1984 (10) TMI 224 - AT - Central Excise

Summary

Issues Involved:
1. Construction and applicability of Notification No. 120/75-C.E.
2. Fulfillment of condition (iv) of Notification No. 120/75-C.E.
3. Commercial relationship between Appellant and stockists.
4. Assessability of bonus articles cleared without payment of duty.
5. Valuation of goods under Section 4 of the Central Excises and Salt Act, 1944.

Detailed Analysis:

1. Construction and Applicability of Notification No. 120/75-C.E.:
The Tribunal examined Notification No. 120/75-C.E., which exempts certain goods from duty in excess of the duty calculated on the invoice price, provided specific conditions are met. The key condition under scrutiny was condition (iv), which mandates that the invoice price should not be influenced by any commercial, financial, or other relationship between the manufacturer and the buyer, other than the relationship created by the sale of the goods.

2. Fulfillment of Condition (iv) of Notification No. 120/75-C.E.:
The Tribunal analyzed whether the relationship between the Appellant and its stockists influenced the invoice price. The Appellant argued that the conditions in the letters of appointment were misconstrued and were merely for sales promotion. The Tribunal found that the letters of appointment constituted agreements for sale of goods and not contracts of agency. The relationship created by these agreements was commercial but did not influence the invoice price. The Tribunal held that the invoice price was in terms of the agreement and not influenced by the relationship created by the agreement to sell.

3. Commercial Relationship Between Appellant and Stockists:
The Tribunal noted that the letters of appointment brought about a commercial relationship between the Appellant and the stockists, which matured into a relationship consequent upon a completed sale each time goods were consigned to the stockists. The Tribunal concluded that this relationship did not influence the invoice price and thus did not disqualify the Appellant from availing the benefit of the Notification.

4. Assessability of Bonus Articles Cleared Without Payment of Duty:
The Tribunal agreed with the decisions of the Government of India and the Bombay High Court, which held that bonus articles given by the Appellant were not free but their price was included in the invoice for the quantities billed. The Tribunal found that this practice was akin to a sales gimmick and did not warrant the payment of duty on the bonus articles.

5. Valuation of Goods Under Section 4 of the Central Excises and Salt Act, 1944:
The Tribunal noted that the Notification provided an alternative mode of valuation to Section 4 of the Act. The Tribunal emphasized that the concepts of valuation under Section 4 could not be imported into the construction of the Notification. The Tribunal held that the lower authorities were not justified in directing the assessment of the goods to duty on the basis of the prices at which the stockists sold them to other dealers. The prices at which the Appellant sold their goods to their stockists were to be the assessable values in terms of Section 4.

Separate Judgment by Senior Vice-President:
Senior Vice-President S. Venkatesan concurred with the conclusion but reached it through a different route. He emphasized that the Notification could not override the provisions of Section 4 and that the duty payable should be the lower of the duty in terms of the Notification or Section 4. He noted that the lower authorities had incorrectly directed the assessment based on the prices charged by the stockists to their independent dealers. He concluded that the invoice prices of the Appellant should be the assessable values in terms of Section 4.

Conclusion:
The Tribunal allowed the appeal, holding that the Appellant was entitled to the benefit of Notification No. 120/75-C.E. and the consequential relief. The Tribunal directed that the prices at which the Appellant sold their goods to their stockists should form the basis of valuation for duty purposes.