[Order per : S.S. Sekhon, Member (T)]. - Heard both sides. The Apex Court vide its order dated 17-3-2005 [ (S.C.)] in Civil Appeal No. 2216 of 2000 set aside the Order No. A-2067/CAL/99 dtd. 23-9-99 [ (Tri.)] in Appeal No. EA/235/99 filed by the appellant and remanded the matter back for the decision of the issues on merits.
2. The facts leading to the present appeal are :
(a) The appellants have a factory at Bamboo Flat, South Andamans and their Head Office at Calcutta. They are manufacturers of plywoods and related products and during the material time it appears that this assessee had manufactured plywoods of different varities and sold most of them (about 98%) to their dealers all over the country through their depots at various places. On a few occasions, the goods were sold on ex-factory price and delivery basis. Enquiries made revealed that there was no real normal price in terms of Section 4(1) of the Central Excise Act, 1944 in the sense that the assessee’s ex-factory sales were artificial and there were not sales, to satisfy the conditions of Section 4(1) of the Central Excise Act, 1944.
(b) It appeared since the assessee has a number of Depots across the country and all their dealers placed their orders on and got delivery from such Depots only and it was only to a negligible number of buyers, the goods were supplied ex-factory, at ex-factory prices. Such ex-factory prices, even after loading, transportation and all other taxes, were considerably lower than as compared to the ex-depot prices. Ex-factory prices therefore were alleged to be contrived.
(c) Since the dealers had no real access to the ex-factory procurement and orders were required to be ex-depot and only on stray occasions sales were ex-factory basis, these sales and shipping in such cases was handled by the assessee, on behalf of their dealers who bore the cost upon being billed by the assessee. It appeared that the ex-factory and ex-depot sale followed virtually from the factory to dealers and there was a great difference between ex-factory and ex-depot price. Therefore, the ex-factory prices were felt to be contrived.
(d) It also appeared that ex-factory price remained unchanged from October, 1991 till the time of the search operation on 21-7-94, while the depot price had been revised upwards several times.
(e) A Show Cause Notice No. VCH 44/15() 108-CE/Cal-ll/Adjn/95/205 dtd. 3-5-1995 asking the assessee as to why the Central Excise Duty of Rs. 76,17,656/- should not be demanded and why a penalty should not be imposed. The Commissioner has confirmed duty demand and ordered appropriated Rs. 15 lakhs paid by the assessee during the course of investigation and ordered the assessee to pay the balance amount of duty and imposed penalty of Rs. 8 lakhs also.
(f) The assessee filed an appeal before the Tribunal who vide order Supra dated 23-9-99 set aside the order and allowed the appeal which has now been remanded back by the apex court.
3. The issue of ex-factory price if, available irrespective of quantum of sates to determine the assessable value u/s. 4 is well settled. However, such small ex-factory sales should be the normal price for goods and should not be contrived/impugned. The latest decision in this case is, the case of Commissioner v. Rathi Super Steel Ltd., 2005 (66) RLT 784 (CESTAT Delhi), wherein an appeal filed against the order by Rathi Super Steel Ltd. but the same was dismissed on the ground of delay as well as on merit by the apex court. The Tribunal in this order, relied, in the case of Indian Oxygen Ltd., (Supreme Court) and held that the value of the goods cleared at the factory gate being available, therefore ex-factory price is to be assessable value in respect of the goods cleared from the depots. The following decision, also would lead to the same conclusion :-
(i) (Collector of Central Excise v. Bharati Telecom Ltd.)
Valuation (Central Excise) - Ex-factory price being ascertainable and there being no evidence to show that factory gate sales are not genuine, such ex-factory price to be the assessable value - Section 4 of Central Excise Act, 1944. [ (S.C.), relied on]. [para 5]
Civil Appeal against the aforesaid decision of the Tribunal was dismissed by the Hon’ble Supreme Court in (Commissioner v. Bharati Telecom Ltd. by holding as under :-
“In view of the decision of this Court in M/S Indian Oxygen Ltd. v. Collector Of Central Excise reported in (S.C.) coupled with the findings of the Tribunal that the Revenue had admitted that there were factory gate sales and there was no evidence to show that the factory gate sales were not genuine and factory price was ascertainable, these appeals must be dismissed.
The appeals are dismissed but without any order as to costs.”
