1989 (1) TMI 227 - AT - Central Excise

Issues Involved:
1. Determination of assessable value of photocopiers for Central Excise Duty.
2. Classification of sales as wholesale or retail.
3. Admissibility of deductions for retailing expenses under Rule 6(a) of the Central Excise (Valuation) Rules, 1975.

Detailed Analysis:

1. Determination of Assessable Value of Photocopiers:
The appellants manufacture photocopiers under the brand name Modi Zerox 1045, which fall under Item 33 D of the erstwhile Central Excise Tariff. The primary dispute concerns the assessable value of these machines for Central Excise Duty for the period from 4-3-1985 to 28-2-1986. The appellants requested that the judgment be issued after considering two other appeals filed by the department for the subsequent period beginning 1-3-1986. However, due to a shortage of Judicial Members, the Bench decided to proceed with the current appeal separately.

2. Classification of Sales as Wholesale or Retail:
The appellants had no conventional dealer network and sold about 7-8% of their machines on a hire-purchase basis through leasing companies, with the rest sold directly to consumers. The Assistant Collector and the Collector (Appeals) treated these sales as wholesale sales for different reasons. The appellants argued that all sales were retail sales, thus entitling them to deductions for retailing expenses under Rule 6(a). The department's representative put forth three propositions:
(i) Sale of even one machine to a direct customer was a wholesale sale.
(ii) Sales to leasing companies were wholesale sales, making the invoice price the normal price under Section 4(1)(a) of the Central Excises and Salt Act, 1944.
(iii) If sales to leasing companies were ignored, the deemed dealer's margin should be determined at around 11.6%.

The Tribunal held that sales of one machine each to various offices for actual use were retail sales, not wholesale sales. The price of Rs. 1,33,500/- charged was a retail price, as there was no higher retail price beyond this.

3. Admissibility of Deductions for Retailing Expenses:
The appellants argued that invoicing to leasing companies was not a wholesale sale as envisaged in Section 4(1)(a) because it was a financing arrangement rather than a trading activity. The Tribunal agreed, stating that leasing was a financing arrangement and not a wholesale sale in trade parlance. Therefore, the invoice prices to leasing companies did not meet the requirements of normal price under Section 4(1)(a).

The Tribunal concluded that all machines were supplied directly to customers, with about 92-93% sold outright and 7-8% given on hire-purchase basis. In the absence of a normal price under Section 4(1)(a), the retail price of Rs. 1,33,500/- per machine was used to work back the assessable value, with the only dispute being the amount of deductions to be made. Rule 6(a) of the Central Excise (Valuation) Rules, 1975 was cited, which allows deductions necessary to arrive at the wholesale price.

The appellants claimed total retailing expenses of Rs. 39,005/- per machine, while the department suggested a deduction of 10-11% based on the comparable CANON NP-271 machine. The Tribunal noted that the dealer's margin for CANON was 11.6%, but this margin was depressed due to installation costs and interest on credit. Adjusting for these factors, the Tribunal determined a dealer's margin of about 15% was appropriate.

The Tribunal also considered the higher retail price of the appellant's machine compared to CANON's, concluding that a 15% margin over the retail price of Rs. 1,33,500/- should be allowed as retailing expenses. Central Excise Duty and other taxes, if paid, would also be deductible. Freight costs were presumed included in installation expenses and did not warrant further deduction.

Conclusion:
The appeal was partly allowed, with the Tribunal granting a 15% margin over the retail price of Rs. 1,33,500/- as retailing expenses under Rule 6(a) of the Central Excise (Valuation) Rules, 1975. Consequential relief was to be granted to the appellants.

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