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TMI Blog2005 (4) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... t-Collector is, therefore, liable to be set aside. The assessable value on which the duty has been paid by the appellants, in the present case, even in respect of transactions with Syndet in Uttar Pradesh is higher than the approved assessable value for Okhla factory of Syndet and this itself proves the bona fide of the appellant and the genuineness of the price particularly when the goods are only 'Fena' brand sold practically to the same dealers. This issue, therefore, is no longer res integra and, therefore, the Collector could not have confirmed the demand under Section 4(1)(b) of the Act when there are significant sales at the factory gate to the independent buyers throughout India. It is not permissible on the part of the CEGAT to change the basis of the demand since the assessee was asked to show cause only in relation to applicability of Section 4(1)(b) of the Act. Thus the appellate Tribunal remanded the matter for quantification of duty demand. - 5854 of 1999 - - - Dated:- 26-4-2005 - S.N. Variava, Dr. A.R. Lakshmanan and S.H. Kapadia, JJ. [Judgment per : A.R. Lakshmanan, J.]. - This appeal is preferred against the Final Order of the Customs Excise Gold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sales made by the appellants to Syndet. 5.The appellants had earlier filed two sets of price lists, one in respect of the sales effected to dealers in all the States other than the State of Uttar Pradesh and the other in respect of sales effected to Syndet in Uttar Pradesh. In this price list for sales in Uttar Pradesh, the resale price of Syndet was declared as the assessable value for payment of excise duty, since the Department was treating Syndet as related to the appellants. These price lists were provisionally approved by the Department. Based on the circular issued by the C.B.E. C, show cause notices were issued by the Department all relating to price lists filed before 4-10-1991 proposing to take the highest price at which the goods are sold by the appellants which incidently happened to be the price at which the goods are sold in Uttar Pradesh where appellants' related person effects sales to dealers. The appellants filed a single price list in Part-I under Section 4(1)(a) of the Act in respect of their sales made to independent dealers based on the sale price charged to these dealers. Price list also covered sales in Uttar Pradesh made to Syndet. Excise duty was pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is also not invokable in the present case and hence order of the appellate Tribunal on this score is unsustainable. 9.While elaborating the above submissions, learned counsel appearing for the appellants, invited our attention to the relevant portions of the Tribunal's order, the order of the Commissioner and other related documents, Circulars and Annexures. 10.To appreciate the arguments of the learned counsel, it is beneficial to reproduce Section 4 of the Act : "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 not a related person and the price is the sole consideration for the sale : Provided that - (i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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, prin, spool, reel or wrap beam or any other thing in which or on which the excisable goods are wrapped, contained or wound ; (ii) does not include the amount of the duty of excise, sales tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of comparing price does not arise. According to Mr. A. Subba Rao, Section 4(1)(a) of the Act is not applicable as there is no comparable sale price available for independent buyers as in Uttar Pradesh no sale has been effected directly to dealers and the entire sale has been effected through SCIL who has been held as related to the appellant. He would further submit that if the goods have not been genuinely offered to all other dealers at the same price then it would be reasonable to conclude that the price under Section 4(1)(a) of the Act main clause cannot be determined. Therefore, when no goods have been offered for sale to any person nor supplied in Uttar Pradesh except to Syndet then the wholesale price charged at the depot when the goods enter the wholesale market for the first time, would be the normal price under Section 4(1)(b) of the Act read with Rules 7 5 of the Central Excise Valuation Rules, 1975. 12.Mr. Subba Rao further submitted that though the circulars are binding on the Department once that part of the Circular which is relevant for the purpose of this case is declared as invalid by the Delhi High Court in the case of Indian Rayon Industries Ltd. v. Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal reveals this position : "The adjudicating authority ordered the assessment of the goods sold in the State of Uttar Pradesh through SCIL on the basis of the prices charged by SCIL from the wholesale buyers in U.P. The prices charged by the SCIL from the stockists/distributors in U.P. were taken to be the normal prices for determining the assessable value and for levying the central excise duty after giving the benefit of admissible deductions." 16.The appellate Tribunal, by the impugned order, has upheld the order of the respondent-Collector, however, on a totally new and different basis which was never the case of the Department either in the show cause notice or in the impugned order. The appellate Tribunal, in the impugned order, has held as under : "All the wholesale dealers and all the wholesale buyers in the whole of the country would not be taken to form a single class of buyers. M/s. SACI and SCIL were related persons. M/s. SACI sold their goods in the State of U.P. through SCIL and no direct sales were effected by SACI in the State of U.P. Seen in the light of the Tribunal's decision in the case of Goramal Hari Ram Ltd., the prices at which SCIL were disposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the requirements of Section 4(1)(a) of the Act is available and there is no dispute on this factual position. About 35% of the production of the goods is sold by the appellants to independent and unrelated dealers spread through the country other than in Uttar Pradesh. There is no dispute raised by the Central Excise Department with regard to these sales. Appellants' sale price to these independent dealers duly satisfy the requirements of Section 4(1)(a) of the Act in every respect and there is no dispute on this factual position. In respect of these sales to independent dealers located other than in U.P., appellants have paid excise duty based on their sale price to these dealers. This factual position is