(ii) [Bio Foods (P) Ltd. v. Commissioner of Central Excise]
Valuation (Central Excise) - Freight and special packing charges not includible in the assessable value irrespective of whether the appellants had collected these amounts in all cases or not - Appellants, contention that they sell the goods both at the factory gate and from depots remaining unchallenged, orders demanding duty on the differential amount between the amounts realised under these two headings and amount actually spent being incorrect, set aside - Section 4 of Central Excise Act, 1944. [para 4]
Civil Appeal against the aforesaid decision of the Tribunal was dismissed by the Hon’ble Supreme Court in [Collector v. Bio Foods (P) Ltd.] by holding as under :-
“We have perused the judgment of the Tribunal and, in our opinion, it has relied upon the judgment of this Court in the case of M/S Indian Oxygen Ltd. v. Collector Of Central Excise, (S.C.) and we find no reason to interfere with the same. The appeal is dismissed.”
(iii) (Southern Bottlers Pvt. Ltd. v. Collector of Central Excise) - In this decision, in Paragraphs 9 and 10, the Hon’ble Tribunal held as under:
“9…….. It is well stated that if there are sales at the factory gate even though they may be few, the rate at which the sales have been effected at the factory gate could be taken into consideration. The decision is reported in [1979 E.L.T. J117 (Mad.-H.C), cited supra]. It is stated in the judgment as follows :-
“Inasmuch as the petitioner effects a few sales at wholesale market rate at the factory gate itself, it is that rate which has to be taken as the normal price of the products, especially when the respondents have not shown that such sales have not taken place or that such sales were to related persons or that the sales were effected on other considerations than of price alone.”
“10. In the light of the above decision, it is clear that the Collector’s order did not follow the correct legal position. The impugned order therefore cannot be sustained.”
Civil Appeal against the aforesaid decision of the Tribunal was dismissed by the Hon’ble Supreme Court in (Collector v. Southern Bottlers Pvt.Ltd.)
(iv) (Commissioner of Central Excise v. Moon Beverage Limited).
Valuation (Central Excise) - Ex-Factory price - Representative character - Department pleading that they were not
Civil Appeal against the aforesaid decision of the Tribunal was dismissed by the Hon’ble Supreme Court in (Commissioner v. Moon Beverages Limited).
(v) (Geep Industrial Syndicate Ltd. v. Collector of Central Excise)
Valuation (Central Excise) - Ex-factory sales constituted nearly 3% of the total sales - Depot sale prices higher than the ex-factory sales after allowing admissible deductions - So long as the existing ex-factory price is not shown to be rigged or influenced by extra commercial considerations, that price has to be taken as the normal price and assessment to duty must be made on that basis - Quantum of goods sold by a manufacturer on wholesale basis at the factory gate is entirely irrelevant - Section 4 of Central Excise Act, 1944. [para 4]
(vi) (Collector of Central Excise v. Falcon Tyres Ltd.)
Valuation (Central Excise) - 2% sales effected at factory gate whereas 98% sales effected through depots - Ex-factory price to be taken as basis in determining value even with reference to depot sales, ex-factory price being ascertainable - Section 4 of Central Excise Act, 1944. [ (S.C.) relied on]. [para 4]
(vii) (D.C.W. Limited v. Collector of Central Excise) - In this decision, in Paragraph 10, the Hon’ble Tribunal held as under:-
“10. Quantum of goods sold by a manufacturer on wholesale basis is entirely irrelevant. The fact that the said sale may be few or scanty does not alter the true position. (A.K. Roy & other v. Voltas Ltd.). It is also settled that if ex-factory price is acceptable, such ex-factory price shall be the basis for determination of the value under Sec. 4 of the Central Excises and Salt Act. [Indian Oxygen Ltd. v. CCE reported in ]. It is also well settled that percentage of sales at factory gate is not a determinative factory. Sales at factory gate as long as they are genuine they shall be the basis of the assessable value. [Woodcraft Products Ltd. v. CCE, Shillong reported in 1988 (35) E.L.T. page 495].”
(viii) (Mahalakshmi Glass Works Ltd. v. Collector of Central Excise)
Valuation - Ex-factory price if ascertainable same to be the assessable value under Section 4 of the Central Excises and Salt Act, 1944 - Small percentage of sales to third parties not to alter the legal position.
(ix) (Indian Aluminium Cables Ltd. v. Collector of Central Excise)
Valuation - Wholesale cash price determinable even on basis of single sale - Number of wholesale dealings or quantum of goods sold or whether sales scanty, irrelevant - Section 4 of the Central Excises and Salt Act, 1944.
(x) (Commissioner of Central Excise v. Kitply Industries Limited.)
