THIRD MEMBER ON REFERENCE : SHRI LAJJA RAM, MEMBER (T) KITPLY INDUSTRIES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE, SHILLONG

JUDGEMENT

(1.) BRIEFLY stated, facts of the case are as follows : -

(2.) LD . Advocate, Shri V. Laxmikumaran for the appellant has submitted that it is apparent that the Commissioner has accepted the assessable value, as approved, at the factory gate. Once the price at the factory gate is ascertainable and has been accepted, question of any additional consideration does not arise. He further submits that once the price under Section 4(1)(a) is available and is not disputed, Revenue does not have the choice to consider the price at Depots/branches, as clearly ruled by the Apex Court in Indian Oxygen (supra). It is also not disputed that Landle has taken all the goods from depots at discounts higher than those available to other buyers/dealers. But this fact he submits, is totally immaterial to the assessable value at the factory gate which is not disputed. All the goods cleared from the factory have invariably paid duty at that undisputed assessable value.

(3.) WE have carefully considered the pleas advanced from both sides on the issue of additional consideration received by the appellant by way of (i) advertisement expenses incurred by Landle and (ii) notional interest on interest -free deposit of Rupees two crores made by Landle. Price is a consideration for sale of the goods. Consideration may be received by the seller of the goods in terms of money or in other forms. When additional consideration, other than that ostensibly paid and received for the goods, is established, price ostensibly received or earlier approved price loses significance and that cannot form the basis of assessable value of goods under Section 4(1)(a). This is built in the terms of Section 4(1)(a) which places a condition on acceptance of the normal price i.e. the price in the course of wholesale trade at which the goods are ordinarily sold by using the expression where price is the sole consideration for sale. When the goods are removed from its factory by a manufacturer to its depot (s) there is no sale of such goods and sale would be effected later from the depot (s). In truth, therefore, no sale -price at the time and place of removal of goods is available for those goods (being removed to depot). But for the purpose of convenience, price available for such (similar) goods had they been sold at the factory gate is taken, because duty is required to be charged in terms of Rule 49 of the Central Excise Rules, 1944 when the goods are removed from the factory. If the goods are subsequently sold at depots, without any additional consideration, that is the end of the matter, because price at the factory gate cannot be said to have been influenced by any additional consideration and price at the factory was the sole consideration for sale. It is in the absence of any allegations, in Indian Oxygen (supra) regarding sales at depots, on additional consideration, that the Apex Court decided that if the price at the factory gate under Section 4(1)(a) is available, one need not go to the price at Depot. But the factual situation in the present case is totally different. There is a subsisting agreement between the appellant and Landle for supply of a minimum quantity of the goods per month at a fixed discount which is admittedly far higher than the discount given to other dealers in consideration of the advertisement and interest -free deposit of rupees two crores. Therefore; price of goods for supply to Landle (though not specifically earmarked as such at the point of removal from factory) is vitiated ab initio at factory gate by virtue of the terms of the said agreement on the ground that the sale -price at the factory gate has not taken into account the additional consideration flowing back to the appellant/manufacturer.