Customs, Excise and Gold Tribunal - Delhi
Camphor And Allied Products Ltd. vs Commr. Of C. Ex. on 15 February, 2000
Equivalent citations: 2000(118)ELT65(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. Whether Department was right in holding that Part-II price cannot be taken as the normal price when the buyers had failed to fulfil the condition of clearing the quantity they had contracted to clear in terms of the Contract' is an issue to be resolved by the Larger Bench.
2. Originally three member Bench was constituted to hear the matter. Later it was enlarged to Five members in view of the submissions made by the Departmental Representative that view taken by the three member Bench in the case of Bombay Latex & Dispersions Pvt. Ltd. 1985 (19) E.L.T. 527 (T) is also to be considered while deciding the issue herein.
3. The appellants are engaged in the manufacture of various chemical products like distilled turpentine and dipentine oil etc. They sell the goods at the factory gate to wholesale dealers. The appellants filed price list in Part-I for such clearances. Apart from that they also effected sales to contracted buyers who purchased bulk quantities. In the said contracts with the buyers, the price agreed upon for the bulk quantity and the period within which the quantity is to be lifted, are also indicated. In respect of these clearances price lists in part-II are filed along with the contracts. The contract price is lower than the part-I price. The dispute is in respect of price list in part-II. The case of the Department is that some of the buyers had not lifted the quantities as agreed within the stipulated time as per the contract. Therefore, it was held that for the purpose of valuation and assessment supplies with reference to such buyers were to be governed by the price list shown in Part-I meant for general sales to independent wholesale buyers and not by the contracted price as per the price list in part-II. Accordingly, the differential duty was demanded on the basis of price indicated in part-I price list.
4. In the referring order, it is observed that on similar facts and circumstances, the Tribunal as per Final Order Nos. 181-182/97-A in the very party's case had allowed valuation on the basis of price lists shown in part-II. But Eastern Zonal Bench had taken a different view in the case of Indian Aluminium Co. v. C. C. E., reported in 1998 (27) RLT 80, holding that part-II price cannot be taken as the normal price when the buyers had failed to fulfil the condition of clearing entire quantity as agreed in terms of contract. In view of the difference between Co-ordinate Benches of the Tribunal, the question is referred to Larger Bench.
5. Learned counsel, appearing for the appellants, submitted that buyers who purchase bulk quantities at a discounted price are of different class of buyers. In the instant case, purchasers entered into contracts with the assessee to buy bulk quantity within stipulated time to get concession in the price. As can be seen from the impugned order, five of them (M/s. Advance Chemical Sales Corporation, Delhi, M/s. Manmohan Chemical Ind., Delhi, M/s. Shree Chemical, Bombay, M/s. Agro Chemical, Bombay and M/s. Mukesh Chemical, Bombay), did not lift the quantity as agreed within the stipulated time, but nevertheless, goods lifted by them during the period was at a price as per terms of the contract. Since the goods were lifted in pursuance of the contract, the contract price would prevail in respect of the quantity lifted by them during the period. He said that notwithstanding the contract, price at which the goods are sold is relevant in determining the normal value and duty has to be calculated at the point of time of removal of the goods as envisaged under Section 4 of the Central Excise Act. Where goods are sold at a factory gate to any particular class of wholesale buyers and the goods are sold by the assessee at different prices to different classes of buyers, each such price shall be taken to be normal price as envisaged under proviso to Section 4(1)(a) of the Act. He said that transaction effected in the instant case is governed by the proviso to Section 4(1)(a) of the Act. In this context, he referred to Section 4(1)(a) and its proviso which reads as under :-
"SECTION 4 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 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 the sale;
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;"
6. Learned Departmental Representative, appearing for the Revenue justified the view taken by the Eastern Zonal Bench in the case of Indian Aluminium Company, referred to above. In that case, it was observed that 'contract price is admissible and was approved by the authorities only on the fulfilment of contract'. He contended that price lists in part-II cannot be the basis in determining the normal price since buyers had failed to fulfil the conditions of clearing quantity as agreed in terms of the contract. The said buyers cannot be treated as separate class of buyers since they have not fulfilled the contract. He also relied upon the decision of the Tribunal in the case of Shakti Insulated Wires (P) Ltd. 1990 (49) E.L.T. 554 (T), Gujarat Reclaim and Rubber Products Ltd. 1998 (99) E.L.T. 455 and Bombay Latex & Dispersions Pvt. Ltd.] 1985 (19) E.L.T. 527, in support of his contention.