Valuation (Central Excise) - Normal price under Section 4(1)(a) of Central Excise Act, 1944 ascertainable from ex-factory sales to independent buyers - No evidence of any additional consideration or flow back or of prices being not genuine - Acceptable - Charge of undervaluation not substantiated by alleging that ex-factory sales constituted only about 10% of the total sales and that remaining 90% sales were from depot at a higher price - No warrant for resorting to costing when normal price was available from genuine ex-factory sales.
(xi) (Kitply Industries Ltd. v. Commissioner of Central Excise)
Valuation (Central Excise) - Normal price under provisions of erstwhile Section 4(1)(a) of Central Excise Act, 1944, at which goods sold at factory gate to wholesale buyers, being available, such price, and not the ex-depot price, to be made basis to determine assessable value of goods in the absence of any evidence showing flow back of any additional consideration besides such price. [ (Tribunal) relied on]. [para 6]
(xii) (Triveni Sheet Glass Works Ltd. v. Collector of Central Excise)
Valuation (Central Excise) - Goods sold partly through ex-factory and partly through depots - Ex-factory wholesale prices where available, they constitute the basis for assessment of all the goods to central excise duty -Section 4 of the Central Excise Act, 1944.
(xiii) (Sarada Plywood Industries Ltd. v. Union of India)
Valuation (Central Excise) - Representative character of ex-factory prices - 5% to 15% goods sold in wholesale at factory gate and remaining 85% to 95% goods sold from depots - No evidence adduced by Revenue to show that ex-factory sales were not at arm’s length or that price was unreasonably low - Ex-factory price to form the basis for determination of assessable value for entire quantity of goods cleared in accordance with Section 4(1)(a) of Central Excises and Salt Act, 944 - Relative quantum of goods sold ex-factory immaterial.
(xiv) (Merinoply & Chemicals Ltd. v. Collector of Central Excise)
Valuation (Central Excise) - Goods partly sold from depots and partly from factory - Ex-factory price ascertainable - Ex-factory price to be the assessable value under Section 4 of Central Excises and Salt Act, 1944.
However, in the present case, the Commissioner has considered the fact and has arrived on his findings based on commercial improbabilities and from the statement of various dealers and noted that there was no change in the ex-factory prices since 1991. In the grounds before us, the appellant have not given any material to explain how the ex-factory price remains same while the Depot price went on increasing. No doubt, it is a fact, that the appellants are located in Andaman, where, there may not be any considerable demand and buyers for the goods. In such situation it would be a commercial necessity to remove the goods to mainland India and market the same in mainland India. The buyers in mainland in India find more convenient to place orders with nearby Depots, where they could examine the goods and then take delivery ex-depot. If the ex-depot prices have gone up, they cannot be ascribed only to an explanation by the appellant, on the grounds of only transportation and other overhead cost in the increase. The cost of raw material and manufacturing overheads also would have increased, until shown otherwise which would have render the ex-factory prices to consequently increased. If the ex-factory prices for the entire period after 1991 have not increased, they are suspicious and doubtful.
4. The question here is not about the quantum of sales but is on no increase over the period of time of ex-factory prices which again is contra to all commercial reality. Therefore ex-factory prices are doubtful contrived and not normal. In view of this matter, when once the ex-factory prices are not found to be a commercial reality, they cannot be considered to be normal price as envisaged in Section 4(1) of the Central Excise Act, 1944. If the ex-factory price is not a normal price, the same cannot be applied to pay duty on goods to be removed to depots.
The plea and reliance on the case law as extracted herein above by the appellant would not help their case, if the ex-factory price is contrived and upheld to be not normal as it alleged by the department.
5. The Commissioner has, vide order impugned arrived at the valuation and the grounds taken in appeal do not show any reason how and why the Commissioner’s working of the assessable values of the goods for the demand, thereafter demand of duty are to be not as per the provisions of law. In this view of the matter we find no justification in this appeal to upset the orders of the Commissioner.
6. The plea of no cross-examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex-factory prices remain static. Since we are not upholding and applying the ex-factory prices, as we find them contravened and not normal price as envisaged under Section 4(1), we find no reason to disturb the Commissioners orders.
In view, of the findings arrived at, we would confirm the duty demand. However, we find that for earlier period the assessee has a favourable order on their ex-factory prices. Therefore, we find that the penalty, imposed, in the facts of this case was not called for. We would set aside the same and would order confirmation of the duty demands as made by the ld. Commissioner. Appeal allowed only as regards the penalty imposed, which is to be set aside. The duty demands are confirmed. Appeal disposed of accordingly.
(Pronounced in court on 7-7-2006)