Customs, Excise and Gold Tribunal - Tamil Nadu
Addison And Co. vs Cce on 28 April, 1999
Equivalent citations: 1999(84)ECR587(TRI.-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from the order in appeal No. 187/94(M) dated 23.8.1994 passed by the Collector of Central Excise (Appeals), Chennai confirming duty demand of Rs. 2,15,447.67 against the appellants under Rule 9 of the Central Excise Rules, 1944 besides imposing penalty of Rs. 2000/- on them under Rule 173Q of the said Rules.
2. The facts in brief are that the appellants who are manufacturers of Tools' falling under heading 8207.00 of the schedule to the CET Act, 1985 has filed price?-list bearing No. 6/92-93 dated 31.3.1992 under Part I for a consignment comprising of 15,744 units for supply to one M/s. Best Drill Centre in which assessable value was indicated as Rs. 4,81,338/-. The Assistant Collector had accorded provisional approval to the said price list. Later the jurisdictional range officer served a show cause notice on the appellants proposing to revise the assessable value to Rs. 24,09,333/- being the earlier assessable value as per the approved price lists with consequential differential duty demand of Rs. 2,51,477.61. This was confirmed after adjudication by the Assistant Collector. The contention of the appellants had been that the impugned items slow movers and non-standard which remained unsold for over a year and hence with a view to clearing the goods they offered them in a lot for a sole consideration of Rs. 4,81,338/-. They contended that they filed price list under part I inadvertently instead of under Part II and that the assessable value indicated by them for approval is the sole consideration for sale. The Assistant Collector took the view that the assessable value of the impugned goods could not be anything other than the value at which the products are normally sold. He further opined that unless the product is proved to be either sub-standard, deteriorated or scrap, there can be no reason for lowering the value. Appellants had relied upon several case laws before the Collector (Appeals) who did not agree with them and distinguished the judgements which were cited. The Collector (Appeals) rejected the plea of the appellants for lowering the price of the slow movers on the ground that the price charged by the assessee being the sole consideration is only the determinative factor for according approval of the price lists. He held that if these arguments were to be accepted, even abnormally low price charged or free gifts have to be accepted for the purpose of levy of duty. He has noted that the provisions of Section 4(1)(a) lay down that the normal price should be the price at which the said goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade are quite relevant to decide this particular valuation dispute. He has noted that in this case there was an approved price list and there is no provision under Section 4 by which a very low price can be accepted merely for the reason that the goods are slow movers. Therefore, the plea for accepting their price list for sale in a lot for sale of Rs. 4,81,338/- was not accepted by the department. He also rejected the plea of not filing the price list under part II on the ground that part II price list is applicable to cases for excisable goods for sale to class of buyers under Section 4(a) proviso (i) of the Central Excise Act, 1944. He noted that in order to file price list under Part II for approval, it is the responsibility of the assessee to prove that the impugned buyer in this case belongs to special class of buyer. He noted that the buyer in the present case is M/s. Best Drill Centre, a dealer and the impugned goods were not sold to any other dealer for the same price. He noted that in order to constitute a class of buyers there should be some distinguishing factors, like the region in which such buyers are situated, be they wholesale dealers or industrial consumers.
