2006 (10) TMI 20 - AT - Central Excise

Valuation(Central excise)-Appellant were used to charge different price from members and its non-members - Demand of interest for the period subsequent to enactment of section by the authority.

Summary

Issues: Valuation of molasses sold by appellant sugar mills.

In this judgment by the Appellate Tribunal CESTAT, New Delhi, the only issue for consideration was the valuation of molasses sold by the appellant sugar mills. The dispute arose when the Revenue authorities rejected the sale price fixed by a federation of co-operatives, of which the appellant sugar mills were members, for being lower than the price at which molasses was sold to non-members. The authorities argued that the buyer and seller were related parties, leading to the rejection of the federation's fixed price. The appellant contended that members of a co-operative federation should not be considered related parties, citing a Supreme Court judgment and a Tribunal decision to support their claim that transaction value should be accepted even between federation members.

The Tribunal analyzed the situation and found that the core issue was not the relationship between the buyer and seller but whether the prices set by the federation for its members were commercial prices. A letter from the federation clarified that the price was not the sole consideration for the sale, indicating a non-commercial aspect to the pricing. The Tribunal emphasized that only a commercial price could be considered a normal sale price for assessment purposes. As the federation's price was not solely based on commercial considerations, the Revenue authorities were justified in rejecting it and assessing duty based on the price to non-members, which was deemed a commercial price. The Tribunal distinguished previous judgments cited by the appellant, highlighting that the disqualification of the sale price was due to its lack of commercial nature, not the membership of the federation.

Ultimately, the Tribunal agreed with the Revenue authorities that the rejection of the sale price was correct, and the duty demand based on the price to non-members was sustainable. The appeals were dismissed concerning the duty demands. Additionally, the Tribunal ruled in favor of the appellants regarding the demand for interest, stating that interest liability would only apply from the enactment date of the relevant statutory provision, and not for the period before that date.

In conclusion, the judgment resolved the valuation issue by emphasizing the importance of commercial pricing for assessment purposes and upheld the rejection of the federation's price in favor of the price to non-members as a commercial benchmark.