Customs, Excise and Gold Tribunal - Delhi
Apte Amalgamation (Pvt.) Ltd. vs Collector Of Central Excise on 26 February, 1987
Equivalent citations: 1987(11)ECR516(TRI.-DELHI), 1987(28)ELT445(TRI-DEL)
ORDER M. Gouri Sankara Murthy, Member (J)
1. The sole issue that arises in this Appeal is as to whether the assessable value of dry cell batteries manufactured by the Appellant for Philips India Ltd. and bearing their trade name is to be determined on the basis of the price at which they are sold to Philips or on the basis of the price at which they are sold by Philips to their customers.
2. The material facts in brief are -
(a) the appellant entered into an agreement with Philips India for the manufacture and supply of dry cell batteries on 26.4.1972. The agreement provided, inter alia, for -
(i) manufacture of prototypes of each distinctive type of goods agreed to be manufactured and sold to Philips and submission of such prototypes for their approval,
(ii) right of Philips for inspection of the quality of components and raw materials, and institute quality control checks,
(iii) branding of the goods sold to Philips with their name,
(iv) liability of Philips for transport charges from Appellant's factory to the godown of Philips,
(v) passing of title to and ownership in the goods, notwithstanding, to Philips only on acceptance at their godown;
(b) the appellant, accordingly, filed a price list effective from 2.8.1972 declaring their price to Philips and it was duly approved. This was after ascertaining the price at which Philips themselves sell the goods to their customers;
(c) however, when the appellant filed a fresh list effective from 13.4.1973 on the same basis, they were required to apply for provisional clearance by letter dated 9.8.1973;
(d) a notice to show cause dated 13.3.1974 was issued to the appellant requiring them to show cause as to why the price at which Philips, themselves, sell the goods to their customers should not form the basis for the determination of the assessable value;
(e) in adjudication it was held, inter alia, that -
(i) Philips India, themselves, were engaging in the manufacture of their brand name products with all necessary checks. They get their brand name products manufactured through the appellant,
(ii) accordingly, the price at which Philips India sell the products is the assessable value;
(f) in appeal, the order was confirmed on the ground that the goods were marked and sold with the brand name of Philips India;
(g) the instant appeal was the upshot.
3. On a perusal of the papers and on the submissions made it would appear to us that -
(a) the question as to who exactly the "manufacturer" is in accordance with the definition of that word in S.2(f) of the Act cannot arise in the context of the agreement between Philips India and the appellant which is nothing but an agreement to sell future goods between two independent parties: It is not as if Philips India had hired the labour and services of the appellant in the production or manufacture of excisable goods [Section 2(f) of the Act]. If that were so, consistent with such a finding, duty should have been demanded from Philips India, the "manufacturer rather than the appellant;
(b) on the contrary, if the appellant were, indeed, the manufacturer, (and therefore the assessee) then, the assessable value of the goods manufactured has to be the "wholesale cash price for which an article of the like kind or quality is sold or capable of being sold at the time of removal of the article for delivery at the place of manufacture" in accordance with the unamended S.4 of the Act. The question of adoption of the price at which a wholesale buyer sells them after purchase from the manufacturer and delivery at the place of manufacture is beside the point, if a wholesale price at the factory gate is ascertainable ;
(c) in terms of the agreement between the parties, the delivery is at the factory gate itself seeing that the cost of transport from the appellant's factory to the godown of Philips India is to be borne by Philips India, notwithstanding that, in terms thereof, the title to and property in the goods was intended to pass only on acceptance at the godown of Philips India [See Section 24 of the Sale of Goods Act, 1930]. A covenant for acceptance at the premises of the buyer is not inconsistent with a delivery at the seller's premises and the wholesale cash price payable by Philips India, that did not include the cost of transport, is, nonetheless, a price for delivery at the place of removal;
(d) there is no reason, therefore, for rejecting the wholesale price at the premises of the appellant despite it being available and ascertain the assessable value on the basis of a wholesale price at any other place "nearest thereto" under the second limb of S.4, when for a fact the sale cannot be anything other than an arms length sale, merely because of manufacture to a brand name;
(e) thus, in 1977 ELT 177 [A.K. Roy v. Voltas Ltd. - (1973) 2 SCR 1089], it was held that -
"So, even if there was no market in the physical sense of the term at or near the place of manufacture where the articles of a like kind and quality are or could be sold, that would not in any way affect the existence of market in the proper sense of the term provided the articles themselves could be sold wholesale to traders, even though the articles are sold to them on the basis of agreements which confer certain commercial advantages upon them. In other words, the sale to the wholesale dealers did not cease to be wholesale sales merely because the wholesale dealers had entered into agreement with the respondent under which certain commercial benefits were conferred upon them in consideration of their undertaking to do service to the articles sold, or because of the fact that no other person could purchase the articles wholesale from the respondent. We also think that the application of clause (a) of Section 4 of the Act does not depend upon any hypothesis to the effect that at the time and place of sale, any further articles of like kind and quality should have been sold. If there is an actual price for the goods themselves at the time and place of sale and if that is a 'wholesale cash price', the clause is not inapplicable for want of sale of other goods of a like kind and quality.";
(f) following the aforesaid decision, in 1978 ELT 444, (Atic Industries v. H.H. Dave, Assistant Collector of Central Excise) it was reiterated that "The only relevant price for assessment of value of the goods for the purpose of excise in such a case would be the wholesale cash price which the manufacturer receives from Sale to the first wholesale dealer, that is, when the goods first enter the stream of trade";
(g) in 1983 (14) ELT 1896(Union of India v. Bombay Tyre International Ltd.) as well, it was decided "Accordingly, we hold that pursuant to the old S.4(a), the value of an excisable article for the purpose of excise levy should be taken to be the price at which the excisable article is sold by the assessee to a buyer at arm's length in the course of wholesale trade at the time and place of removal" (Paragraph 25 of the report);
(h) mere manufacture according to the buyer's specifications or under his supervision or to his brand name does not militate against an arm's length sale. Thus in 19,85 (22) ELT 302 (Union of India v. Cibatul Ltd.) and 1985 (22) ELT 324 (Joint Secretary to Government of India v. Food Specialities Ltd. ) it was held that -
(i) manufacture of goods to a specification constituting the buyer's standard,
(ii) tests by the buyer and supply only on approval,
(iii) affixture of the trade mark of, the buyer to those supplied after approval,
(iv) shareholding by the buyer in the manufacturing company, do not militate against an arm's length sale. The manufacturer " owns the plant and machinery, the raw material and the labour and manufactures the goods and under the agreements, affixes the trade marks on the goods". The manufacturer produces the goods on his own account and sells the goods with the trade marks affixed on them to the buyer. These are decisions under the old Section 4, seeing that the agreements construed as well as the relevant periods were prior to the amendment thereof;
(i) in the Tribunal as well [E-Appeal No. 80/82-A- Collector of Central Excise v. Mistair Home Products] we had occasion to hold, following the aforesaid decisions, that, merely on account of an agreement providing for such or similar conditions, the manufacturer and the buyer do not become "related persons" as defined in the amended Section 4.
4. In the premises, the appeal is allowed. Any amounts paid or collected pursuant to the adjudication order in this case be refunded.