3. Shri Krishna Srinivasan, learned Counsel for the appellants argued that there was no bar under Section 4 to sell the goods which are 'slow movers' and non-standard which remained unsold for over a year to a particular class of buyer who would buy such goods which have lost marketability. The buyer being a different class by himself is buying as the same is being sold in a lot and being industrial buyer, who utilise the items for his use would be a class by himself and he cannot be equated with other buyers, who purchase goods when goods had value and market. He submitted that the price list can be revised and subsequent filing of the part II price list by the said buyer is required to be accepted. The view was taken by the Tribunal in the case of Castrol India Ltd. v. CCE as wherein the Tribunal has held that sale being made to industrial consumer and the Tribunal accepted the price which has been offered as negotiated with the customer and after finalisation of the price, the appellants having filed the price list under part II and claimed assessment at lower price should be accepted. The reasons given is that substantive benefit provided under law cannot be denied so long as it can be shown that the parameters which entitled the assessment under Section 4(1)(b) are satisfied. The Tribunal held that the sale being to industrial consumer and so long as it can be shown by the appellant that the sale was in the normal course of business the lower price agreed to for sale between the appellants and the consumer would be acceptable. The learned Counsel further relied upon the judgement of the Tribunal in the case of DCW Ltd. v. CCE as wherein also similar view was expressed that industrial consumers are a class of buyers and factory gate price approved under Part II price list in respect of industrial consumers which are class of buyers are deemed to be normal price. He pointed out that a wholesale buyer can be a class of buyer himself and there can be separate lower price for outstation dealers and local dealers and price can be fixed for separate consideration to meet local competition in regions by providing for freight and local tax element. He also relied upon the judgement in the case of Gora Mai Hari Ram Ltd. v. CCE as in support of his plea. In this judgement, it is held that it is an accepted proposition that local and outstation wholesale dealers are treated as different classes of buyers when differentia based on valid commercial reasons. The Tribunal has examined a large number of judgements to arrive at this conclusion. This decision was also followed by the Tribunal in the case of CCE v. Dharampal Satyapal Ltd. as . He further relied upon the judgement in the case of Ind-Sphinx Precision Pvt. Ltd. v. CCE as reported in 1994 (5) RLT 99 (CEGAT-A). In this case, the Tribunal has relied upon several earlier judgements and has also held that there could be different class of buyers viz. industrial consumers would form one class and there can be more than one normal price. It also held that trade discount cannot be denied on the mere ground of non-uniformity and there is no such condition to be read into Section 4 as the word "trade discount" not qualified for the word "uniform". It has been held that trade discount is bound to vary if some dealers take guarantee purchasing larger quantities. It has been held that percentage can be different for various reasons such as (i) status of the buyer (ii) class of buyer (iii) quantity of the goods sold (iv) favourable or unfavourable market conditions in a particular region or at a particular point of time (v) financial crisis (vi) cut throat competition (vii) introduction of a product in a new region. It has been held that whatever may be reason for allowing different trade discount their variation must be based on commercial transaction. The Tribunal held that different rates of trade discount are permissible so long as lack of uniformity is not found on any extra commercial consideration. The learned Counsel also relied upon the case of Ester Industries Limited v. CCE as wherein it has been held that price for sale at factory gate being available for certain varieties of polyester film, ex-depot price of identical goods even if higher is not to be taken into consideration. In this case the Tribunal relied upon the judgement of the Hon'ble Supreme Court in the case of Indian Oxygen Ltd. v. CCE as and it has been held wholesale ex-factory price cannot be rejected simply because higher price exists for consumers of a particular class of buyers unless buyer is a related person or consideration flowing back from purchaser to manufacturer. He also relied upon the judgement in the case of Shriram Food Fertilizers Ltd. v. CCE as wherein based on the earlier judgements, the Tribunal held that the wholesale dealers in each zone can in the facts and circumstances of the case be considered as different classes of buyers and the Tribunal relied upon the judgement of the Hon'ble Delhi High Court in the case of Indian Rayon Industries v. CCE as .
4. Smt. Aruna N. Gupta, learned DR for the Revenue argued that different price as claimed by the appellants cannot be accepted as there is wholesale price. She also submitted that the quality of the goods are not worsened and different price can be accepted only on geographical consideration and not in the circumstances as in the present case. In support of her plea she relied upon the judgement in the case of Indian Aluminium Cables Ltd. v. CCE as wherein it has been held on the basis of the Hon'ble Supreme Court judgement in the case of A.K. Roy and Anr. v. Voltas Ltd. as reported in 1977 ELT J-177 : 1973 Feb. Cen-Cus 60 (SC) : 1975 Cen-Cus 104C (SC) : 1990 (26) ECR 138 (SC) : ECR C 412 SC that once wholesale dealings at arms length are established, the determination of the wholesale price may not depend upon the number of wholesale dealings. The quantum of goods sold by a manufacturer on wholesale basis is entirely irrelevant. The fact that such sales may be few or scanty does not alter the true position. Therefore, the argument of the appellants that a single sale instance should not be taken into account, is not tenable and the valuation of ACSR conductors adopted at Rs. 17000/- per MT on the basis of a single sale was held to be correct in law and no interference was called for.
