-IV (related person) and that they had not clearly protested against approvals of price lists in part-II which related to sales to Government Bodies and Departments etc. They also realised that in terms of proviso to Section 4(1)(a) of the Act there could be different normal prices in different classes of wholesale buyers and that the definition of "wholesale trade" in Section 4(4)(e) of the Act included sales to Government, local authorities and other buyers who purchased their requirements otherwise than In retail. They were also aware that the Supreme Court judgment in the case of Coromandal Fertilisers Limited 1984 (17) E.L.T. 607 (S.C.)] stood in their way of claiming deduction of over-riding commission paid by them to their main dealers in respect of sales made directly by them to Government Bodies and Departments etc. The final stand of the respondents as put-forth before us was that the respondents would not press for any legal or technical objection to the department's appeals and would not also ask for any refund in respect of sales made to Government Bodies and Departments etc. provided their plea to apply the net dealers price was accepted as the assessable value for other categories of sales and removals (retail sales, captive use and stock transfers to Regional Sales Offices). We also brought to their notice that in terms of the statutory Explanation inserted in Section 4(4)(d) of the Act in 1982, but which was given retrospective effect from 1-10-1975, only the duty of excise actually paid by them to the Government could be deducted from the cum-duty sale price realised by them and that, consequently, in cases where they had realised more duty from the customers but paid a lesser amount to the Government, the portion of duty retained by them with themselves had to be treated as a part of their price realisation and assessable value of the goods re-calculated accordingly. We brought to their notice the judgment of a Division Bench of the Karnataka High Court reported at 1986 (23) E.L.T. (Kart.) in this connection and also several rulings of this Tribunal on this point. The learned advocate, on instructions from the respondents, stated that subject to their right of appeal to the Supreme Court they would not, at this stage, object to reworking of the assessable value in terms of the Explanation to Section 4(4)(d).
7. While not pressing for their refund claims in respect of sales to Government Bodies and Departments, the respondents sought to draw a distinction between Government Bodies and Departments on the one hand and public sector undertakings and projects and State Transport Undertakings on the other. We cannot appreciate this distinction. In paragraph '3' above, we have reproduced from their letter dated 23-9-1975 in extense to show that they treated all these bodies, undertakings and authorities under the same class as Government Departments. This was their own marketing pattern as disclosed in their very first letter in terms of the new Section 4 when the Question of any pressure (sic) department was not there. The price lists\ in part-II filed by them in pursuance of this marketing pattern covered the following classes of buyers in one group:-
(1) "Government Departments.
(2) Nationalised Transport Undertakings.
(3) Projects.
(4) Local Bodies.
(5) D.G.S & D. Indentors".
The respondents cannot now make out a new ease. Sales made to all the five categories of Government Bodies and Departments, as stated by them above, shall be treated alike in terms of the proviso to Section 4(1)(a).
8. The two main points of the department, namely, treating Government Bodies and Departments as separate class of buyers and working back of the assessable values in cases where a portion of the duty realised from the customers was retained by the respondents, in terms of the Explanation to Section 4(4)(d), having been conceded by the respondents, we can now deal with the rest of the points pressed for by the learned representative of the department.
(1) The learned representative of the department stressed time and again that the respondents had not filed an appeal against the Assistant Collector's order dated 12-4-1977 passed in remand proceedings and the said order, therefore, became final. We do not agree. Once the order-in-appeal, which directed remand to the Assistant Collector, itself was appealed against, first before the Central Government and then before the High Court, in was not necessary for the respondents to file a separate appeal against the order dated 12-4-1977 of the Assistant Collector passed in remand. In any case, now! that the respondents have conceded the department's point relating to sales to Government Bodies and Departments etc., there is practically no substance left in this point of the department.
(2) the learned representative of the department maintained that there had so far been no determination of assessable values in respect of stocks transferred to Regional Sales Offices of the respondents. He contended that such stock transfers should be re-assessed on the basis of eventual sales ex-depots. We find no authority for such a proposition. There was no sale of the stock transfer goods at the time and place of removal. But the normal price at which such goods were ordinarily sold by the assessee to a wholesale buyer at the time and place of removal, i.e., the factory gate, was available Under Section 4(1)(a). We man the normal price charged by the respondents from their main dealers for sales ex-factory, or the net dealer price. When the normal price Under Section 4(1)(a) is ascertainable, there is no need to wait for the eventual sale of the goods stock transferred to depots. The legal position on this point is clear enough and we see no point in leaving, it open for a fresh determination by the Assistant Collector.
(3) The learned representative of the department maintained that a portion of the refund claimed by the respondents, relating to the period from 29-9-1981 to 2-2-1982, was time barred Under Section 11A (Section 11B?) of the Act. The respondents had paid duty under protest during this period. But such protest was meaningless since the Madras High Court had already decided the point in their favour on 28-9-1981 that their main dealers were not related persons. The respondents explained that though the Learned Single Judge of the Madras High Court had decided their writ petition in their favour on 28-9-1981, that was not the end of the matter because the department did not accept the said judgment and filed appeals first to the Division Bench and then to the Supreme Court. The respondents had, therefore, to safeguard their interest and they kept paying duty on the higher value under protest. We agree with the respondents. The refund claim arising as a consequence of the High Court judgment, later confirmed by the Supreme Court, was not time barred.
(4) Finally, the learned representative of the department contended that retail sales and removals for captive use were not the subject matter of original adjudication by the Assistant Collector and hence the assessments made in these cases had become final and it was not open to the respondents to bring them up at the time of claiming consequential refund. We do not agree. Once the normal price Under Section 4(1 )(a) had been finally determined at the level of the Supreme Court, assessments of all categories to which such normal price should apply would have to be re-opened. We have already stated that removals for captive use and for retail sales had to be assessed at the normal price available at the time and place of removal Under Section 4(1)(a).
9. Pursuant to the judgment of the Madras High Court, later confirmed by the Supreme Court, and in the light of our above discussion, we no order as under :-
(1) Sales to main dealers, retail sales, removals for captive use and stock transfers to Regional Sales Offices of the respondents should be assessed at the normal price Under Section 4(1 )(a), i.e., the net dealer price charged by the respondents from their main dealers from time to time.
(2) Sales to Government Bodies and Departments etc., as detailed in paragraph V above, should be assessed at the prices actually paid by these buyers to the respondents, inclusive of any over-riding commission payable or paid to main dealers, under proviso (i) to Section 4(1 )(a).
(3) Where the respondents have realised a higher amount of central excise duty but paid a lesser amount to the Government, the retained portion of the duty should be treated as their price realisation and the assessable value re-calculated accordingly, in terms of Explanation to Section 4(4)(d).
(4) Consequential refund due to the respondents in terms of this order should be re-quantified and paid. If the re-quantification shows that any excess payment has been made to the respondents, the respondents should refund such excess to the department.
10. The six appeals are disposed of accordingly.