1994 (1) TMI 137 - AT - Central Excise

Summary

Issues Involved:
1. Whether industrial consumers in different states can be treated as different classes of buyers under Section 4 of the Central Excises and Salt Act.
2. Whether there can be more than one normal price for industrial consumers based on regional market conditions.

Detailed Analysis:

Issue 1: Classification of Industrial Consumers
The appellant, a manufacturer of white cement, sold the product to wholesale dealers and industrial consumers at different prices in various states, citing competitive market conditions. The Department issued a Show Cause Notice to revise these prices, proposing a uniform price for industrial consumers across all states. The Assistant Collector confirmed this proposal, and the Collector upheld it, leading to the present appeal.

The Collector relied on the Bombay High Court's judgment in Godrej Boyce Manufacturing Ltd. v. Union of India, which held that industrial consumers are one class under Section 4 of the Central Excises and Salt Act, implying a single price for industrial consumers. The appellant argued that different market conditions necessitate treating industrial consumers in different states as separate classes of buyers, referencing Section 4(1)(a) which allows different prices for different classes of buyers.

Issue 2: Determination of Normal Price
The main contention was whether multiple normal prices could exist for industrial consumers based on regional differences. Section 4(1)(a) defines the normal price as the price at which goods are ordinarily sold in wholesale trade, provided the buyer is not related and the price is the sole consideration. The appellant argued that the different prices charged to industrial consumers in various states met these criteria and should be considered the normal price.

The Department contended that industrial consumers constitute a single class, and therefore, there should be one normal price. However, the appellant cited multiple judgments, including Amar Chemicals v. Collector of Central Excise and Music India v. Union of India, supporting the view that different prices based on genuine commercial considerations should be accepted.

Judgment Analysis:

Majority Opinion:
The majority opinion, led by Member (J), held that the prices charged by the appellant from various industrial consumers in different regions represent the normal price under Section 4. It was noted that the prices were not influenced by extra-commercial considerations, the buyers were not related persons, and the price was the sole consideration for the sale. Therefore, the assessable value should be based on the different prices charged in different states.

Dissenting Opinion:
Member (T) disagreed, stating that industrial consumers across different states should be treated as a single class, and a single normal price should apply. The dissent emphasized that the first proviso to Section 4(1)(a) does not permit separate assessable values for sub-classes within a single class of buyers.

Final Resolution:
The matter was referred to a third Member due to the difference of opinion. The third Member, P.C. Jain, concluded that there can be more than one normal price for industrial consumers based on regional market conditions. It was emphasized that classification must be based on objective criteria and commercial practices, not merely on the whim of the assessee.

Final Order:
In view of the majority opinion, it was held that there can be more than one normal price for industrial consumers based on regional market conditions. Consequently, all appeals were allowed, recognizing the different prices charged in different regions as valid under Section 4.

Conclusion:
The judgment affirmed the principle that industrial consumers in different states can be treated as different classes of buyers, allowing for multiple normal prices based on regional market conditions, provided these prices meet the criteria set out in Section 4(1)(a) of the Central Excises and Salt Act.