5. On careful consideration of the submissions made and on perusal of the entire judgements cited, the question that arises for consideration is as to whether the sale made by the appellants in the present case to their buyer viz. M/s. Best Drill Centre who is an industrial consumer can be considered as separate class of buyer. Further whether the price of the goods can be considered on the ground that the same being 'slow movers' and having remained unsold for over an year and whether the price offered by the said industrial consumer as a lot for sole consideration can be accepted, and as stated in the price list under part II filed by the appellants. In terms of the judgements cited supra, it is noticed that the law as it stands now is that separate class of buyers can be recognised and there can be different prices for different dealers/wholesalers and for industrial consumers, the relevant circumstances being already noted supra. If that be the case and if there is no extra consideration and the transaction is at arm's length the transaction is required to be accepted. Further if there is a separate price list filed under Part II subsequently that is required to be accepted as held by the Tribunal in the case of Castrol India (supra). On accepting this proposition, the price of the item which were 'slow movers', which remained unsold for over a year, and the appellants having called for tenders and accepted the same on behalf of the industrial consumer, can be accepted in the light of the judgements noted above. Such sales to industrial consumers, when there is no extra sale consideration, has been accepted by the Tribunal in the noted judgements. In the case of Ind-Sphinx Precision Pvt. Ltd. (supra) the Tribunal analysed the situation as arisen from the sale, under Section 4 of the CE Act, and accepted the proposition that there can be different assessable value for same type of goods. The Tribunal laid down various reasons such as (i) status of the buyer, (ii) class of buyer, (iii) quantity of goods sold (iv) favourable or unfavourable market conditions in a particular region or at a particular point of time (v) financial crisis (vi) cut throat competition (vii) introduction of the product in a new region. The Tribunal held that whatever may be reasons for allowing different rates of trade discount, the Tribunal noted that their variations must be based on commercial consideration. It noted that different rate of trade discounts are permissible so long as there is no extra commercial consideration. In the present case, there is no such allegation that there was any extra commercial consideration. In the present case the appellants had offered for sale of certain tools by their circular dated 10.3.1993, as could be seen from page No. 26 of the paper book, wherein they had given 19 conditions for acceptance of the price. In the offer they have noted that the tools referred to in the list had been manufactured by the company's high standard of quality and that the tools are now being offered for sale in "AS IS WHERE IS" condition without any express or implied warranty or condition as to the quality. It also noted various conditions. On perusal of these conditions, it is clear that the goods were being offered for sale in a lot and reasons for such sale was also indicated. It is clear that the appellants' factory had to dispose of these goods i.e. slow movers as the stocks had piled up which necessitated such sale. The appellants accepted the offer of M/s. Best Drill Centre who was an industrial consumer and therefore, the transaction clearly indicated that it is not a normal sale through factory gate or on wholesale basis but sales made in the circumstances to an industrial buyer who constitute a buyer by themselves. Such sale has been approved in the noted judgement in the case of Metal Box India Ltd. as , wherein it has been held that for a buyer who has lifted 90% of the output on guaranteed basis and thus saved the assessee from incurring advertising costs for marketing its product if the factory offers trade discount, that amount cannot be included in the value of excisable goods and it has to be deducted for computing the normal price of the goods and the discount was to the extent of 50% and the Hon'ble Supreme Court accepted the same. The Hon'ble Supreme Court also held that even if trade discount is not uniformly given or is given at different rates to different purchasers it cannot by itself disqualify it from being excluded for arriving at the assessable value so long as the lack of uniformity is not founded on any extra commercial consideration. Therefore, the ruling of the Hon'ble Supreme Court would apply to the present case of sale also. In the case of Govt. of India v. MRF Ltd. as , the Hon'ble Supreme Court on an analysis of Section 4 has laid down the determining factors for arriving at the assessable value in different situation. Para 5 of the judgement is noted herein below:
5. A reading of Section 4 lends itself to the following analysis:
Where the duty of excise is chargeable on excisable goods with reference to their value, the normal price at which such goods are sold shall be deemed to be the value of such goods subject to other provisions of Section 4.
