1997 (2) TMI 354 - AT - Central Excise

Summary

Issues:
1. Valuation of goods for assessment under Section 4 of the Central Excises & Salt Act, 1944 based on contracts with customers.
2. Determination of whether transactions were on a principal to principal basis.
3. Interpretation of agreements with customers Palsons Drugs & Chemical Industries and SOL Pharmaceuticals.
4. Applicability of previous tribunal and Supreme Court decisions to the current case.

Analysis:
1. The case involved the valuation of goods for assessment under Section 4 of the Central Excises & Salt Act, 1944, based on contracts with two customers, Palsons Drugs & Chemical Industries and SOL Pharmaceuticals. The department contended that the prices at which the goods were sold to these customers were not on a principal to principal basis, affecting the valuation of the goods.

2. The appellants argued that the transactions with the customers were on a principal to principal basis, citing agreements that outlined mutual agreements on transfer prices and marketing arrangements. However, the department argued that the goods were sold by the appellants on a cost price basis without addition to selling cost, indicating a different nature of the transactions.

3. The agreements with Palsons Drugs & Chemical Industries and SOL Pharmaceuticals were analyzed to determine the nature of the transactions. The agreement with Palsons involved marketing arrangements beyond simple agency agreements, with Palsons fixing retail prices despite the appellants owning the trade mark. The agreement with SOL Pharmaceuticals indicated a significant level of control by the buyer over the manufacturing process, leading to the conclusion that the transactions were not on a principal to principal basis.

4. The tribunal considered previous decisions, including the Pawan Biscuit Company (P) Ltd. case and the Union of India v. Cibatul case, to assess the applicability of those rulings to the current case. It was concluded that the agreements in the present case did not align with the principles established in those cases, leading to the rejection of the appeal and upholding the valuation based on the prices charged by the customers.

In conclusion, the tribunal upheld the department's view that the transactions with Palsons Drugs & Chemical Industries and SOL Pharmaceuticals were not on a principal to principal basis, impacting the valuation of the goods for assessment purposes under the Central Excises & Salt Act, 1944. The appeal was rejected based on the detailed analysis of the agreements and the applicability of previous legal precedents to the case.