1998 (6) TMI 256 - AT - Central Excise

Tribunal upholds Collector's decision on contract prices, requires concrete evidence for undervaluation

The Tribunal dismissed the Revenue's appeal, upholding the Collector (Appeals)' decision. It concluded that the contract prices were valid under Section ... Valuation Issues Involved:1. Validity of fluctuating and lower prices for Hydrochloric Acid (Hcl).2. Classification of buyers as different classes based on location.3. Acceptance of contract prices under Section 4(1)(a) of the Central Excise Act.4. Relevance of previous judgments and their application to the current case.Detailed Analysis:1. Validity of fluctuating and lower prices for Hydrochloric Acid (Hcl):The respondents submitted 19 price lists for the sale of Hcl, showing significant price variations among buyers of the same class. The Assistant Collector issued a show cause notice questioning these price discrepancies and proposed a uniform price of Rs. 500/- per metric tonne. The respondents justified the fluctuating prices due to limited market demand, the corrosive nature of the product, storage constraints, and transportation costs. They argued that the necessity to dispose of unsold stock led to lower prices. The Assistant Collector, however, held that there was no contract price for the goods and relied on previous judgments to discard the purchase orders as contracts, concluding that different prices for the same class of buyers were not justified.2. Classification of buyers as different classes based on location:The Assistant Collector asserted that different wholesale dealers cannot be treated as different classes of buyers merely because they are located in different places. He emphasized that all customers involved were dealers/traders and thus formed one class of buyers. The Collector (Appeals), however, held that it is reasonable for the assessee to classify buyers based on commercial considerations, provided the classification is rational and identifiable. This view was supported by the Tribunal's decision in Goramal Hari Ram Ltd. v. CCE, which allowed for different prices for different classes of buyers.3. Acceptance of contract prices under Section 4(1)(a) of the Central Excise Act:The Assistant Collector rejected the contract prices, arguing that the agreements were merely purchase orders and confirmations, not enforceable contracts. The Collector (Appeals) disagreed, stating that contract prices declared by the respondents are valid under Section 4(1)(a). The Tribunal observed that the agreements were indeed contracts enforceable by law, satisfying the requirements of Section 4(1)(a). There was no evidence to suggest that the prices were not in the course of wholesale trade, at the time and place of delivery, or that any additional consideration flowed back to the respondents.4. Relevance of previous judgments and their application to the current case:The Assistant Collector relied on judgments such as Shakti Insulated Wires (P) Ltd. v. CCE and Bombay Latex & Dispersion (P) Ltd. v. CCE to support his stance. The Revenue also cited the Bombay High Court's decision in Godrej & Boyce Manufacturing Co. (P) Ltd. v. UOI, asserting that wholesale dealers cannot be treated as different classes of buyers based on location. The Tribunal, however, noted that the Bombay High Court's judgment had been set aside by the Apex Court and distinguished it in subsequent cases. The Tribunal also referenced the Indian Oxygen Ltd. case, which was deemed irrelevant as it pertained to assessments based on depot prices rather than factory gate prices.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the Collector (Appeals)' decision. It concluded that the contract prices were valid under Section 4(1)(a) and that different prices for different classes of buyers based on location were permissible. The Tribunal emphasized the need for concrete evidence to support allegations of undervaluation and found no such evidence in this case.