TaxTMI 
TaxTMI 
2005 (4) TMI 65
X X X X Extracts X X X X
X X X X Extracts X X X X
....rtment in respect of these sales. 3.The appellants also sold the goods in the State of Uttar Pradesh to a company called Syndet & Chemical Industries Ltd. (for short 'Syndet') at a price which was lower. Syndet, in turn, sold the goods to its dealers in Uttar Pradesh at a price which was higher than the price at which the appellants sold the product outside Uttar Pradesh. Roughly 35% of the goods are sold to independent dealers and 65% of the goods are sold to Syndet by the appellants. Syndet is also the owner of trademark "Fena" for detergent powder and allied products. According to the appellants, they have paid excise duty for sales made to Syndet also at the price charged by the appellants from the independent dealers situated all over the country, other than in Uttar Pradesh, since according to the Department, the appellants (SACI Allied products Pvt. Ltd.) and buyer Syndet are related persons as per Section 4(4)(c) of the Central Excise and Salt Act, 1944 (hereinafter referred to as "the Act"). 4.The respondent-Collector passed an order dated 30-3-1995 to the effect that Syndet is a related person and, therefore, in view of third proviso to Section 4(1)(a) of the Act, excis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....take Syndet's resale price as the basis for determining the assessable value in respect of sales made by the appellants to Syndet in Uttar Pradesh. On this basis, differential duty was demanded for the period from 13-12-1990 to November, 1994. The Collector of Central Excise, Meerut passed an order on 30-3-1995 confirming the proposals made in the show cause notice and demanding differential duty accordingly. The appellants filed appeal before the appellate Tribunal and submitted that since sale price to independent dealers are available, the same should be taken as the basis for determining the assessable value in respect of sales to related persons also. The Tribunal passed the impugned order on 22-6-1999 upholding the order of the Commissioner entirely on a new and different basis. On the issue of quantification of duty demand, the appellate Tribunal remanded the matter to the Collector for de novo consideration. Aggrieved by the impugned final order passed by the Tribunal, the appellants preferred the above appeal before this Court. 7.We heard Mr. V. Lakshmikumaran, learned counsel, appearing for the appellants and Mr. A. Subba Rao, learned counsel, appearing for the responden....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rice, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; (iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail; (b) where the normal price of such goods is not ascertainable for the reason, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as they may be prescribed. Where, in relation to any excisable goods the price thereof for delivery at the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale. Explanation. - For the purposes of this sub-clause, the amount of the duty of excise payable on any excisable goods shall be the sum total of - (a) the effective duty of excise payable on such goods under this Act; and (b) the aggregate of the effective duties of excise payable under other Central Acts, if any, providing for the levy of duties of excise on such goods, and the effective duty of excise on such goods under each Act referred to in clause (a) or clause (b) shall be, - (i) in a case where a notification or order providing for any exemption (not being an exemption for giving credit with respect to, or reduction of duty of excise under such Act on such goods equal to, any duty of excise under such Act, or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), already paid on the raw material or component parts used in the production or manufacture of such....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Ltd. v. Union of India, 1994 (73) E.L.T. 25 (Delhi), the appeal against which was dismissed by this Court in 2002 (143) E.L.T. A269, it is permissible to the Department to take note of the fact of the judgment of the Delhi High Court which is confirmed by this Court and ignore the Circular for the purpose of arriving at assessable value in regard to the Uttar Pradesh. It was further submitted that it is open to the Department to contend before this Court not to take note of the two circulars and that the circulars are binding on the Department but not on quasi-judicial authority and this Court. It was also submitted that no appeal lies against a finding, as it was contended that the Department has not filed any appeal against the finding of the Collector that the assessable value has to be only under Section 4(1)(b) of the Act and once the Tribunal comes to the conclusion that Section 4(1)(b) of the Act is not applicable, the appeal of the assessee has to be allowed and it is not open to the Tribunal or for the Department to contend that Section 4(1)(a) of the Act is applicable. It is open to the party-respondent to sustain the judgment of the Tribunal though it has not filed any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....were disposing of the goods of SACI in the State of U.P. had been correctly taken as the normal price for determining the duty liability of SACI under Section 4 of the Act." 17.Thus according to the appellate Tribunal, since the dealers in Uttar Pradesh who purchased the goods from Syndet, and independent dealers in other parts of the country to whom the appellants directly sold the goods are different class of buyers, appellants' price to the independent dealers cannot be taken as the basis for assessing appellants' sales to Syndet in Uttar Pradesh. This finding of the appellate Tribunal is based on first proviso to Section 4(1(a) of the Act. While the show cause notice and the order of the Collector proceeded on the basis of the invocation of third proviso to Section 4(1)(a) of the Act, the appellate Tribunal for the first time in the impugned order has sustained the proceedings on the basis of first proviso to Section 4(1)(a) of the Act. It was argued that the first proviso to Section 4(1)(a) of the Act was never invoked by the