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1. To get this appeal heard, appellants are required to pre-deposit duty amount of Rs. 232,51.1717- and penalty of Rs. 2,31,28,779/- for which they have filed application seeking waiver and stay. The issue is with respect to the valuation under Section 4 of the Central Excise Act for clearances of goods in the Domestic Tariff Area (DTA) from an Export-Oriented Unit (EOU), i.e. the appellant.

2. Heard Shri R. Raghavan, ld. Advocate for the appellants and Shri S. Kannan, ld. D.R.

3. Ld. Advocate submits that the applicants are an Export-Oriented Unit who are permitted to sell upto a maximum of 25% of the total value of clearances in DTA as per permission granted by the Development Commissioner of the Zone, which had been obtained. The appellants also claim the benefit of Central Excise Notification No. 2/95, dated 15-1-1995 for such DTA clearances. However, vide Notice, dated 17-11-1998 issued by Additional Director General of Anti-evasion, it was alleged that diferential duty on Cefo-taxime Sodium and Cefazolin Sodium, two bulk drugs covered by DPCO order, was recoverable since they were cleared at a lower price than the maximum price fixed by the DPCO. It was alleged that in terms of Section 4(1)(a)(ii), the maximum sale price fixed by the DPCO would form the assessable value. Suppression of facts were also alleged which led to the passing of the Order-in-Original No. 7/99, dated 22-4-1999 by Commissioner of Central Excise wherein the duty and penalties were imposed as well as interest at 20% per annum was also confirmed under Section 11AB. But the proceedings in respect of confiscation proposals were dropped.

(2) It will be relevant to mention that this proviso applies notwithstanding anything contained in proviso (iii). The effect is that even in the case of slaes by the assessee to related person if such sales are at the price or the maximum price fixed under any law, the assessment shall be made at the price or the maximum price so fixed and the 'normal price' will not be determined in the manner laid down in proviso (iii).

He submits that in this case since the goods sold by the present appellants in DTA were not at the statutory price, therefore in terms of the said Circular the normal price under Section 4 would be the assessable value. Ld. Advocate further submits that the question of applicability of the DPCO prices to various drugs is a matter which had been agitated by the Industry before the Central Govt. and the same was pending consideration. Accordingly, vide F. No. 120/7/98-CX. 3, dated 23-12-1998 addressed by the Under Secretary, Central Board of Excise and Customs to all Commissionerates, etc., if had been directed that the show cause notices issued on Pencillin-G demanding differential duty on the basis of the DPCO maximum price should not be enforced at all till further directions from the Board. Ld. Advocate also submitted that the appellants were the only manufacturing unit who have been not only issued with show cause notice, but also the same has been adjudicated upon. In cases of all other competitors, in various parts of the country, though show cause notice may have been issued from time to time to safeguard the Revenue from time bar, they have not been adjudicated upon and recovery enforced, Ld. Advocate further submits that in answer to the Unstarred Question No. 1396, dated 11-12-1998 in the Rajya Sabha as to whether bulk drug companies are flouting DPCO by selling the price below those prescribed by it and thereby evading Excise duty, etc.', the Hon'ble Minister of State in the Ministry of Chemicals and Fertilizers had clarified as under :-

"Under the provisions of DPCO 1995, the Government fixes only the Maximum Sale Price of the bulk drugs under Price Control. The DPCO 1995 does not prohibit sale at lower prices. Prices of bulk drugs not under Price Control, are determined, charged by the manufacturers as per their commercial judgment". In view of the above, the question of evasion of Excise duty etc. does not arise".

Ld. Advocate also submits that since the general practice was to sell the goods even less than the maximum price prescribed by the DPCO, therefore the appellants harboured a bona fide belief that for the reasons explained above, the DPCO price shall not be the assessable value and the normal price at which the goods were sold would be the assessable value. Duty was therefore paid under this bona fide belief. On the contrary, nothing has been shown by the Revenue to show that this was done with any wilful intent to evade duty. The only ground on which the extended period has been invoked in the order impugned is that the DPCO Circular relating to bulk drugs of 1995 was not brought to the department's notice. In this connection, he submits that the said order is a statutory order passed by the Govt. of India and available in the Gazette. There was no need for the appellants to bring this to the notice of another wing of Govt. of India, particularly when they were under the bona fide belief that they had correctly declared the assessable value as per the Board's Circulars cited supra. Therefore, he submits that even the extended period of limitation would not be applicable in this case. Ld. Advocate concludes by praying that since they have demonstrated that the case on merits is totally in their favour both in terms of question of assessable value as well as on limitation, therefore their application for full waiver and stay requires favourable consideration. He further submitted that the matter could be remanded to the Original Authority as he has not only in internal page 9 in para 7 of the order impugned (the Ld. Commissioner has) noted the words 'instructions of 8-8-1975' but has held that he would not follow the same because, they were contrary to provisions of Section 4(1)(a)(ii). In this connection, he cites the decisions of the Hon'ble Supreme Court in the case of Ranadey Micronutrients v. CCE as in 1996 (87) E.L.T. 19 wherein the Hon'ble Apex Court had held that Ciculars issued by CBEC to all Collectorates are not advisory in character but binding on them and the department cannot be allowed to plead that such a Circular was not held in law as they were meant for adoption of uniform practice. Therefore, the departmental officers cannot repudiate the Circular on the ground that it is inconsistent with the statutory provisions. Ld. Advocate submits that the findings of the ld. Commissioner in the order impugned is totally against the said judgment of the Hon'ble Supreme Court. He further cites the decision of the Hon'ble Apex Court in the case of Paper Products Ltd. v. CCE as in 1999 (112) E.L.T. 765 (S.C.) wherein taking a similar view as in the case of Ranadey Micro-nutrients Ltd. (supra), the Hon'ble Apex Court has further held that consistency and discipline are of far greater importance than winning or losing Court proceedings and therefore, the department is totally precluded from challenging the correctness of the Circular even on the ground of the same being inconsistent with statutory provisions. Ld. Advocate submits that in view of the order impugned having not followed both the Circular of 1975 (supra) as well as the ratio of the Board's letter noted supra to keep in abeyance all enforcement procedures with respect to DPCO prices and valuation, therefore the Order-in-Original impugned needs to be set aside and the matter remanded to the Original Authority for a reconsideration of the entire issue in terms of these positions noted above.

(a) The DPCO prescribes a maximum sale price and in view the submissions noted above, we are of the prima facie view that there is nothing in law which prevents the appellants to sell their bulk drugs at a price lower than maximum price prescribed by DPCO.

(b) We are also of the prima facie considered view that Section 4(1) (a) Proviso (ii) would apply to situations where the price is a statutorily fixed price, that is to say that every manufacturer of that commodity would be forced by law to sell only at that price. In the present case, the DPCO order does not establish such a situation. It only fixes a maximum ceiling price. Therefore, the legal fiction created by the proviso would apply only to statutorily fixed price and not to ceiling price, otherwise the legal fiction created would render contra to the provisions to Section 4(1)(a) itself.