7. We have carefully considered the matter. The price lists in part-II refers to contract price. In the case before us, buyers have entered into contracts with the manufacturer to buy the goods in bulk quantity and agreed to lift such quantity within the stipulated time to get concession in the price of the goods. Some of the buyers did not lift the full quantity of goods as agreed within the stipulated period but nevertheless they got concession in the price of the goods, which were lifted during the period in terms of the contract. According to the department, since buyers have not fulfilled the contract in lifting the full quantity as agreed, the price at which goods are sold to them is governed by part-I price and not part-II price. In the show cause notice dated 19-6-1985, it was specifically alleged that in some of the cases, supply of Sodium Acetate Trihydrate under Tariff Item 68 was not consistent with the terms of contract and since the contracts were not fulfilled, supplies were to be governed by the respective price lists in proforma Part-I and not price list proforma Part-II. If contract was not fulfilled as agreed to between the parlies whether that can be the subject matter in determining the valuation and assessment in terms of Section 4 of the Act is an issue to be considered. In other words, whether Taxing Authority can discard the price lists in part-II in determining the assessment on the ground that terms and conditions of the contract are not fulfilled by the contracting parties. Contract is an agreement which is enforceable in a court of law. Contract is an agreement in between the parties. It confers rights and creates obligations on respective parties to the contract. Contract is a right in Personal as against right in Rem. It means parties to the contract can enforce performance of contract. If promisor fails to fulfil his obligation under the contract the right vests with the promisee to enforce a contract and to file a suit against the promisor for recovery of compensation or damages due to such breach of contract. It is true that some of the buyers got concession in the price of the goods without lifting entire quantities in terms of the contract. It is not even the case of the department that assessee had filed a suit against such buyers for non-performance and got damages which would form part of additional consideration in determining the price. If the part performance was accepted by the promisee or contract was complete with varied terms and conditions it is the end of the matter in between them and it is not open to a stranger to question the validity of the contract. The Tribunal has rightly decided this issue in favour of the assessee in the very party's case as per Order Nos. 181-182/97-A following the ruling given by the Madras High Court in the case of Standard Electric Appliances 1979 (4) E.L.T. J53. The doubts expressed by the DR are clearly answered by the said High Court in observing that "though in law the purchaser who agreed to purchase a particular quantity and gets a concession in the price of the goods may not be entitled to have the concession if the agreed quantity of goods is not purchased by him during the stipulated period, where a purchaser like the petitioner permits such a purchaser to have the advantage of a concessional price even though he had not cleared the full quantity of the goods within the stipulated period, or permits him to clear the goods beyond the time, the respondents cannot say that the petitioner should not have granted the quantitative concession as the goods have not been cleared within the stipulated time". The decisions referred to by the DR are also not relevant to decide the issue involved herein. In the cases cited by him, the issue was whether particular transaction constitutes a contract or not. That is not the situation here. In the show cause notice, it was specifically charged that price list in part-II was not applicable for not performing the contract. It means the existence or formation of contract was not in doubt. Not fulfilling the terms of the contract is not a ground to discard part-II price list if it is otherwise genuine, in our view. Further, we are not in agreement with the view taken by the Eastern Zonal Bench that approval of price was subject to fulfilment of the contract. This observation is contrary to the provisions of Excise law since no Section or Rule enables the excise authorities to approve price subject to fulfilment of contract. Since the goods were lifted in pursuance of the contract at a price at which the goods are sold to buyers in the normal course of trade and in the absence of any material to establish that extra commercial consideration has been received due to such lowering price, there was no justification to discard part-II price in determining the valuation and assessment in terms of Section 4 of the Act. In the facts and circumstances, the question referred to the Larger Bench is answered in favour of the assessee and in the result, the appeals are allowed.