Department either in the show cause notice or in the impugned order and it was for the first time that the appellate Tribunal in the impugned order has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o unrelated buyers should be adopted as the basis for payment of excise duty even in respect of sales to related buyers. In such a situation, third proviso to Section 4(1)(a) of the Act will not come into play at all. Since in the present case, normal price to independent dealers is available, same should be treated as the basis for arriving at the assessable value in respect of sales to Syndet also. This submission of Mr. V. Lakshmikumaran is duly supported by the judgment of this Court in Union of India v. Kantilal Chunilal & Ors., 1986 (Suppl.) SCC 345 = 1986 (26) E.L.T. 289 (S.C.). This judgment dealt with a situation when 34% to 40% of sales were effected by the assessee to a related buyer namely, Alok Textiles and balance sales were to unrelated buyers. Excise Department sought to levy excise duty, in respect of sales made to Alok Textiles, based on Alok Textiles' resale price to its buyers. This Court negatived such an approach and held that the value for the purpose of excise duty even in respect of sales effected to the related buyer Alok Textiles should be the price at which the goods were sold to unrelated buyers. The relevant portion of the judgment is reproduced herein....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat these 20.1% sales were bona fide sales and they were made in the normal course of wholesale trade. They satisfied all the conditions of 'normal price' under Section 4(1)(a). Accordingly, the price charged by the respondents from these dealers should constitute the basis of valuation for all the Motor Cycles removed from the respondents' factory during the material period. There is no need to resort to the Valuation Rules for working out the assessable value." 23.In paragraph 6 of the judgment in the case of Escorts Tractors Ltd. v. Collector of Central Excise, Delhi, 1998 (103) E.L.T. 533 (Tribunal), it was held as under: "The Department has no case that the appellant, during the period in question, has so arranged that the tractors were not generally sold in the course of wholesale trade except to or through M/s. Escorts Ltd. and hence consequently proviso (iii) to Section 4(1)(a) has not been invoked. According to Section 4(1)(a), the assessable value should be deemed to be the normal price of the goods, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds produced before the authorities below, Syndet also manufactures the goods in its Okhla factory in Delhi and sells the goods on its own and the Central Excise Department at Delhi has accepted the price at which Syndet has been selling to its dealers and paying excise duty accordingly without any dispute. It was submitted that the assessable value on which the duty has been paid by the appellants, in the present case, even in respect of transactions with Syndet in Uttar Pradesh is higher than the approved assessable value for Okhla factory of Syndet and this itself proves the bona fide of the appellant and the genuineness of the price particularly when the goods are only 'Fena' brand sold practically to the same dealers. Regarding Submission No. 3 : 27.The only reason given by the appellate Tribunal in the impugned order for adopting Syndet's resale price to its dealers as the basis for payment of excise duty in respect of sales made by the appellants to Syndet is that dealers in different regions constitute different classes of buyers and in view of the first proviso to Section 4(1)(a) of the Act, each such price shall be taken as the normal price and duty should be paid accor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Section 4(1)(a) of the Act cannot be invoked in such circumstances. Having issued such a circular which is binding on the Department, the Revenue cannot now contend to the contrary and say that dealers in different regions constitute different classes of buyers and, therefore, price to independent dealers cannot be adopted for sales to Syndet in Uttar Pradesh. Further, during the disputed period, when the appellants were filing price lists regionwise declaring different prices for different dealers located in different regions, based on the above circular dated 25-1-1990, show cause notices were issued by the Department contending that it is not permissible to have different prices for dealers in different regions. The show cause notices sought to take the highest price as the assessable value which incidently was the price at which the goods were sold by Syndet to its dealers. Having taken such a stand based on the circular of C.B.E. & C, which held the field then, it is not open to the Revenue or to the appellate Tribunal to hold that dealers in different regions constitute different classes of buyers and, therefore, the price to independent dealers in other regions cannot be ado....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Appliances v. CCE, 1994 (69) E.L.T. 312 which has been affirmed by this Court in 1998 (100) E.L.T. A64. This issue, therefore, is no longer res integra and, therefore, the Collector could not have confirmed the demand under Section 4(1)(b) of the Act when there are significant sales at the factory gate to the independent buyers throughout India. 32.We have already referred to the certain findings of the Tribunal applying the first proviso to Section 4(1)(a) of the Act, confirmed the same demand. In our view, it is not permissible on the part of the CEGAT to change the basis of the demand since the assessee was asked to show cause only in relation to applicability of Section 4(1)(b) of the Act. 33.In the case of Commissioner of Central Excise, Calcutta-II v. TISCO Ltd., 2004 (174) E.L.T. 307 (S.C.) (S.N. Variava & Dr. A.R. Lakshmanan, JJ.), it was held that in order to attract the first proviso to Section 4(1)(a) of the Act, there has to be an averment and the proof of the existence of a trade practice in that trade that the goods are being sold at different prices to different class of buyers. This Court, further, held that to claim benefit of proviso to Section 4(1)(a) of the....