1991 (8) TMI 187 - AT - Central Excise

Issues Involved:

1. Whether the lower prices charged by the assessee to Indo-Kem Ltd. and Rama-Kem Ltd. are justified.
2. Whether the two companies can be considered a different class of buyers.
3. Whether the movement of goods from the factory to the godown and then to the customers affects the applicability of the price list.
4. Applicability of Notification 80/80, dated 19-6-1980.
5. Whether the contract prices should be accepted for the purpose of levy of ad valorem duty.

Detailed Analysis:

1. Whether the lower prices charged by the assessee to Indo-Kem Ltd. and Rama-Kem Ltd. are justified:

The assessee, a manufacturer of Synthetic Organic Dye-stuff, submitted two price lists: one for wholesale dealers and another for two specific customers, Indo-Kem Ltd. and Rama-Kem Ltd., at lower prices. The department alleged that the lower prices were deliberately suppressed to remain within the exemption limit of Rs. 15 lakhs as per Notification No. 80/80, dated 19-6-1980. However, it was noted that there was no allegation of any relationship between the assessee and the two companies, nor any extra-commercial consideration influencing the prices. The appellate tribunal found that the contract prices were genuine and negotiated at arm's length, thus justifying the lower prices.

2. Whether the two companies can be considered a different class of buyers:

The adjudicating authority initially held that Indo-Kem and Rama-Kem could not be treated as a different class of buyers, applying the same price as other dealers. However, the appellate tribunal disagreed, stating that the lower authority's finding was not warranted by Section 4 of the Central Excises and Salt Act, 1944. The tribunal relied on the Delhi High Court's decision in Sylvania & Laxman Ltd., which established that different prices could be charged to different buyers if the contracts were genuine and at arm's length.

3. Whether the movement of goods from the factory to the godown and then to the customers affects the applicability of the price list:

The department argued that since the goods were first moved to the assessee's godown and then to the customers, the normal price applicable to other wholesale dealers should be used. However, the appellate tribunal found that the movement of goods did not affect the contract prices. The tribunal emphasized that Section 4 of the Act does not concern itself with the movement of goods but with the genuineness of the contract prices, which was not in dispute.

4. Applicability of Notification 80/80, dated 19-6-1980:

The department alleged that the lower prices were intended to keep the aggregate clearances within the Rs. 15 lakhs exemption limit. The appellate tribunal found this allegation to be coincidental and not supported by evidence of any flow back from the customer companies to the assessee. Therefore, the tribunal held that the benefit of Notification 80/80 should not be denied based on mere suspicion.

5. Whether the contract prices should be accepted for the purpose of levy of ad valorem duty:

The appellate tribunal concluded that the contract prices negotiated with Indo-Kem and Rama-Kem were acceptable for the purpose of levy of ad valorem duty. The tribunal emphasized that the prices were genuine, negotiated at arm's length, and not influenced by any extra-commercial considerations. The tribunal also noted that the department did not dispute the genuineness of the prices or the contracts.

Conclusion:

The appellate tribunal allowed the three appeals filed by the assessee and dismissed the appeal of the department, holding that the contract prices with Indo-Kem and Rama-Kem were valid and applicable for the purpose of levy of ad valorem duty. The tribunal emphasized that the movement of goods did not affect the contract prices and that the benefit of Notification 80/80 should not be denied without concrete evidence of any flow back or extra-commercial considerations.

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