1990 (2) TMI 160 - AT - Central Excise

Summary

Issues:
Assessment of Central Excise duty on goods sold to distributors, determination of assessable value when some distributors are alleged to be related persons, application of Proviso 3 to Section 4(ii) of the law, verification of existence and activities of distributors, and application of legal principles from relevant judgments.

Analysis:
The judgment concerns the assessment of Central Excise duty on goods sold to distributors, specifically focusing on the determination of the assessable value when some distributors are suspected to be related persons. The appellant argued that the assessable value should be based on the price at which goods are sold to all distributors, even if some are related persons. The appellant emphasized that merely providing a warranty does not establish a distributor as a related person. The legal position was acknowledged by the respondent, who highlighted the need to verify the factual existence and activities of all distributors mentioned. The respondent also pointed out Proviso 3 to Section 4(ii) of the law, suggesting that adverse inferences may be drawn if sales to independent distributors are not reasonable in quantities.

The judgment referred to the legal precedent set by the Bombay High Court in Cosmos (India) Rubber Works P. Ltd. v. Union of India, emphasizing that Proviso 3 applies only if all goods are sold to related persons. However, the exact percentage of sales through alleged related distributors versus independent distributors was not immediately available. The Tribunal clarified that if sales through the independent distributors were consistent and at the same price as related distributors, that price should be the basis for the assessable value. Due to insufficient information before the Tribunal, the impugned order was set aside, and the matter was remanded to the Assistant Collector for verification.

The Tribunal directed the Assistant Collector to confirm the existence of all seven distributors, ensure regular sales to the independent distributors, and verify that the prices to all distributors were uniform. If these facts were verified, the classification list provided by the appellant should be approved, including the mentioned discount. The appellant was instructed to provide necessary documents for verification. If the Assistant Collector confirmed uniform pricing to all distributors, appropriate relief should be granted. Consequently, the appeal was allowed by remand, pending the verification of crucial facts by the Assistant Collector.