1. Dispute regarding determination of normal price for excise duty on goods removed from factory to consignment magazines under the Central Excise Act, 1944. (Para 1 , 2 , 3 , 4 , 5 )
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1997 Supreme(SC) 864
1997(4) Supreme 662
Supreme Court of India
Suhas C. Sen, K.T. Thomas, JJ.
IDL Chemicals Limited - Appellant
versus
The Collector of Central Excise -Respondent
Civil Appeal No. 439 of 1989
Decided on 9-5-1997
Counsel for the Parties :
For the Appellant, S. Ganesh, Amit Bansal, Advocates, for M/s. J.B.D. & Co., Advocates.
For the Respondent, Gouri Shankarmurthy, V.K. Verma Anubha Jain, Advocates.
Important Points
When excisable goods are removed from a factory without being earmarked for a specific buyer, the 'normal price' for duty calculation is determined based on sales to independent/ordinary customers, rather than special customers, regardless of the volume of sales to those special customers.
Subject
Tax Law - Central Excise
Act Referred
Headnote
Central Excise Act, 1944-Section 4(1)-"Normal Price"-A price at which goods are usually sold to whole sale dealers-Bulk of goods produced by appellant were sold to Coal India Ltd.-Some goods not being sold at factory gate were being taken to various magazines all over country-Appellant failed to make declaration as to the price of goods despatched to various agents-Duty had to be calculated at the point of time of removal of goods-Goods sold to Coal India Ltd. were at a rate much lower than rate charged for goods sold to ordinary customers-Excise Officer was right in calculating the price, in respect of goods taken to various magazines, which would be payable by an ordinary customer as the "normal price". (Para 9)
Legal Category Hierarchy
Table of Contents
2. Whether normal price for goods removed to magazines should be based on bulk buyer rates or ordinary customer rates in the absence of a price list. (Para 6 , 7 , 8 )
3. Duty must be calculated at the time of removal; without a specific buyer earmarked or a price list filed, ordinary customer rates constitute the normal price. (Para 9 )
4. In the absence of a declared price list or earmarked buyer at the time of removal, normal price is determined by sales to independent customers. (Para 9 )
5. Appeal dismissed. (Para 10 )
6. How is the normal price for excise duty determined when goods are removed from a factory to consignment agents without a specific buyer?
When goods are removed without being earmarked for a specific buyer and no price list is filed, the normal price is determined based on the price charged to independent or ordinary customers. (Para 9 )
7. At what point in time must the excise duty be calculated for goods removed from a place of manufacture?
Under Rule 9-A of the Central Excise Rules, duty must be calculated and paid at the point of actual removal of the goods from the factory. (Para 9 )
8. Does the eventual sale of goods to a government undertaking at a lower price alter the duty liability determined at the time of removal?
No, the liability to pay duty at the time of removal from the place of manufacture is not altered even if the goods are ultimately sold to a government company at a lower rate. (Para 9 )
Judgment
Sen, J.-The appellant, IDL Chemicals Limited, manufactures explosives at its factory at Sonaparbat. The raw materials for explosives are obtained from diverse sources. The finished goods are sold in the following manner :-
(i) Goods which are sold to customers like Coal India Limited.
(ii) Goods sold to public sector companies and Government undertakings.
(iii) Goods which are sold to ordinary customers who do not have long term contract.
(iv) Goods which are transferred from the factory premises to various magazines outside the State of Orissa which ultimately are sold to persons enumerated in categories (i), (ii) and (iii).
2. There is no dispute that the goods are sold to Coal India Limited and Government undertakings at a rate much lower than the rate charged for the goods sold to ordinary customers who do not have any long term contract with the appellant.
3. There is also no dispute that excise duty is paid at the factory gate on the basis of three different prices :-
(i) The price paid by Coal India Limited.
(ii) A little higher price paid by public sector companies and Government undertakings.
(iii) Goods sold to ordinary customers at a much higher rate.
The ad valorem duty is imposed separately on the three types of sales made by the appellant. There is no dispute on these sales.
4. Nearly 50% of the goods manufactured by the appellant are not sold at the factory gate, but are transported to various magazines outside the State of Orissa. From these magazines the goods are ultimately sold to Coal India Limited, Government undertakings and also to other customers. There is also to dispute that bulk of the goods are purchased by Coal India Limited at a low rate. Ordinary purchasers have to pay a much higher price.
5. The dispute in this case is about the excise duty which has to be paid at the time of removal of the goods from the appellant s factory outside the State of Orissa to its magazine.
6. The procedure followed by the appellant was to calculate the duty on the basis of the price usually paid by Coal India Limited. The appellant used to execute a bond under Rule 9-B of the Central Excise Rules, 1944 and pay the duty provisionally on the basis of its own calculation on this basis. As and when sales ultimately took place, if any higher price was realised the differential duty was paid by the appellant. On behalf of the appellant, it is contended that there is no allegation of any suppression of fact or avoidance of tax by the appellant. The appellant following this procedure has from time to time paid whatever duty was payable by it.
7. It has further been contended on behalf of the appellant that the duty is to be paid on the "normal price", as contemplated by Section 4(1) of the Central Excise Act, 1944. The "normal price" is a price at which the goods are usually sold to the wholesale dealers. There is no dispute that in this case the bulk of the goods produced by the appellant are sold to Coal India Limited. When the goods are not being sold at the factory gate and are being taken to various magazines all over the country, the question of determination of "normal price" of these unsold goods arises. The "normal price" in this case will have to be found by reference to the price at which the goods are sold to Coal India Limited, which according to the appellant consumes nearly 90% of the goods produced by the appellant. There is no reason to calculate normal price to be anything but the price usually paid by Coal India Limited. It has further been contended that the Act contemplates a provisional assessment and final assessment. The assessee provisionally paid taxes when the goods were removed from factory gate to the godowns and finally paid the tax when the final assessment was made. The procedure followed by the assessee was accepted and acted upon by the excise authority for a number
