Customs, Excise and Gold Tribunal - Delhi
Delton Cables Ltd. vs Collector Of C. Ex. on 10 September, 1998
Equivalent citations: 1999(108)ELT116(TRI-DEL)
ORDER
U.L. Bhat, J. (President)
1. The common appellant in these appeals has submitted a request for adjournment of the appeals on the ground that their counsel is very busy in another Bench of CEGAT. In one of the appeals, it is stated that their counsel is no longer looking after their affairs and they would like to engage another Counsel. We are not satisfied that these are valid grounds for adjournment in old cases. We rejected the request for adjournment. Shri Darshan Varma, Sr. Assistant of the appellant who is present before us declined to address any arguments. We have heard Shri K. Shiv Kumar, JDR and persued the papers.
2. Appellant, engaged in the manufacture of wires and cables was selling about 60% of the manufactured goods to M/s Delton Sales & Services Ltd. (DSSL, for short), who in turn, was effecting sales to wholesale dealers. The remaining part of the manufactured product was being sold by the appellant to various industrial consumers. Appellant filed price list in Part II on the basis of an agreement entered into with DSSL. Three separate show cause notices were issued to the appellant alleging that DSSL was not undertaking manufacture of wires and cables but, was only engaged in buying and selling the products, that the sale price of DSSL to their wholesalers was higher than the sale price of the appellant to DSSL, that therefore, it must follow that DSSL was acting merely as selling agent of the appellant, that both the concerns were related persons under Section 4(4) (c) of the Central Excise Act, 1944 and hence, it was proposed to approve the price list with the direction that assessable value shall be based on the price charged by DSSL to their wholesalers. Appellant resisted the notices and denied the alleged facts cited therein and claimed that appellant's declared price should be accepted as the basis for determination of assessable value. Over-ruling these contentions, the Assistant Collector passed separate orders approving the price lists with the direction that assessable value shall be based on the price charged by DSSL to their wholesalers. These orders have been approved by Collector (Appeals). Hence, the present appeals.
3. The material allegations in the show cause notices are that DSSL was acting merely as selling agent of the appellant and that the two concerns were related persons. The conclusion that DSSL was acting merely as selling agent of the appellant was based on the premise that DSSL was not manufacturing the goods but, was only buying and selling the goods. This could not be a sufficient ground to come to the conclusion of agency. We have perused the copies of the agreement entered into by the appellant. It is true, as indicated by the lower authorities, that the agreement does not contain a price escalation clause. That was not necessary since the agreement did not stipulate a particular price. The parties agreed that appellant shall sell and DSSL shall buy at prices agreed to by the parties from time to time. There is nothing in the show cause notices to indicate the status of DSSL as an agent. The notice also did not refer to any fact or circumstance from which an inference of relationship can be drawn. The impugned orders do not refer any further facts. The orders disclose that certain items of plant and machinery pertaining to DSSL were being used by the appellant under the terms of a hire agreement. We fail to see how this could attract the operation of Section 4(4)(c) of the Act. We have perused the copies of hire agreement. There is nothing out of the ordinary in this agreement. The show cause notices do not indicate the nature of shareholding in the two concerns or the identity of the persons responsible for running the affairs of the two concerns. The show cause notices do not set up a case that one company had share in another company or that the same set of persons was looking after the affairs of both the companies. In other words, the proper officer did not really investigate the circumstances surrounding the two companies or the circumstances surrounding the transactions of two companies to find out whether there was any relationship between the two companies which would attract Section 4(4)(c) of the Act. Therefore, the allegation of relationship must fail. So also the allegation of agency.
4. What remains is the circumstance that the price charged to DSSL by the appellant was slightly less than the price charged by the appellant to industrial consumers. DSSL on one hand and industrial consumers on the other may be regarded as falling in two different classes of buyers. DSSL, one single buyer was purchasing about 60% of the goods manufactured by the appellant while all the industrial consumers together were purchasing about 40% of the goods so manufactured. Hence, allowance of quantity discount to DSSL would be natural and that would certainly explain the lesser price charged to DSSL. There is nothing illegitimate or improper in the lesser price charged to DSSL.
5. For the reasons indicated above, we hold that there was no justification to direct that prices charged by DSSL to their wholesalers should be the basis for determination of assessable value of goods manufactured and cleared by the appellant. The impugned orders are set aside and appeals are allowed.