2012 (12) TMI 501 - AT - Central Excise

Transaction value - manufacture of aerated water and edible syrup alleged that appellant was charging different rates for clearance of the edible syrup at their factory gate from the three distributors and HCR - rate charged from HCR was 30% less than the rate charged from the other three distributors - whether HCR can be termed as a different class of buyer as compared to the three distributors of the appellant company Held that - Assessee can pay excise duty at lesser transaction price at which the goods were sold to one category of buyer provided he is able to show cogent reason as to how the buyer fall within different class of buyer - different price based on various rational commercial considerations like regional different taxes, quantity off-take, presence of competitors, future demand etc. - appellant not only averred that HCR was treated as different class of buyer but this fact is established from the record In favor of assessee

Summary

Issues Involved:
1. Differential Excise Duty Demand
2. Classification of Buyers
3. Related Person Definition
4. Extraneous Consideration
5. Applicability of Proviso to Section 4(1)(a) of Central Excises and Salt Act, 1944

Detailed Analysis:

1. Differential Excise Duty Demand:
The appellant, M/s. Parle Bisleri Pvt. Ltd., was charged with differential excise duty for supplying edible syrup to Hard Castle Restaurant (HCR) at a rate 30% less than the rate charged from other distributors. The Department issued a show cause notice demanding the differential duty by taking the transaction value as the value charged from the other distributors. The appellant contested this, arguing that the lower rate was justified as HCR was a bulk purchaser.

2. Classification of Buyers:
The appellant argued that HCR was a different class of buyer compared to the other distributors, as HCR purchased the syrup for captive consumption in McDonald's restaurants, whereas the other distributors purchased it for resale. The Tribunal found that HCR, being a bulk purchaser and using the syrup for captive consumption, constituted a different class of buyer. The Tribunal held that the appellant was justified in charging a lower price to HCR under the proviso to Section 4(1)(a) of the Central Excises and Salt Act, 1944.

3. Related Person Definition:
The Tribunal examined whether HCR could be considered a "related person" under Section 4(3)(c) of the Act. It was determined that there was no evidence to show that HCR was related to the appellant. HCR did not market the syrup to others but used it in McDonald's restaurants, and thus could not be termed a distributor or sub-distributor of the appellant.

4. Extraneous Consideration:
The Department argued that the lower price charged to HCR was due to an international business tie-up between McDonald's and Coca Cola, the parent company of the appellant. The Tribunal found no evidence of any extraneous arrangement or consideration that would justify the lower price as an attempt to evade excise duty. The Tribunal concluded that the lower price was due to HCR being a bulk purchaser.

5. Applicability of Proviso to Section 4(1)(a) of Central Excises and Salt Act, 1944:
The Tribunal referred to the proviso which allows different prices for different classes of buyers if the buyer is not related and there is no extraneous consideration. The Tribunal found that HCR was a different class of buyer and that the appellant was within its rights to charge a lower price and pay excise duty on that transaction value. The Tribunal also dismissed the Department's reliance on the Supreme Court judgment in the TISCO case, noting that the appellant had adequately demonstrated that HCR was a different class of buyer.

Conclusion:
The Tribunal concluded that the impugned order of the Commissioner (Appeals) was based on an incorrect appreciation of facts and law. The appeal was accepted, and the impugned order was set aside, validating the appellant's practice of charging a lower price to HCR and paying excise duty on that basis.