TMI Blog1988 (10) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into agreement dated 1-9-1980, 10-6-1981 and 13.5.82 with M/s. Ponds (I) Ltd. All these agreements were not made known to the department at the time of filing of the Price Lists for approval. On perusal of the said agreements it was noticed that gross sale price of the Metal Containers was indicated in the agreement and certain abatements from the same towards (1) Quantity rebate fixed on slabs basis dependent on quantity proposed to be purchased by M/s. Ponds (I) Ltd., (2) Special Body Maker rebate and (3) Cash discount at 2% of the price arrived at after deducting items (1) and (2) above from gross selling price and the net price arrived at. However, in the Price Lists filed by M/s. Metal Box India Ltd. for approval they had quoted only the net price at which the Metal Containers were sold in the course of wholesale trade instead of quoting the gross sale price as stated in the agreement and claiming the deductions towards items (1), (2) and (3) as stated above, to arrive at the assessable value and to enable the department to verify the claim and allow the admissible discounts and approve the assessable value. Disparities between the sale price adopted for M/s. Ponds (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siderations by way of interest accruing to the advances made by M/s. Ponds (I) Ltd. be not added to arrive at the assessable value for the period from 1-7-1980 to 30-6-1983; (2) the gross price from the net price should not be arrived at and interest accruing to the advances added thereto and assessable value arrived at for the period on and from 1-7-1983; and (3) the consequential differential duty be not demanded from them and also why future assessments be not done on the above basis. In their reply they denied that there was any short-levy and/or short payment warranting demand for alleged differential duty and prayed for dropping of the proceedings. It appears that by another show cause notice dated 18-1-1985 M/s. Metal Box India Ltd. were also called upon to show cause as to why Basic Excise Duty and Special Excise Duty of Rs. 23,50,013.40 and Rs. 1,17,500.68 respectively for the period from 1-7-1980 to 13-11-1984 be not demanded and recovered. In reply they submitted that the subsequent Notice-cum-Demand was unwarranted in view of the fact that issues raised in the earlier notice, if decided in terms of their reply to the show cause notice dated 27.6.84 then the subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) and (2) above from the gross selling price are not admissible under the Central Excises and Salt Act and therefore, the Assistant Collector was right in rejecting their plea for the abatement of discounts and rebates as aforesaid since they are not allowed in accordance with normal practice of wholesale trade of the party. However, the Collector (Appeals) did not agree with the Assistant Collector for loading the interest charges @ 18% on advances made by M/s. Ponds (I) Ltd. with the assessable value. Accordingly he modified the adjudication order passed by the Assistant Collector to that extent vide his impugned order. 4. Aggrieved, the department as well as M/s. Metal Box India Ltd. have filed their present appeals. In the appeal filed by the department they have challenged that part of the impugned order which has held that loading of price with interest, not actually paid is not correct in law. 5. In the appeals filed by M/s. Metal Box India Ltd. they have challenged that part of the impugned order which has held that the demand was not time barred and that discounts and rebates allowed by them to M/s. Ponds (I) Ltd. were not deductible while arriving at the assessable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 11A of the Central Excises and Salt Act, 1944. He cited the following cases - (1) Union of India v. Bombay Tyre International Ltd., 1983 E.L.T. 1896 (SC) (Emphasis was laid on para 42) (2) Facit Asia Ltd. v. Collector of Central Excise, 1985 (21) E.L.T. 711 (3) Standard Electric Appliances v. Supdt. of Central Excise, 1986 (23) E.L.T. 302 (Madras) (4) Auto Lamps Ltd. v. Collector of Central Excise, 1987 (29) E.L.T. 889 (Tribunal) 9. In reply Shri S. Krishnamurthy, learned SDR supported the impugned order and while arguing the Department s appeal submitted that the Collector (Appeals) erred in setting aside the Order of the Assistant Collector to the extent that loading of the price with interest charges @ 18% on advances was not correct. 10. In reply to the argument raised in the Department s appeal Shri N. Mookherjee, learned counsel for M/s. Metal Box India Ltd. supported that part of the impugned order which had disallowed the loading of interest on advances with the assessable value. 