1987 (2) TMI 334 - AT - Central Excise

Summary

Issues:
- Whether the sale price of primary bulk turpentine charged by the respondents was influenced by any extra-commercial consideration.

Detailed Analysis:

Issue 1: Sale Price Influence
The common issue in three department appeals was whether the sale price of primary bulk turpentine charged by the respondents to a specific customer was influenced by extra-commercial considerations. The exemption Notification No. 120/75-CE allowed assessment at invoice value under certain conditions, including that the price should not be influenced by any relationship between the manufacturer and the buyer other than that created by the sale of goods. The Assistant Collector objected to clauses in agreements between the respondents and the customer, alleging that the price was not at arm's length. The Collector (Appeals) ruled in favor of the respondents, leading to the department's appeal to restore the Assistant Collector's order.

Issue 2: Department's Contentions
During the hearing, the department argued that the price charged was unduly influenced by tied sales agreements, low prices compared to other buyers, and security deposits. The department acknowledged that allowances could be made for the price difference due to the unique bulk supply method to the customer company. The respondents, a government undertaking, explained the historical context of their agreements with the customer company and the pricing mechanisms approved by the government.

Issue 3: Tribunal's Decision
The Tribunal considered the arguments and found merit in the respondent's explanation. It noted that the agreements were long-term and based on costing approved by the government. The Tribunal emphasized that the substance of the agreements mattered more than the form, highlighting that the pricing factors were taken into account at the agreement's inception. The Tribunal rejected the department's contention that the price was influenced by non-commercial relationships, citing lack of evidence of proceeds flowing back to the respondents or any special relationship between the parties.

Issue 4: Conclusion
Ultimately, the Tribunal dismissed all three appeals, finding that the department failed to justify interference with the order-in-appeal. Despite the respondents raising a time bar legal plea, the Tribunal's favorable merits finding rendered the time bar issue unnecessary for consideration. The decision upheld the Collector (Appeals) ruling in favor of the respondents, emphasizing the lack of evidence supporting the department's claims of price influence by extra-commercial considerations.