ADDISON AND CO. Vs. CCE

JUDGEMENT

(1.) THIS appeal arises from the order in appeal No. 187/94(M) dated 23.8.1994 passed by the Collector of Central Excise (Appeals), Chennai confirming duty demand of Rs. 2,15,447.67 against the appellants under Rule 9 of the Central Excise Rules, 1944 besides imposing penalty of Rs. 2000/ - on them under Rule 173Q of the said Rules.

(2.) THE facts in brief are that the appellants who are manufacturers of Tools' falling under heading 8207.00 of the schedule to the CET Act, 1985 has filed price? -list bearing No. 6/92 -93 dated 31.3.1992 under Part I for a consignment comprising of 15,744 units for supply to one M/s. Best Drill Centre in which assessable value was indicated as Rs. 4,81,338/ -. The Assistant Collector had accorded provisional approval to the said price list. Later the jurisdictional range officer served a show cause notice on the appellants proposing to revise the assessable value to Rs. 24,09,333/ - being the earlier assessable value as per the approved price lists with consequential differential duty demand of Rs. 2,51,477.61. This was confirmed after adjudication by the Assistant Collector. The contention of the appellants had been that the impugned items slow movers and non -standard which remained unsold for over a year and hence with a view to clearing the goods they offered them in a lot for a sole consideration of Rs. 4,81,338/ -. They contended that they filed price list under part I inadvertently instead of under Part II and that the assessable value indicated by them for approval is the sole consideration for sale. The Assistant Collector took the view that the assessable value of the impugned goods could not be anything other than the value at which the products are normally sold. He further opined that unless the product is proved to be either sub -standard, deteriorated or scrap, there can be no reason for lowering the value. Appellants had relied upon several case laws before the Collector (Appeals) who did not agree with them and distinguished the judgements which were cited. The Collector (Appeals) rejected the plea of the appellants for lowering the price of the slow movers on the ground that the price charged by the assessee being the sole consideration is only the determinative factor for according approval of the price lists. He held that if these arguments were to be accepted, even abnormally low price charged or free gifts have to be accepted for the purpose of levy of duty. He has noted that the provisions of Section 4(1)(a) lay down that the normal price should be the price at which the said goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade are quite relevant to decide this particular valuation dispute. He has noted that in this case there was an approved price list and there is no provision under Section 4 by which a very low price can be accepted merely for the reason that the goods are slow movers. Therefore, the plea for accepting their price list for sale in a lot for sale of Rs. 4,81,338/ - was not accepted by the department. He also rejected the plea of not filing the price list under part II on the ground that part II price list is applicable to cases for excisable goods for sale to class of buyers under Section 4(a) proviso (i) of the Central Excise Act, 1944. He noted that in order to file price list under Part II for approval, it is the responsibility of the assessee to prove that the impugned buyer in this case belongs to special class of buyer. He noted that the buyer in the present case is M/s. Best Drill Centre, a dealer and the impugned goods were not sold to any other dealer for the same price. He noted that in order to constitute a class of buyers there should be some distinguishing factors, like the region in which such buyers are situated, be they wholesale dealers or industrial consumers.

(3.) SHRI Krishna Srinivasan, learned Counsel for the appellants argued that there was no bar under Section 4 to sell the goods which are 'slow movers' and non -standard which remained unsold for over a year to a particular class of buyer who would buy such goods which have lost marketability. The buyer being a different class by himself is buying as the same is being sold in a lot and being industrial buyer, who utilise the items for his use would be a class by himself and he cannot be equated with other buyers, who purchase goods when goods had value and market. He submitted that the price list can be revised and subsequent filing of the part II price list by the said buyer is required to be accepted. The view was taken by the Tribunal in the case of Castrol India Ltd. v. CCE as wherein the Tribunal has held that sale being made to industrial consumer and the Tribunal accepted the price which has been offered as negotiated with the customer and after finalisation of the price, the appellants having filed the price list under part II and claimed assessment at lower price should be accepted. The reasons given is that substantive benefit provided under law cannot be denied so long as it can be shown that the parameters which entitled the assessment under Section 4(1)(b) are satisfied. The Tribunal held that the sale being to industrial consumer and so long as it can be shown by the appellant that the sale was in the normal course of business the lower price agreed to for sale between the appellants and the consumer would be acceptable. The learned Counsel further relied upon the judgement of the Tribunal in the case of DCW Ltd. v. CCE as wherein also similar view was expressed that industrial consumers are a class of buyers and factory gate price approved under Part II price list in respect of industrial consumers which are class of buyers are deemed to be normal price. He pointed out that a wholesale buyer can be a class of buyer himself and there can be separate lower price for outstation dealers and local dealers and price can be fixed for separate consideration to meet local competition in regions by providing for freight and local tax element. He also relied upon the judgement in the case of Gora Mai Hari Ram Ltd. v. CCE as in support of his plea. In this judgement, it is held that it is an accepted proposition that local and outstation wholesale dealers are treated as different classes of buyers when differentia based on valid commercial reasons. The Tribunal has examined a large number of judgements to arrive at this conclusion. This decision was also followed by the Tribunal in the case of CCE v. Dharampal Satyapal Ltd. as . He further relied upon the judgement in the case of Ind -Sphinx Precision Pvt. Ltd. v. CCE as reported in 1994 (5) RLT 99 (CEGAT -A). In this case, the Tribunal has relied upon several earlier judgements and has also held that there could be different class of buyers viz. industrial consumers would form one class and there can be more than one normal price. It also held that trade discount cannot be denied on the mere ground of non -uniformity and there is no such condition to be read into Section 4 as the word "trade discount" not qualified for the word "uniform". It has been held that trade discount is bound to vary if some dealers take guarantee purchasing larger quantities. It has been held that percentage can be different for various reasons such as (i) status of the buyer (ii) class of buyer (iii) quantity of the goods sold (iv) favourable or unfavourable market conditions in a particular region or at a particular point of time (v) financial crisis (vi) cut throat competition (vii) introduction of a product in a new region. It has been held that whatever may be reason for allowing different trade discount their variation must be based on commercial transaction. The Tribunal held that different rates of trade discount are permissible so long as lack of uniformity is not found on any extra commercial consideration. The learned Counsel also relied upon the case of Ester Industries Limited v. CCE as wherein it has been held that price for sale at factory gate being available for certain varieties of polyester film, ex -depot price of identical goods even if higher is not to be taken into consideration. In this case the Tribunal relied upon the judgement of the Hon'ble Supreme Court in the case of Indian Oxygen Ltd. v. CCE as and it has been held wholesale ex -factory price cannot be rejected simply because higher price exists for consumers of a particular class of buyers unless buyer is a related person or consideration flowing back from purchaser to manufacturer. He also relied upon the judgement in the case of Shriram Food Fertilizers Ltd. v. CCE as wherein based on the earlier judgements, the Tribunal held that the wholesale dealers in each zone can in the facts and circumstances of the case be considered as different classes of buyers and the Tribunal relied upon the judgement of the Hon'ble Delhi High Court in the case of Indian Rayon Industries v. CCE as .