Invoice-price exemption fails where buyer relationship influences price, and review cannot enlarge duty demand or impose penalty.

Invoice-price exemption under Notification No. 120/75-C.E. was unavailable where the price was influenced by a commercial or financial relationship between manufacturer and buyer; bulk clearances, interest-free finance, and buyer-imposed conditions on marketing and manufacture showed the arrangement was not an ordinary buyer-seller transaction. Review powers under Section 35A could not be used to enlarge the duty demand beyond the period covered by the original show cause notice, nor to impose penalty when no penal provision had been invoked in that notice. The demand was sustainable only within the notice period, and the penalty was set aside.

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Issues: (i) whether the assessee was entitled to the benefit of Notification No. 120/75-C.E. dated 30-4-1975 in respect of the goods cleared to its buyer; and (ii) whether, in exercise of review powers, the demand could be enlarged beyond the period covered by the original notice and penalty could be imposed though no penal provision had been invoked in that notice.

Issue (i): whether the assessee was entitled to the benefit of Notification No. 120/75-C.E. dated 30-4-1975 in respect of the goods cleared to its buyer.

Analysis: The notification permitted assessment on the basis of invoice price only where that price was not influenced by any commercial, financial or other relationship between manufacturer and buyer. The record showed that the bulk of the production was cleared to the buyer, that interest-free finance had been provided, and that the buyer had imposed conditions touching marketing and manufacturing matters. These circumstances established that the invoiced price was influenced by a relationship going beyond an ordinary buyer-seller arrangement, so the condition in the notification was not satisfied.

Conclusion: The assessee was not entitled to the benefit of Notification No. 120/75-C.E. dated 30-4-1975.

Issue (ii): whether, in exercise of review powers, the demand could be enlarged beyond the period covered by the original notice and penalty could be imposed though no penal provision had been invoked in that notice.

Analysis: Review under Section 35A of the Central Excise Act was confined to the correctness, legality, or propriety of the decision originally made and did not authorise expansion of the demand beyond the period covered by the show cause notice. The same provision also did not permit introduction of penal consequences when the original notice had not invoked any penal provision. Accordingly, the demand could stand only for the period covered by the notice and the penalty could not be sustained.

Conclusion: The enlarged demand was unsustainable and the penalty was set aside.

Final Conclusion: The assessee lost on eligibility to the exemption notification, but succeeded on the limited scope of the review notice and on penalty, resulting in only partial sustenance of the duty demand.

Ratio Decidendi: An exemption based on invoice price is unavailable where the price is influenced by commercial or financial relationship between manufacturer and buyer, and review powers cannot be used to enlarge the original demand period or impose penalty beyond the scope of the notice.

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