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TMI Blog2019 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order by the lower authorities reveal that the distributors have been appointed to facilitate smooth transit of the goods from the factory of the appellant to the location of the govt. authorities where the orders are placed pursuant to the rate contract entered into between the appellant and the govt. authorities. The distributors are not free to affix the price on the packages nor they can in any manner independently deal with the said goods. Therefore, the Revenue’s argument is that the transaction between the Appellant and the distributors are only on paper, which has been admitted also during the course of investigation by the distributors stating that the transaction is only on paper and the difference of price is their margin which attributes to various expenses. This Tribunal has already considered more or less similar facts and circumstances in Bright Drugs Industries Ltd.’s case [2016 (7) TMI 298 - CESTAT NEW DELHI]. In the said case, M/s Bright Drug Industries Ltd. was engaged in the manufacture of pharmaceuticals product and P&P medicaments, entered into rate contract with the Maharashtra Govt. as also with some other govt. agencies for supply of medicaments on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Customs (Appeals), Nagpur. 2. Briefly stated the facts of the case are that the appellants are engaged in the manufacture of various pharmaceutical products and P P Medicaments falling under Chapter 34.03 of Central Excise Tariff Act, 1985. During the relevant period i.e. from 1999 to 2005, they have manufactured various medicines and supplied against rate contract to Government Hospitals, Govt. agencies and District authorities. On the basis of intelligence and subsequent investigation, it was alleged by the Department that the medicines manufactured by them are exclusively sold to Govt. authorities putting a mark on packages For Govt. Supply Only , Not for Sale against rate contract, but excise duty was paid on the transaction value with their distributors, who in turn, supply the said medicines to hospitals at the rate approved by the Govt. authorities. Also, it revealed during the course of investigation that even though there was increase in the price of the medicines subsequent to levy of excise duty and thereafter increase of rate of duty during the relevant period, the appellant though collected duty in excess that was paid to the Govt. but failed to deposit the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dealers margin was considered as commission then the same should be taken as trade discount and admissible as deduction from the selling price. Further, he has submitted that the transaction between the appellant and the distributors are on principal to principal basis and the distributors are not agent of the appellant. The distributors income was equal to the difference between the price on which they purchased the medicines from the appellant and the price at which they sell the medicines to the Govt. The margin money is retained by the distributors and there is no evidence of any flow back of money from the distributor to the appellant. He has further submitted that clause 7.10 of the rate contract has been mis-interpreted as in the said clause, it stipulates that the appellant cannot sale to any Govt. institution or public sector consumer or local authorities in the Maharashtra State below the rate accepted to mean that no distributor could have been appointed by the appellant. However, reading clause 2.8 of the said rate contract along with veracity clause, it could be stated that the only contract restriction that sale could not be made to a Govt. institution or public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustainable in law. Besides there is no suppression of facts with intention to evade payment of duty, hence penalty also is not attracted. 8. The learned Advocate further submitted that since the issue involved in the present case involves interpretation of valuation provisions and there is no evidence to establish that the second appellant Mr. Sangthani has knowingly dealt with the goods liable for confiscation. Therefore, imposition of penalty under Rule 26 of the Central Excise Rules, 2002 is perverse and bad in law. 9. Per contra, learned AR Shri N.N. Prabhudesai for the Revenue has submitted that the investigation against the appellant revealed that they were supplying the medicines on rate contract to Govt. Institutions and Govt. Hospitals etc. through rate contract approved by the Govt. authorities by calling tender from manufacturer of the medicines. As per approved rates under the contract, the quantities mentioned in the tender were procured from the manufacturer against the approved rate by mentioning the rate contract number and specifying the period for which the supply was required. Every rate contract had its validity period for supply. The supply has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly/sale of the medicines to the Govt. But, while raising the excise invoices, the prices mentioned by the appellant is less than the contractual rate contract price for supply/sale of the product than agreed between them and the Govt. The appellant has issued an authorization in favour of the distributors to raise invoices for and on their behalf and to collect the amount of the medicines sold and supplied by the appellant to the govt. authorities. This indicates that all the goods were carried out by intermediate distributors on behalf of the appellant. Further, referring to the definition of the transaction value prescribed under Section 4(3)(d) of Central Excise Act, 1944, he has submitted that amount paid or payable to any person by the assessee or to a person on behalf of the assessee, the amount so paid or payable will be the transaction value. He has vehemently argued that what is relevant in the said provision is that the amount paid or payable for the goods and in the present case, the payable amount is fixed as per the rate contract. The statements of various persons recorded by the Department confirm the fact that the distributors are on paper only and their role is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the price charged by the appellant to the distributors, who in turn, supplied/delivered the medicines to the Govt. authorities, Agencies against the rate contract be considered as the transaction value. Revenue, on the other hand, argued that the transaction value between the appellant and the distributors is not the true transaction value but on paper only, since the appellants as per the tender floated by the Govt. authorities are required to supply the goods against rate fixed in the said tender. 12. Before analyzing the arguments advanced by both sides, it is necessary to reproduce the relevant provisions of Section 4 of the Central Excise Act dealing with valuation of goods, which reads as under: - SECTION 4. Valuation of excisable goods for purposes of charging of duty of excise:- (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h some other govt. agencies for supply of medicaments on an agreed price in response to the tender floated by the said govt. agencies. Medicaments were required to be floated by the appellants, which were clearly to be marked as Govt. supply only and Not for Sale . In these circumstances, analyzing the price charged by the Bright Drugs Industries to the distributors, this Tribunal observed as follows: - 8. The issue required to be decided in the present case is as to whether the clearance of goods by M/s. BDIL to M/s. Anupam for further despatch of the same to the Government authorities in terms of the contract entered into between M/s. BDIL and Government agencies, would attract duty at the value at which the goods were sold by the appellant to M/s. Anupam or given in the peculiar facts and circumstances of the case, the duty is required to be paid at the contracted value. Admittedly, the rate contract is between M/s. BDIL and the State of Maharashtra for supply of the medicines manufactured by them at a contracted price. Such medicines also have the stamp to the effect that the same have been specifically manufactured for supply to Government departments and it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the part of the goods which stand directly supplied by the manufacturer to the Government hospital having been assessed at the contracted price, a part of the goods in respect of the same very contract cannot be allowed to be assessed on a different assessable value merely because the appellant have roped in an intermediary agency in between. As such we find no infirmity in the views adopted by the authorities below and hold that the appellant were required to discharge the duty liability at the contracted price in respect of the goods supplied by them to the Government hospitals, either directly or through M/s. Anupam. 15. We also are of the view that the price charged by the appellant to the distributor cannot be considered as true transaction value within the scope of the definition of transaction value, therefore, the price at which the goods were ultimately sold/supplied to the govt. agencies against rate contract be the correct transaction value and duty is required to be paid on the same. 16. The appellant has also contended that the demand is barred by limitation, inasmuch as department was well aware of the fact that the appellant had been supplying the medicines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected. from the buyer to be deposited with the Central Government.- (1) Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, [every person who is liable to pay duty under this Act or the rules made thereunder, and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under this Act or the rules made thereunder from the buyer of such goods] in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government 18. A plain reading of the said provision reveals that a person who is liable to pay duty and has collected any excess amount than the amount assessed as duty from the buyer representing as duty of excise, then such excess amount so collected be deposited with government. In the present case we do not find any such circumstances present. Moreover this issue has also been dealt with by this Tribunal in Bright Drugs Industries Ltd. case. This Tribunal observed as follows: - 13. Admittedly, there was a revision on account of incre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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