2005 (3) TMI 114 - SC - Central Excise

Disallowance of the lower price on the ground that the bulk buyers did not constitute a different class of buyers and cannot be distinguished from other wholesale buyers; there cannot be more than one price for the same class of buyers Held that - In order to get benefit of Section 4(1)(a) (proviso)(i) the assessee has to establish that discount claimed was in accordance with the normal practice of wholesale trade in the concerned goods sold to different classes of buyers, and it shall be subject to the existence of other circumstances specified in Clause (a). In the instant case the assessee-appellant has not placed on record the number of persons engaged in the wholesale trade. There may be cases, where in a particular region there is a scope for increasing the turnover by giving incentive to some. But there must be some intelligible criteria for treating the benefited persons differently from others. It is true that comparison can or may be made intra-region and not by taking all regions together. But even then the appellant has not shown the justification for wide variation within the same region. For example, in region where transactions are substantial i.e. Delhi the variation is between 546 and 1523. Similar is the position in Ahmedabad Zone where the variation is between 414 and 1541. In Madras Zone it varies between 52 to 368. No reason was indicated as to why the named persons were chosen. Even though it is open to the assessee to chose the persons, it cannot be left to its ipse dixit. No rational basis for selecting the persons was established. On considering the relevant factors, the authorities and CEGAT have recorded finding of fact that no rational basis has been established. Appeal dismissed.

Summary

Issues:
Challenge to judgment of West Regional Bench at Mumbai of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) regarding classification of buyers for determination of value under Section 4 of the Central Excises and Salt Act, 1944.

Analysis:
1. Factual Background: The appellant filed price lists for compressors in Part I and Part II, showing a lower price for alleged bulk buyers. The Assistant Collector proposed disallowance of the lower price, which was confirmed in the notice. On appeal, the Collector (Appeals) accepted that bulk buyers were a different class, allowing the lower price.

2. CEGAT Judgment: CEGAT held that there can be different classes of buyers based on rational and identifiable commercial considerations. It found no rational basis to distinguish bulk buyers, leading to the allowance of Revenue's appeal.

3. Appellant's Arguments: The appellant contended that the price concession was rational, beneficiaries were identifiable, and discounts were based on commercial considerations. Reference was made to legal precedents to support the claim that discount was deductible under the Act.

4. Respondent's Response: The respondent argued that the appellant failed to establish an intelligible rationale for differentiating between groups of buyers. The Revenue Authorities and CEGAT were justified in rejecting the appellant's claim.

5. Legal Provisions: The judgment discussed Section 4(1)(a) (proviso) of the Act, defining the valuation of excisable goods for charging duty, and the definitions of "wholesale dealer" and "wholesale trade" under the Act.

6. Interpretation of Proviso to Section 4(1)(a): The Court emphasized that to claim a discount under the proviso, the appellant had to prove that the discount was in accordance with the normal practice of wholesale trade for different classes of buyers, subject to specified circumstances.

7. Classification and Rational Basis: The Court analyzed the need for a rational basis for classification of buyers, emphasizing that discounts should be founded on a rational basis and not extraneous considerations.

8. Judicial Precedents: The judgment cited various legal precedents to highlight the importance of factual findings by tribunals, emphasizing that interference is limited if the tribunal acts within the correct legal principles.

9. Conclusion: The Court dismissed the appeal, finding no merit in challenging the CEGAT judgment, with no order as to costs.

This detailed analysis covers the issues involved in the judgment, the arguments presented by both parties, the legal provisions discussed, and the Court's interpretation and conclusion based on the facts and legal principles involved in the case.