11. Before we proceed to consider the respective arguments advanced by the parties, it would be advantageous to state a few admitted facts on record which are as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T.S.R. Co., M/s. Calcutta Chemicals, M/s. Viniba Products etc. even though all are Industrial consumers constituting the same class of buyers. M/s. Ponds (India) Ltd. have been given a special and favoured treatment by way of deductions in the form of discounts from the wholesale price while in respect of other buyers M/s. Metal Box India Ltd., have not given any discounts whatsoever. I am of the view that the quantity discount are to be allowed provided they are uniformly admissible to all independent buyers of the same quantity and the cash discount should also be admissible if they are available to all the buyers. In the instant case, the assessees have contended that if there were other customers who could place orders on them of the same magnitude as M/s. Ponds (India) Ltd., they would have granted the same rebates and discounts. But this is only a hypothetical statement and does not represent the reality. When at the time of personal hearing M/s. Metal Box India Ltd., were asked whether they send any circular to all cosmetic manufacturers to the effect that if the latter places orders for such and such quantity, certain discounts would be given, they stated that there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r words, there is a special relationship between M/s. Metal Box India Ltd. and M/s. Ponds (India) Ltd., apart from the trade relationship which is on account of huge advances held by the former from the latter, resulting in a very low price charged to M/s. Ponds (India) Ltd., as compared to other buyers. 22. On a study of prices charged by M/s. Metal Box India Ltd., to different buyers, I notice that in certain cases the price charged in respect of M/s. Ponds (India) Ltd., is nearly 50% less than the price charged in respect of certain buyers viz. M/s. Calcutta Chemicals Ltd., and M/s. Viniba Products etc. This does not mean a simple variation in price, but a chasm. When their attention was drawn to this point, the assessees have stated that they require time to set machine for each customer separately because each product is unique and distinct. The machine setting for one customer will not be same for another customer. Therefore, for small quantity orders it will not be economical for the company to accept orders at lower prices. Where the order quantity is substantial, certain price concession is given. The assessees have further added that the gestation cost before crystalisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have stated that they keep a sizable advance from M/s. Ponds India Ltd. to ensure maintenance of adequate stock of raw material and finished goods by them so as to maintain an uninterrupted and regular flow of supplies to M/s. Ponds India Ltd. This would mean that M/s. Metal Box India Ltd. had obtained the advance for utilising them as their capital for the purchase of raw materials and in consideration of that a reduction had definitely been shown in the sale price to M/s. Ponds India Ltd. The extent of such reduction can reasonably and justifiably be attributed to the interest amount payable on the advance, which had M/s. Metal Box India Ltd. obtained from any other source with interest bearing loan such interest elements would have been loaded on to the cost of manufacture and sale price to the metal containers, naturally increasing the present price adopted towards M/s. Ponds India Ltd. 26. According to proviso (i) to sub-section (1) (a) of Section 4 of the Central Excises and Salt Act, 1944, where different prices are charged by the assessees from different classes of buyers, each such price shall constitute the price of the goods provided they satisfy the other ingredie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the appellants. As such it cannot be said that such discounts, as stated above, are allowed in accordance with the normal practice of wholesale trade of appellants. Therefore, the discounts mentioned above are not admissible under the Central Excises and Salt Act." 14. We find no cogent reason to differ with the said findings recorded by the authorities below. According to proviso (i) to sub-section (1) (a) of Section 4 of the Central Excises and Salt Act, 1944, where different prices are charged by the assessees from different classes of buyers, each such price shall constitute the normal price of the goods provided they satisfy the other ingredients of the said Section 4(1)(a). Further, as per Section 4(4)(d)(ii) of the said Act value does not include the trade discount (such discount not being refundable on any account 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. The quantity discounts are allowable provided they are uniformly admissible to all independent buyers of the same class and cash account is admissible if they are available to all the buyers. One of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia v. Bombay Tyre International Ltd., 1983 E.L.T. 1896 (S.C.) cited by the learned counsel for the appellants M/s. Metal Box India Ltd. supports our view. In that case their Lordships of the Hon ble Supreme Court had categorically held that since under new Section 4(1) (a) the price should be the sole consideration for the sale, it will be open for the Revenue to determine on the basis of evidence whether a particular transaction is one where extra-commercial consideration has entered and, if so what should be the price to the taken as the value of the excisable article for the purpose of excise duty and that is what exactly has been done in the case and after analysing the evidence on record it is found that extra-commercial consideration had entered into while fixing the price of the metal containers to be supplied by M/s. Metal Box India Ltd. to M/s. Ponds (I) Ltd. 15. In view of the above we reject the contention of the learned counsel for the appellants M/s. Metal Box India Ltd. that the rebate and discount in question should not be included while arriving at the assessable value. 