2017 (6) TMI 207 - AT - Central Excise

Valuation - the appellant had sold goods manufactured by them at different prices at their factory gate and also through consignment agents in Kerala - The department entertained the view that the factory gate price is to be adopted as normal price in terms of Section 4 of the Central Excise Act as it stood at the relevant time - whether there can be different values for the same goods manufactured when they are sold in wholesale at the factory gate and at depots to different classes of buyers as provided by section 4 of the Act? - Held that - wholesale dealers of a particular region can constitute a separate class of buyers. When sale at factory gate is to one class of such buyers and sale from depot, to which stocks has been transferred, takes place to another class of buyers, ex-factory price charged cannot be the relevant normal price for assessing duty on those goods - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Section 4 of the Central Excise Act regarding the determination of normal price for goods sold at factory gate and through consignment agents.

Analysis:
The case involved a manufacturer of iron and steel products falling under Chapter 72 of the Central Excise Tariff Act. The appellant had sold goods at different prices at their factory gate and through consignment agents in Kerala. The Central Excise duty was paid by the appellant based on the value realized through consignment agents, which was often less than the factory gate price. The department contended that the factory gate price should be considered the normal price for duty calculation. The original authority confirmed a demand for differential duty, leading to a demand of duty amounting to ?1,38,782 for August 1996. The Commissioner (A) upheld the decision, prompting the appellant to appeal.

During the hearing, the appellant's advocate argued that sales at the factory gate and through consignment agents should be treated as made to different classes of buyers, allowing for different normal prices as per Section 4(1)(a) of the Central Excise Act. This argument was supported by citing relevant case laws, including CCE Rajkot vs. Gujarat Heavy Chemicals Ltd., Arkay Engineering Works vs. CCE Allahabad, Allied Resins & Chemicals Ltd. vs. CCE Kolkata-V, and CCE Chandigarh vs. Taparia Tools Ltd.

The respondent, represented by the AR, supported the impugned order. However, the Tribunal found that the issue had been settled by the Larger Bench in the case of Taparia Tools Ltd., which addressed the question of different values for goods sold at the factory gate and depots to different classes of buyers. The Tribunal held that wholesale dealers of a particular region could constitute a separate class of buyers, and the ex-factory price could not be considered the relevant normal price for assessing duty on goods sold to different classes of buyers. The Tribunal, citing various other cases in alignment with this view, set aside the impugned order and allowed the appeal.

The decision was pronounced in Open Court on 26/04/2017 by the Appellate Tribunal CESTAT Bangalore, with the appeal being allowed in favor of the appellant.