2002 (4) TMI 195 - AT - Central Excise

Issues Involved:
1. Determination of factory gate price and assessable value.
2. Sales through C & F Agents versus direct sales to dealers.
3. Difference in sale prices and suppression of value.
4. Inclusion of commission paid to C & F Agents in assessable value.
5. Nature of agreements with C & F Agents.
6. Deduction of commission from assessable value.
7. Direct sales to C & F Agents and creation of subterfuge.
8. Dealer's commission versus dealer's margin.
9. Calculation of State tax liability.
10. Determination of wholesale price and uniform pricing.
11. Receipt and accounting of sale proceeds.
12. Determination of wholesale cash price and arm's length transactions.

Detailed Analysis:

1. Determination of factory gate price and assessable value:
The appellants, M/s. KPL, were alleged to have no 'factory gate price' for goods delivered at Hyderabad, Bombay, and Trichy. The value of goods cleared to these places was to be determined with reference to the delivery price at these locations.

2. Sales through C & F Agents versus direct sales to dealers:
M/s. KPL sold goods through C & F Agents in Hyderabad, Bombay, and Trichy, whereas in other regions, sales were direct to dealers. The authorities considered sales to independent dealers as sham and held that the assessable value should include the commission paid to C & F Agents.

3. Difference in sale prices and suppression of value:
There was a substantial difference in the sale price of goods as per invoices issued by C & F Agents compared to those declared by M/s. KPL at the time of removal from the factory. This discrepancy indicated suppression of the value of goods.

4. Inclusion of commission paid to C & F Agents in assessable value:
The Commissioner held that the value for assessment should include the commission paid to C & F Agents, as these agents were selling the goods at a higher price than declared by M/s. KPL.

5. Nature of agreements with C & F Agents:
The agreements with C & F Agents entailed various services for which they were paid commissions. These agreements were viewed as Agency Agreements, and the commission paid did not qualify for deduction while determining the assessable value.

6. Deduction of commission from assessable value:
M/s. KPL's practice of paying commission to C & F Agents was not considered a deductible expense for assessing the value of goods.

7. Direct sales to C & F Agents and creation of subterfuge:
In August-September 1995, M/s. KPL started direct sales to regions including their C & F Agents, creating a subterfuge to claim lower assessment values for stock transferred goods.

8. Dealer's commission versus dealer's margin:
M/s. KPL allowed a dealer's commission to C & F Agents, which was not allowed to other dealers, and the amount equaled the C & F Agent's commission. This commission was not considered a trade discount but a payment for services rendered.

9. Calculation of State tax liability:
The commission retained by agents was added to the basic value for State tax calculation, whereas the dealer's margin was not included, indicating different natures for dealer's margin and commission.

10. Determination of wholesale price and uniform pricing:
M/s. KPL fixed the wholesale price by dealers, and the sale price was worked out by allowing discount deductions to maintain uniform pricing across the country.

11. Receipt and accounting of sale proceeds:
The entire sale proceeds, including the commission to C & F Agents, were received and accounted for by M/s. KPL, and the commission was separately calculated and paid, indicating the declared invoice value was incorrect.

12. Determination of wholesale cash price and arm's length transactions:
The wholesale cash price was to be determined based on arm's length transactions. Prices charged to special or favored buyers, including additional commissions, were not considered normal prices under Section 4.

Conclusion:
The Tribunal concluded that the issues under consideration were already settled in earlier proceedings where similar show cause notices were issued and decided in favor of M/s. KPL. The Tribunal found that the department's attempt to raise the same issues was barred by limitation and the principle of res judicata. Consequently, the appeals were allowed, and the impugned order passed by the Commissioner was set aside.

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