1996 (2) TMI 209 - AT - Central Excise

Summary

Issues: Interpretation of Notification No. 120/76-C.E. regarding duty exemption based on invoice price, correct determination of true invoice price, impact of price correction on duty calculation, relevance of proviso clause (iv) in the Notification.

In this case, the appellant, a manufacturer of Chlorosulphonic Acid, supplied goods to a public sector undertaking under a contract, availing duty exemption under Notification No. 120/76-C.E. The appellant initially cleared products at a higher price but later agreed with the purchaser on a reduced price, seeking a refund for the duty difference paid. The lower authorities rejected the claim, stating that the invoice price system was adopted for duty payment, and subsequent changes were not considered unless a price list was filed. The appellant argued that they did not intend to switch systems but only sought correction in the invoice to reflect the agreed price reduction. The Tribunal noted that the appellant's intention was to maintain the invoice price system under the Notification and rectify the error in the invoice, not to avail both systems. The correct invoice price should reflect the actual price, and any error should be rectified, irrespective of when the price change occurred. The Tribunal emphasized that the appellant's request for correction did not imply a shift to the price list system, which requires approval for price reductions. The Notification aims to exempt duty based on the invoice price, and corrections to reflect the accurate price are permissible.

Regarding the proviso clause (iv) of the Notification, the Tribunal clarified that the clause aims to prevent price influence by relationships beyond the sale contract. In this case, the price was determined by the sale contract between the manufacturer and the buyer, without external influences. The clause does not apply when the price is set through a contractual agreement between the parties involved in the sale transaction. As there was no evidence of external relationships affecting the price, the clause was deemed inapplicable. Consequently, the Tribunal held that the appellant was entitled to the duty refund claimed, overturning the lower authorities' decision. The impugned order was set aside, and the appeal was allowed, granting the appellant the refund as requested.