Customs, Excise and Gold Tribunal - Tamil Nadu
Davangere Cotton Mills vs Commissioner Of C. Ex. on 3 June, 1998
Equivalent citations: 1999(108)ELT807(TRI-CHENNAI)
ORDER V.K. Ashtana, Member (T)
1. These two appeals are against Order-in-Appeal No, 80/94, dated 31-10-.1994 wherein the appellants claim for Part II Price List prices were rejected and Order-in-Original upheld.
2. Briefly, facts are that the appellants M/s. Davangere Cotton Mills manufacture textile fabrics falling under Chapters 52, 54, 55 and 63 of CETA 1985. They filed price lists in Part land n. Show Cause Notices were issued for the period from 25-5-1990 to 14-11-1991 demanding total amount of Rs. 89,219.73 on the ground that the prices filed in Price Lists Part II to their dealers were lower than the normal price available for the same variety of goods indicated in Part I Price List for the period 11-12-1989 to 31-8-1992. Also, more demands were for Rs. 1,33,285.28 and Rs. 31,477.80. All were confirmed by Assistant Collector. As the issue involved is same, both appeals are being heard together and disposed by a common order.
3. Heard learned Advocate Shri A.V. Naik who argued on the following grounds:
(a) that prices under Part I & Part II can co-exist under Section 4 as long as they are on principal to principal basis;
(b) cited (i) 1987 (31) E.L.T. 356 (Bom.)
(ii) 1989 (43) E.L.T. 695 (Tribunal)
(c) that various dealers in wholesale need not be different class of buyers for Part II prices to be valid. Cited 1984 (18) E.L.T. 172 (Bom.) and 1982 (10) E.L.T. 463 (Delhi). The impugned order does not consider the latter at all.
(d) the approved price lists in Part II are wrongly sought to be reopened by Assistant Collector by three show cause notices, whereas the only way available to Revenue was under Section 35E. Cited 1978 (2) E.L.T. (J 111) (Del.) and
(e) From 1-4-1994, invoice prices are being accepted under same Section 4, so the impugned order for past period, being against this, is wrong.
4. He further cited 1996 (87) E.L.T. 546 (Tribunal) in the case of Patel Detergents wherein it was held that different buyers situated at different places conform with Section 4(1)(a) as they could constitute separate class of buyers. 1995 (6) RLT 646 (Tribunal) (Jagdish Electronics) was relied upon therein.
5. He also cited case of Golden Chemicals as reported in 1998 (98) E.L.T. 509 (Tribunal) wherein Part II and Part I prices are distinguished as right in personam and right in rem respectively.
6. He further argued that in the case of Rogers & Co. Pvt. Ltd. v. Union of India as reported in 1993 (67) E.L.T. 249 (Bom.) the Hon'ble High Court held that mutually contracted low price would be in the nature of trade discounts.
7. Heard Shri Rama Rao, JDR. He reiterated the arguments in the impugned order-in-appeal. He argued that to qualify for class of buyers, their customers had to be other than mere wholesale dealers. He cited 1984 (18) E.L.T. 172 (Bom.) wherein it was held that different wholesale dealers cannot be treated as different class of buyers because of their being located in different town or places.
8. We have carefully considered arguments on both sides and the records of the case. We find that the decision in the case of Golden Chemicals was essentially one on trade discounts and the distinction between the legal position of Part II and Part I prices was made out in that context. The present appeal is not on grounds of denial of trade discounts. Hence that decision stands distinguished on facts.
9. The impugned order holds that contracted party (buyer) cannot constitute a separate class of buyer per se. This issue was considered by the Tribunal in the case of Shakti Insulated Wires as reported in 1990 (49) E.L.T. 554 wherein it was held that contracted parties are not different from other wholesale dealers and are hence not a different class of buyers. This was also the view of Hon'ble Bombay High Court in the case of Godrej & Boyce as reported in 1984 (18) E.L.T. 172 (Bom.) wherein it was held that even if such dealers were located in different areas, they would not be a separate class. Therefore, we do not find any infirmity on this account. In fact, the case records appear to be silent on the location of these Part II Price List buyers i.e. whether they are from different locations or not. If some are from the same location, then the case law of Patel Detergents (supra) stands distinguished on that ground.
10. The appellants also refer to the post 1-4-1994 scenario where, according to them, invoice prices are accepted. This is not factually correct. After 1-4-1994, Section 4, admittedly has not changed but only procedural changes under Rule 173C were introduced dispensing with filing and approval of Price Lists. Since the law relating to valuation did not change, it is not correct to claim that any price in the invoice would be legally acceptable. That would be moving to a transaction value system as exists under Section 14 of Customs Act, 1962 read with Rule 4 thereof. On the other hand, Section 4 of CEA, 1944 prescribes a 'normal' i.e. even 'deemed' price.
11. The appellants cite the decisions of Sylvania & Laxman Ltd. v. U.O.I. as reported in 1982 (10) E.L.T. 463 (Del.) wherein it was held in Para 9 as follows :-
"9. Learned Counsel for the respondents has raised an interesting point that what has to be found out is the "normal price" in a wholesale transaction in which case it will be Section 4(b) read with the relevant rules that would be attracted. It will be for the appropriate authorities of the respondents to find out, even if it is held that the parties do not fall within the mischief of the term "related person". This is not the stand taken by the respondents either in their communications or in their return. At first glance it may appear attractive that we only quash the impugned memorandum issued by the Assistant Collector and direct him to re-examine the question of the "normal price" in accordance with the provisions of Section 4(b) read with the relevant rules by finding out what is the wholesale price in a sale at arm's length. On a closer examination, however, we find that it may lead to another round of litigation and we would not like to promote unnecessary litigation. The law regarding computing assessable value is settled. It is the price which the manufacturer charges at the factory gate. In other words, it is the sale at arm's length which becomes the normal price for levy of excise duty. Unless it is shown and it is not shown here, that the contract between the parties is not a normal commercial contract, it is the price at which the goods are supplied at the factory gate by the first petitioner to M/s. Philips India Ltd. which alone will be the assessable value. A careful perusal of the contract between the parties shows that the property in the goods passes from the first petitioner to M/s. Philips India Ltd. on delivery at the factory gate. Therefore, that price at which the first petitioner sells the goods to M/s. Philips India Ltd. is the only relevant price."
Appellants have also cited case of Amar Chemical Industries as reported in 1992 (58) E.L.T. 85 (Tribunal) wherein the Tribunal (Special Bench 'A') has followed the above Bombay High Court Judgment and held that the Part II prices, in view of being at arms length, are the correct assessable values in terms of Section 4 of the Act. In the present case, we find that similar approved Part II prices are assailed before us. However, there is no allegation at any stage that the contract between the buyer and the seller is tainted by any extra-commercial considerations/relationship and hence not at arms length. Therefore, these two decisions are on all fours with the facts of this case and we proceed to apply the ratio thereof.
12. In view of the aforesaid analysis, we need not consider the other grounds of appeal including that of limitation, as the appeals succeed in view of the ratio of these two case laws being available here.
13. We, therefore, set aside the impugned orders and allow the appeals with consequential reliefs, if any.