2005 (3) TMI 344 - AT - Central Excise

Tribunal Upholds Factory Gate Prices for Duty Assessment, Rejects Revenue's Arguments

The Tribunal allowed the appeal, rejecting the Revenue's arguments against using factory gate prices for duty assessment. It emphasized the genuineness of ... Valuation (Central Excise) - Class of buyers Issues Involved:1. Appropriateness of factory gate price as the basis for duty assessment.2. Applicability of proviso to Section 4(1)(a) of the Central Excise Act, 1944.3. Allegation of suppression of facts and invocation of the extended period for duty demand.4. Consideration of different classes of buyers under Central Excise law.5. Relevance of Board Circulars and previous judicial decisions.Issue-wise Detailed Analysis:1. Appropriateness of Factory Gate Price as the Basis for Duty Assessment:The appellants argued that the price lists filed and approved by the jurisdictional officer established the factory gate price under Section 4(1)(a) of the Central Excise Act, 1944. They contended that once the factory gate price is established, it should form the basis for duty assessment, even for goods stock transferred to area sales offices and sold to dealers. This argument was supported by several case laws, including Indian Oxygen Ltd. v. CCE and DCM Ltd. v. Union of India. The Tribunal agreed, noting that the factory gate price is genuine and that the Revenue did not demand differential duty for factory gate sales, indicating acceptance of the factory gate price.2. Applicability of Proviso to Section 4(1)(a) of the Central Excise Act, 1944:The adjudicating authority held that the factory gate price could not be applied to goods stock transferred to area sales offices due to the small percentage of factory gate sales, the absence of certain models at the factory gate, and the nature of sales as retail rather than wholesale. The appellants countered that these factors do not affect the genuineness of the factory gate price. The Tribunal concurred, stating that the proviso to Section 4(1)(a) would only apply if goods were sold at different prices to different classes of buyers from the place of removal. Since the sales from area sales offices did not meet these criteria, the proviso was deemed inapplicable.3. Allegation of Suppression of Facts and Invocation of the Extended Period for Duty Demand:The appellants argued that their marketing pattern was well-known to the Department, as evidenced by extensive correspondence since 1975. They contended that there was no suppression of facts, and thus, the extended period for duty demand under the proviso to Section 11A could not be invoked. The Tribunal found merit in this argument, noting that the Department was aware of the appellants' sales practices and that the Board's Circular dated 25-1-1990 supported the use of factory gate prices for goods transferred to depots.4. Consideration of Different Classes of Buyers under Central Excise Law:The Revenue argued that dealers purchasing from different area sales offices constituted distinct classes of buyers, necessitating different assessable values. The appellants refuted this, stating that the terms and conditions of sale to all dealers were the same and that price differences were due to transportation and depot expenses. The Tribunal agreed with the appellants, citing the Supreme Court's decision in CCE v. TISCO Ltd. and the Tribunal's decision in TELCO Ltd. v. CCE, which clarified that such expenses do not create different classes of buyers under Central Excise law.5. Relevance of Board Circulars and Previous Judicial Decisions:The appellants relied on Board Circular No. 3/90-CX.1, dated 25-1-1990, which clarified that the factory gate price should apply to goods transferred to regional sales depots, provided it is genuine. The Tribunal upheld this view, noting that the Circular was binding on the Department and that the factory gate price was genuine. The Tribunal also distinguished the case from the decision in CCE v. Taparia Tools Ltd., which the Revenue cited, by referencing the TELCO Ltd. decision that aligned with the Board's Circular.Conclusion:The Tribunal concluded that the Order-in-Original lacked merit and allowed the appeal with consequential relief, reaffirming the use of factory gate prices for duty assessment and rejecting the invocation of the extended period for duty demand. The Tribunal emphasized the importance of genuine factory gate prices and the non-applicability of the proviso to Section 4(1)(a) in this context.