2004 (2) TMI 492 - AT - Central Excise

Summary

Issues:
1. Discrepancy in selling price of goods.
2. Application of Section 4 of the Central Excise Act, 1944.
3. Arms-length transaction and principal-to-principal basis.

The judgment involves a case where the respondents, engaged in manufacturing cosmetics and toilet preparations, entered into an agreement with another company to supply goods at a price lower than the selling price of the buyer company. Show cause notices were issued, alleging that the selling price should be considered for assessment under Section 4 of the Central Excise Act, 1944. The Deputy Commissioner confirmed demands and imposed penalties, which were challenged by the assessees before the Commissioner (Appeals) contending that the sale was at arms-length and principal-to-principal basis.

The main issue before the Tribunal was whether the respondents' selling price, lower than the buyer's selling price, should be accepted as the assessable value for excise duty purposes. The Revenue argued that the respondents cannot sell branded products to other customers, implying the price was not the "normal price" as per Section 4(1)(a) of the Act. However, the Tribunal noted that a low price alone does not indicate a non-arms-length transaction, citing precedent cases. The Tribunal also found that the grounds raised by the Revenue were beyond the scope of the show cause notice, which only focused on the price difference. Consequently, the Tribunal agreed with the Commissioner (Appeals) that the sale was in the course of wholesale trade, and the contracted price at the time of removal should be considered the normal price under Section 4 of the Act.

In conclusion, the Tribunal upheld the Commissioner (Appeals) decision, rejecting the Revenue's appeal. The judgment clarified that a low selling price, without additional evidence of non-arms-length transaction, does not automatically invalidate the price as the normal value for excise duty assessment. The decision emphasized the importance of considering the specific allegations in show cause notices and ensuring that the scope of appeals aligns with the issues raised during adjudication.