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TMI Blog2022 (5) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... if only 1% of the goods are sold as per the value under section 4(1) (a), such price shall be deemed to be the value for all clearances by the assessee. A shrewd assessee can sell a small quantity of the goods at a relatively lower price to independent buyers at the factory gate fulfilling all the conditions required under section 4(1)(a) and the rest through other methods. Once the 4(1)(a) price is available, other sale prices do not matter. According to the Revenue the Commissioner has wrongly recorded that there is a factory gate price, while according to the assessee, there was a price under section 4(1)(a). Further, according to the Revenue, during the material time, the appellant sold goods from the factory gate only to four categories of persons viz., individuals, company employees, Jaipur and Bikaner Trading Company and Public Sector Undertakings. Of these, only seconds/rejects were sold to individuals and company employees and therefore, their price cannot be treated as normal wholesale value in the course of wholesale trade - The sale to Bikaner and Jaipur Trading Company was a negotiated contract price, who, therefore, constitutes a class of buyer by itself. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the prices at which the goods were sold from the depots cannot be sustained. Consequently, the imposition of penalty also cannot be sustained. Extended period of limitation - HELD THAT:- There are no elements necessary to invoke extended period of limitation of five years viz., fraud, collusion, wilful misstatement or suppression of facts or violation of provisions of the Act or Rules with an intent to evade payment of duty, since the assessee filed the price declarations as per its understanding. The mere fact that the Revenue has taken a different view about the value cannot be a ground to invoke extended period of limitation. Appeal dismissed - decided against Revenue. - E/901/2008 & E/926/2008 - FINAL ORDER Nos. 30059-30060/2022 - Dated:- 9-5-2022 - MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) AND MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) Shri A.V.L.N. Chary, Authorised Representative for the Revenue Ms. L. Maithili, Advocate for the Assessee. ORDER These two appeals are filed by the Revenue and M/s. Bakelite Hylam Ltd. [ Assessee ] assailing the Order in Original dated 12-09- 2008 [ Impugned order ] passed by the Commissioner of Central Excise an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, section 4 mandated that the value shall be the normal price , that is to say, the price at which such goods are sold in the course of wholesale trade for delivery at the time and place of removal, i.e., the factory gate price. If the normal price cannot be determined in this manner, the Central Excise Valuation Rules provided for determination of the value. The assessee was required to file with the jurisdictional Assistant Commissioner a declaration of the goods being manufactured under Rule 173B and a Price List under Rule 173 C of Central Excise Rules, 1944 [ Excise Rules ] for approval. Section 4 of the Act and Rule 173B and 173C of the Excise Rules are reproduced below: 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 value, such value shall, subject to the other provisions of this section, be deemed to be- (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent; (b) place of removal means- (i) a factory or any other place or premises of production or manufacture of the excisable goods; or (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed; (c) related person means a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the assessee, and any sub- distributor of such distributor. Explanation.- In this clause holding company , subsidiary company and relative have the same meanings as in the Companies Act, 1956 ; (1 of 1956 ) (d) value , in relation to any excisable goods,- (i) where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. Explanation.- In this sub- clause, packing means the wrapper, container, bobbin, pirn, spool, reel or warp beam or any other thing in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) all the excisable goods already deposited or likely to be deposited from time to time without payment of duty in his warehouse; (b) the Chapter, heading No. and sub-heading No., if any, of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) under which each goods fall; (c) the rate of duty leviable on each such goods; (d) the exemption notification availed or proposed to be availed, if any; and (e) such other particulars as the Commissioner may direct, and obtain a dated acknowledgement of the said declaration: Provided that such declaration shall be filed on or before the 15th May, 1995 or such extended period as the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise may permit: Provided further that an assessee producing or manufacturing excisable goods for the first time shall be required to submit the said declaration within thirty days of commencing the production of such excisable goods. (2) If in the declaration so filed under sub-rule (1), any alteration becomes necessary in respect of any goods because of- (a) the assessee commencing production, manufacture or warehousing of goods not mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the date and time of removal of the goods: Provided further that where an assessee,- (i) sells goods to or through related persons as defined in section 4 of the Act; or (ii) uses such goods for manufacture or production of other goods in his factory; or (iii) removes such goods for free distribution; or (iv) removes such goods in any other manner which does not involve sale; or (v) removes goods of the same kind and quality from his factories located in the jurisdiction of different Commissioners of Central Excise or Assistant Commissioners of Central Excise or Deputy Commissioner of Central Excise he shall file, with the proper officer a declaration, in such form and in such manner and at such interval as the Central Board of Excise and Customs or Commissioner of Central Excise may require, declaring the value of the goods under section 4 of the Act, the duty and other elements constituting the price of such goods along with such other particulars as the Central Board of Excise and Customs or the Commissioner of Central Excise may specify. (2) The assessee shall certify in each such document that the amount indicated in such document represents the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teps to ensure that appropriate duty on the said inputs or capital goods has been paid as indicated in the invoice or any other document approved under these rules evidencing the payment of excise duty or the countervailing duty, as the case may be, accompanying thereof, or takes credit of duty or money which he knows or which he has reason to believe, is not permissible under these rules, or does not utilise the inputs or capital goods in the manner provided for in these rules, or utilises credit of duty or money in respect of inputs or capital goods in contravention of any of the provisions of these rules, or does not render proper and true account of the receipt and disposal of the said inputs or capital goods and the credit of duty or money taken thereon as required under these rules, or contravenes any of the provisions contained in Section AA or AAA of Chapter V of these rules; or (bbb) enters wilfully any wrong or incorrect particulars in the invoice issued for the excisable goods dealt by him with intent to facilitate the buyer to avail of credit of the duty of excise or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975) in respect of such g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative laminates which were subject to excise duty on ad valorem basis and that it had filed the price declarations under Rule 173C of the Excise Rules with the jurisdictional authorities. The assessee sold the goods on wholesale from the factory gate and also sold goods from its depots and bulk of the sales were from depots. According to the assessee they have a genuine factory gate price which must be reckoned as the normal price for valuation as per Section 4(1) (a). According to the Revenue, the duty must be determined as per the price at which the assessee sold goods from its depots with some deductions as admissible. 8. A Show Cause Notice [ SCN ] dated 31.1.1996 was issued invoking extended period of limitation covering the period 1991 to 1995 proposing to recover differential duty of Rs. 2,82,58,708/- under section 11A and also proposing to impose a penalty under Rule 173Q of the Excise Rules. It culminated in the Order in Original dated 29.12.1997 being passed by the Commissioner. Another order in original dated 29.5.1998 was passed by the Assistant Commissioner which was upheld by the Commissioner (Appeals) by his order dated 31.12.2003. Assessee s appeals against bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Commissioner held that there was genuine factory gate price but confirmed the demand. According to the Revenue, the finding of the Commissioner in the impugned order that there was a genuine factory gate price was not correct but the confirmation was correct. The demand should have been confirmed holding that there was no genuine factory gate price. The grounds on which Revenue asserts that there was no genuine factory gate price is in paragraphs 7.1 to 7.9 of its appeal which are reproduced below: 7.1 Whereas, the assessee s contention is that a normal wholesale price exists at the factory gate and that the same is applicable for payment of duty on the goods cleared to their Depots, from the evidence brought forth in the show cause notice, it is clear that there did not exist any genuine factory gate sales that satisfy the norms prescribed in Section 4(1)(a) of the Act. 7.2. Clause (a) of sub-section (1) of Section 4 of the Central Excise Act, 1944. stipulates that a price, in order to be acceptable as assessable value under the said clause, shall satisfy the following conditions (a) It should be the price at which such goods are ordinarily sold by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als 2) Company Employees 3) M/s Jaipur and Bikaner Trading company and 4) Public SectorUndertakings. 7.4.1 In the case of sales to Individuals and Company Employees, the goods are meant for personal consumption and in respect of sale of 'seconds / rejects' to Company Employees, the goods are also of inferior quality and the price at which such sales were effected cannot be treated as the normal wholesale value in the ordinary course of business. 