1997 (2) TMI 118 - SC - Central Excise

What is the wholesale price, on which the excise duty is payable, of the fabrics which are manufactured by the appellant-Company? Held that - On the basis of the evidence on record and what was stated in the said order, we came to the conclusion that the proper assessable value would be the purchase price which was paid by M/s. Agarcon to the said 4 firms. The basis for coming to this conclusion was that these four firms were mere shadows and the transactions through them could not obviously be regarded as the genuine transactions. This being so and also considering the fact that the so called wholesale dealers neither had the finances of their own and nor did they have any storage capacity, the only obvious conclusion was that this was only a device which was adopted by the appellant with a view to depress the assessable value for the purpose of excise. This is further strengthened by the fact that M/s. Agarcon is only known as the agent of the appellant and the goods were manufactured according to the designs and specifications given by M/s. Agarcon. Therefore, the conclusion which was arrived at by the Tribunal was correct and calls for no interference. Appeal dismissed.

Summary

Issues: Determination of wholesale price for excise duty on fabrics manufactured by the appellant-Company.

Analysis:
The Supreme Court considered the issue of determining the wholesale price for excise duty on fabrics manufactured by the appellant-Company. The Collector of Excise initially decided that the price charged by the appellant from four wholesale dealers should be the value for excise duty. However, the Central Board of Excise and Customs disagreed with this decision and issued a show cause notice. The Board's order highlighted that the manner in which the goods were sold by the appellant was questionable, with the four parties acting more as commission agents than genuine wholesale dealers. The Board directed the adjudicating authority to seek the Customs, Excise, and Gold Control Appellate Tribunal's intervention to set aside the Collector's order.

Before the Tribunal, the appellant raised two preliminary objections regarding the Board's order. The Tribunal found merit in the second objection but did not consider it necessary to decide. The Tribunal concluded that M/s. Agarcon was not related to the appellant, making M/s. Agarcon's selling price not suitable as the wholesale price. However, the Tribunal determined that the four intermediary firms between the appellant and M/s. Agarcon were mere shadows, lacking financial resources and storage facilities. The Tribunal observed that these firms were merely facilitating the transfer of goods to M/s. Agarcon, leading to the conclusion that the wholesale price should be based on what M/s. Agarcon paid, ignoring the transactions with the intermediary firms.

The appellant contested the Tribunal's decision, arguing that the Tribunal should not have delved into the genuineness of the four intermediary firms. The Supreme Court rejected this argument, noting that the Tribunal's analysis was based on extensive discussions from the lower orders and the Board's reference order. The Court agreed with the Tribunal's findings, emphasizing that the transactions through the intermediary firms were a device to manipulate the assessable value for excise duty purposes. The Court upheld the Tribunal's decision that the proper assessable value should be the purchase price paid by M/s. Agarcon to the intermediary firms. The Court dismissed the appeal and imposed costs on the appellant.