"Normal price" means the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade or delivery at the time and place of removal. If, however, the buyer is a "related person" and the price is not the sole consideration for the sale, the price cannot be treated as the "normal price". In the case of sale to or through "related person", normal price shall be determined as provided in proviso (iii) to Section 4(1).
It is, however, not necessary that there should be one uniform normal price for all the goods sold by an assessee. There may be cases where the goods are sold by the assessee at different prices to different classes of buyers (not being, of course, related persons). In such a case, the price charged to each class of buyers shall be deemed to be the normal price of such goods in relation to each such class of buyers, subject, of course, to the existence of other circumstances specified in Clause (a).
Where, however, the goods are sold in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law in force or where the law has specified the maximum price, the price so fixed or the maximum price so specified, as the case may be, shall be deemed to be the normal price of such goods.
Where, however, the assessee generally sells his goods in the course of wholesale trade only to or through a related person, the normal price shall be deemed to be the price at which such related persons sells the said goods in the course of wholesale trade at the time of removal to the dealers (not being related persons). Since this Rule is not relevant for our purposes, we are not stating the Rule fully.
If the normal price of excisable goods is not ascertainable for the reason that the goods are not sold or for any other reason, the value of such excisable goods (i.e., the nearest ascertainable equivalent) shall be determined in the manner prescribed by rules (Valuation Rules).
Where the price of any excisable goods at the place of removal is not known and, therefore, the value of such goods is determined with reference to the price charged at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price.
The provisions of Section 4 do not, however, apply in respect of any excisable goods for which tariff values are fixed under Sub-section (2) of Section 3.
"Place of removal" means (i) factory or any other place or premises where the excisable goods are produced or manufactured; (ii) a warehouse or any other place or premises where any excisable goods have been permitted to be deposited without payment of duty according to rules and from where such goods are removed.
"Value" includes the cost of packing where the goods are delivered at the time of removal in a packed condition. "Value" does not, however, include the cost of packing which is of a durable nature and is returnable by the buyer to the assessee. "Packing" shall be understood as defined in the explanation to Section 4(4)(d)(i). "Value" does not include the amount of duty of excise, sales tax and other taxes, if any, payable on such goods.
"Value" does not also include, subject to such rules as may be made, trade discount allowed in accordance with the normal practice of the wholesale trade at the time of removal of such goods. To qualify as a trade discount, the discount should not be refundable on any account whatsoever.
"Wholesale trade" means sales to dealers, Industrial consumers, government, local authorities and other buyers who purchase their requirements otherwise than in retail.
On reading of the above para, it is clear that different prices can be adopted for different buyers. The situations confronted by the appellants demanded sales to be carried out by lot to an industrial consumer i.e. M/s. Best Drill Centre and they have to be considered as a separate class of buyer and the appellants in this case had filed price list under Part II and the same is required to be accepted as subsequent filing of Price list under Part II has been held by tribunal as only a procedural lapse, as in the case of Castrol India Ltd. v. CCE (supra). It has also been held that sales made to Industrial consumer, and price arrived at after negotiations with the consumer and after finalisation of the price appellants having given price list under Part II and claimed assessment at lower rate is required to be accepted. It has been held that substantive benefit provided under law cannot be denied so long as it can be established that the parameters which entitled the assessment under Section 4(1)(b) are satisfied. The learned DR relied upon the judgement in the case of Indian Aluminium Cables Ltd. (Supra). The facts in that case are distinguishable from the facts of the present case. In view of the analysis and applying the case laws noted above, the impugned order is set aside and the appeal is allowed.
(Pronounced in open Court in 28.4.1999).