7.4.2 Employees of M/s BHL have deposed, inter-alia, as extracted in para 8.3 above, that they do not generally undertake retail sale; that they supplied material to a few customers at a negotiated contract price at the factory gate and that the goods are mostly sold through their Depots. M/s Jaipur and Bikaneer Trading Co is one such buyer to whom the goods have been supplied at a negotiated contract price . Therefore, it appears that M/s Jaipur and Bikaneer Trading Company, being a contractual buyer, constitutes a class by itself and the price charged from such buyer is applicable to them only as per proviso (i) to section 4(1)(a) referred above, and such price cannot be adopted for the goods sold to other buyers at Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be mentioned that the show cause notice did not merely indicate the low percentage of factory gate sales, it also spelt out in detail the nature of such sales and why such sales cannot be treated as the normal wholesale price at the factory gate. Further, it was also alleged in the show cause notice that in respect of the limited sales effected by the assessee at the factory gate, the price has been kept artificially low in order to derive undue advantage of adopting the same price for payment of duty on the goods cleared to Depots, even though such goods are actually sold at much higher prices at the Depots. Thus, following the ratio of the decisions of the Tribunal in the aforesaid cases, the ex-factory price claimed by the assessee is liable to be rejected. However, in his Order, the Commissioner has arrived at an incorrect finding that the ex-factory price is acceptable. 7.8. Even though the assessee has contended that Depot prices are not relevant for determination of the assessable value of the goods since they have an established factory gate price, the fact remains that they have collected and have received amounts in the guise of Delivery Charges. When the departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 173Q? 9. We find that Section 4(1) of the Act as applicable during the relevant period does not levy excise duty on the price but on the value and such value shall be a deemed value. If there is a normal price as per Section 4(1)(a), it shall be the deemed value, else it shall be the value determined as per 4(1)(b). Thus, as long as there is price under section 4(1)(a), it will be the value for determining the excise duty and not any other price or transaction value. The proportion of the goods sold under 4(1)(a) to the total sales is irrelevant. For instance, even if only 1% of the goods are sold as per the value under section 4(1) (a), such price shall be deemed to be the value for all clearances by the assessee. The value under section 4(1) (a) and its proviso is subject to the following conditions: a) that it is in the course of wholesale trade; b) it is at the time and place of removal, i.e., at the factory gate; c) to persons who are not related; d) where price is the sole consideration for sale; e) if the goods are not sold except to or through a related person, then the price at which the related person sells the goods shall be the normal price; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent periods covered in the present dispute as follows: a) Ex-factory dispatches of decorative laminates for April 1990 to March 1991 b) a) Ex-factory dispatches of decorative laminates for April 1991 to March 1992 c) a) Ex-factory dispatches of decorative laminates for April 1992 to March 1993 d) a) Ex-factory dispatches of decorative laminates for April 1993 to March 1994 e) a) Ex-factory dispatches of decorative laminates for April 1994 to March 1995 14. Each of these ledgers covers a very large number of buyers to whom the assessee sold goods at factory gate. These details have been summarised by the learned counsel in her written submissions as follows: Buyer group 1990-91 1991-92 1992-93 1993-94 1994-95 Dealers 78 66 69 83 56 Actual user companies 5 5 4 1 3 PSUs 8 2 2 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ledgers produced before us by the assessee and lack of any contrary evidence on behalf of the Revenue. The mere fact that some statements were made before the officers by the employees and functionaries of the assessee will not advance the case of the Revenue when such statements are contrary to the evidence available on records. 18. The last question to be answered is whether the Commissioner was correct in confirming the demand after holding that there was a genuine factory gate price for the goods. As discussed above, as per Section 4 of the Act, as applicable during the relevant periods, value is deemed to be the normal price, i.e., the price under section 4(1)(a). The actual price at which the goods are sold in different invoices and to different buyers is irrelevant. It is also irrelevant as to what percentage of goods were sold at the factory gate price. Once the factory gate price was available under section 4(1)(a), it shall be the value. The confirmation of demand based on the prices at which the goods were sold from the depots cannot be sustained. Consequently, the imposition of penalty also cannot be sustained. 19. Although we have decided the matter on merit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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