16. As regards interest on advances : Shri S. Krishnamurthy, learned SDR appearing for the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular flow of supplies to M/s. Ponds India Ltd . This would mean that M/s. Metal Box India Ltd., had obtained the advance for utilising them as their capital for the purchase of raw materials and in consideration of that a reduction had definitely been shown in the sale price to M/s. Ponds India Ltd. The extent of such reduction can reasonably and justifiably be attributed to the interest amount payable on the advance, which had M/s. Metal Box India Ltd. obtained from any other source with interest bearing loan such interest elements would have been loaded on to the cost of manufacture and sale price to the metal containers, naturally increasing the present price adopted towards M/s. Ponds India Ltd. 18. However, the Collector (Appeals) did not agree with the said findings and set aside the same observing as follows - The other question involved in the appeal is the loading of such interest percentage with the assessable value for loans taken by appellants from customers which has been ordered by the Assistant Collector. On this point, I am unable to agree with the Assistant Collector, inasmuch as, when interest is not payable, and arbitrary percentage of interest cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration, to avoid redundancy of such finished goods and components. From the above it is clear that the aforesaid advances were made to the appellant company to be used for the specific purpose for covering raw and ancillary materials and keeping them in stock sufficient to meet the minimum three or more months requirements of the buyers, depending on the size of the orders placed by them with the Sellers from time to time and mutually agreed upon with a further condition that the Sellers i.e. to say the appellants M/s. Metal Box India Ltd. shall further so plan their inventory and keep stocks of finished goods as to be able to meet the buyers minimum 3 or more months requirements taking into account the fluctuations, if any. In other words M/s. Ponds (I) Ltd. provided the capital free of interest by way of huge advances which are not conceivable in the normal trade, for the purchase of raw materials to manufacture the metal containers and to keep the metal containers so manufactured ready in stock to meet minimum three or more months requirements of M/s. Ponds (I) Ltd. It is to be remembered that huge advances so made by M/s. Ponds (I) Ltd. were free of interest. These advances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on account of the several factors which have contributed to its value up to the date of sale, which apparently would be the date of delivery, are liable to be included. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee up to the date of delivery on account of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacturer after clearance)............ cannot be deducted. 21. In the result we agree with the Assistant Collector that the interest accruing on the advances be added to the price while arriving at the assessable value. 22. As regards the contention as to whether the demand was time barred : Shri N. Mookherjee, learned counsel for M/s. Metal Box India Limited contended that the demand so far as it relates to the recovery of duty prior to 27-12-1983 was barred by limitation of six months and the extended period of 5 years under Section 11 A of the Central Excises and Salt Act, 1944 could not be invoked because failure to submit the financing agreements entered with M/s. Ponds (I) Ltd. does not amount to material suppression of facts. We have considered the arguments and find no force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and claims of abatement from such price under whatever heading he may choose and arrive at the assessable value and seek the approval of the Department and the Department in turn is to allow whatever abatement it considers are admissible and accord approval for the final assessable value. In this case, M/s. Metal Box India Ltd. had failed to disclose the sale price truly reflecting the discounts, abatements and considerations as should have been declared to the Department, but had only declared the net selling price, thereby suppressing the true and full facts to the Department. Thus, we reject the contention of the learned counsel for the appellants that the demand was time barred and hold that the extended period of 5 years for raising the demand was available to the Department as the appellants M/s. Metal Box India Ltd. was guilty of intentionally suppressing the material facts. In this view of the matter we are supported by the decisions rendered by this Tribunal in the case of Kerala State Detergents Chemicals Ltd. v. Collector of Central Excise, 1987 (27) E.L.T. 323 and Aims Oxygen Pvt. Ltd. v. CCE, 1988 (36) 151. 23. In the result we dismiss the appeal filed by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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