not disputed by the respondent. It was argued that once such a wholesale price to an unrelated buyer satisfying the requirements of Section 4(1)(a) of the Act is available, then that price alone should be treated as the normal price in respect of all the sales made by the appellants including the sales made to related persons. In other words, where sales are made by the assessee to wholesale buyers who are unrelated and also to buyers who are related, then the price to unrelat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t users in the public cannot be called a wholesale sale. It was a retail sale, as already held by this Tribunal in the case of M/s. Escorts Ltd. aforesaid. Before a resort is made to the retail price, we have to see whether some other basis of assessment, which in law has precedence over retail price assessment under the Valuation Rules, is available or not. We find that there were two sets of wholesale sales available in this case. The first was to M/s. Enfield Sales Ltd. They were admittedly a 'related person' of the respondents, and, therefore, the respondent's sale price to them was not acceptable. The other set of wholesale sales was to about 150-200 dealers all over India outside Tamil Nadu. The Department has now shown us anything wrong with these sales except saying that they constituted the minority sales. But 20.1% is not an insignificant quantity. Even though it was the minority sale, it becomes important because the rest of the sales were either retail sales or they were sales made to a 'related person'. There is nothing to show that if the dealers outside Tamil Nadu wanted to buy more Motor-Cycles, larger quantities would not have been available to them. We hold that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Customs and submitted that the Revenue is bound by the circulars issued by it and cannot contend to the contrary. Therefore, in view of the circular, third proviso to Section 4(1)(a) of the Act is not invokable in the present case. In this view of the matter, the argument advanced by Mr. A Subba Rao, learned counsel appearing for the respondent, has no merits. 26.As a matter of fact, the Tribunal, by its order, has not questioned the genuineness of the sale between the appellants and Syndet. The appellants submitted before the Tribunal and also before the Collector that the depot of Syndet was existing right from 1976 and it was not created only after the appellants started selling the products to Syndet in 1990. The appellants, in support of this submissions, also filed affidavits of dealers, transporters, employees of Syndet. The Tribunal having accepted the sale as a genuine sale and having accepted that price to independent dealers is available under Section 4(1)(a) of the Act, the appellate Tribunal ought not to have rejected the submission of the appellants regarding the acceptance of price to independent dealers for sales to Syndet also. As could be seen from the recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly when the assessee sells the goods at different prices to different class of buyers. In the present case, sales to dealers in Uttar Pradesh which is being considered as different class by the Tribunal, is not made by assessee - appellant, SACI, but by Syndet after purchasing the goods from the appellant. Hence, first proviso to Section 4(1)(a) of the Act is wholly inapplicable. The impugned order of the appellate Tribunal which is solely based on the first proviso to Section 4(1)(a) of the Act is, therefore, in our view, cannot be sustained. 28.Our attention was invited to the Circular No. 3/90-C.X. 1, dated 25-1-1990 issued by the Central Board of Excise and Customs (at page 18 of Vol.II of the paper book) taking the view that the wholesale dealers in India cannot be considered as belonging to different classes simply because they are located in different places. This position was again reiterated by the CBEC vide its further Circular No. 24/14/93, dated 31-12-1993. Thus, during the disputed period in question in the present case, the C.B.E. C itself has held that dealers in different regions cannot be treated as different classes of buyers and, therefore, the first proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing value only in respect of sales price to Syndet. Arguing further, Mr. V. Lakshmikumaran, submitted that Section 4(1)(b) of the Act will apply only when Section 4(1)(a) is not applicable. Section 4(1)(b) has already been extracted above. The said section will apply only when goods are sold only through related persons and the normal price at which such goods are resold to unrelated dealers is not ascertainable. Since, the Collector has given a finding that there exists a factory gate price and a substantial percentage of goods are sold as well as to independent dealers throughout India at that uniform price, and the Collector is not disputing that the normal price for such goods is ascertainable at the factory gate, in such an event, recourse to Section 4(1)(b) of the Act is not permissible. These submissions merits acceptance. 31.We have already referred to the judgment of this Court in Union of India v. Kantilal Chunnilal Ors. (supra) which has been followed by the Bombay High Court in the case of Cosmos (India) Rubber Works Pvt. Ltd. Ors. v. Union of India, 1988 (36) E.L.T. 102 (Bom.). The Tribunal has also passed the judgment to the similar effect in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true that in cases where, having regard to the nature of the goods and frequent fluctuations of the price of the goods, an assessee or class of assessee may be allowed to declare price of goods on the basis of the challan and advice note. But those are cases where it is not possible to determine the value in accordance with Section 4. Under Section 4, as it then read, the value of the goods is the normal price, i.e. the price at which the goods are ordinarily sold by an assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal where the buyer is not a related person and the price is the sole consideration for the sale. Thus, if it is found that there is a normal price at which goods are sold at the factory gate then even though earlier the assessee was permitted to clear under rule 173C(11) the re-assessment would be on the basis of the normal price as determined under Section 4. We are unable to accept the submission7. that such an interpretation would negate rule 173C(11). A Rule cannot override or be contrary to a Section. Under Section 4 the normal price has to be the value at which the goods are ordinarily sold. Thus clearly Rule 173C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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