2002 (11) TMI 98 - SC - Central Excise

Whether The components which are transferred by assessee to their sister units, the value has to be ascertained under Section 4(1)(b)? Held that - The provisions of the Act are very clear. The proviso does not mean or provide that merely because the assessee sells at different prices to different classes of buyers, the price of that commodity becomes an unascertainable price. The price of that commodity will remain the normal price at which those goods are ordinarly sold by the assessee to the public, in other words, the price at which they are sold in the market. The mere fact that sale is also made to the Defence or to the Civil Department of the Government at different prices would not mean that the price becomes an unascertainable price. In the case of the appellants, a price is ascertainable. They admittedly sell in the market at a particular price. Section 4(1)(b) would not come into play and would not apply at all. Section 4(1)(b) of the Act would only apply if the price cannot be ascertained. In this case, as indicated above, the price is ascertainable and, therefore, the question of application of Section 4(1)(b) does not arise. If Section 4(1)(b) does not apply, Rule 6 will also not apply. Against assessee.

Summary

Issues:
Valuation of excisable goods for excise duty payment concerning components transferred to different units.

Analysis:
The appeal dealt with determining the value for excise duty payment of components transferred by the appellants from their factory to their units at different locations and sold in the market as spare parts. The dispute revolved around whether the value should be ascertained under Section 4(1)(a) or Section 4(1)(b) of the Central Excise Act, 1944. The authorities held that the value should be determined under Section 4(1)(a) as an ascertainable sale price was available, while the appellants argued that for components transferred to sister units, the value should be ascertained under Section 4(1)(b) as no ascertainable sale price existed for those components.

The provisions of the Act, specifically Section 4(1)(a) and Section 4(1)(b), were crucial in determining the valuation of excisable goods for excise duty purposes. Section 4(1)(a) mandates that the value is based on the normal price at which goods are sold in wholesale trade, while Section 4(1)(b) applies when the normal price is unascertainable. The Tribunal's judgment in the appellant's case emphasized that the valuation should be done under Section 4(1)(b) for components transferred to manufacturing units, considering them as removals to a separate class of buyers distinct from wholesale sales of spare parts.

The Court clarified that the normal price under Section 4(1)(a) is the price at which goods are ordinarily sold in wholesale trade, typically through dealers. The proviso allows for different prices for different classes of buyers but does not render the price unascertainable. The Court rejected the argument that the price for components transferred to different units was unascertainable, emphasizing that the appellants sold at ascertainable prices in the market. Therefore, Section 4(1)(b) did not apply as the price was determinable, precluding the need for Rule 6 of the Central Excise (Valuation) Rules, 1975.

The Court dismissed the appeal, highlighting that the Tribunal's reasoning, which deemed the price unascertainable for components sent to manufacturing units, was not sustainable. The Court cautioned against accepting arguments that could allow individuals to evade ascertainable valuation by selling goods at different prices to claim unascertainable prices for captive use. The judgment underscored the importance of following clear valuation rules under the Act to determine excise duty payment accurately.