2005 Supreme(SC) 736

2005(4) Supreme 202
Supreme Court of India
(From Central Excise, Customs and Gold (Control) Appellate Tribunal, New Delhi)
S.N. Variava, Dr. AR. Lakshmanan & S.H. Kapadia, JJ.
M/s. SACI Allied Products Ltd., U.P. —Appellant
versus
Commissioner of Central Excise, Meerut —Respondent
Civil Appeal No. 5854 of 1999
Decided on 26-4-2005
Counsel for the Parties :
For the Appellant : V. Lakshmikumaran, R.K. Hasija, Alok Yadav and V. Balachandran, Advocates.
For the Respondent : A. Subba Rao, Rupesh Kumar, P. Parmeswaran and B. Krishna Prasad, Advocates.

Important point
If the price to independent wholesale dealers, satisfying the requirements of Section 4(1)(a) of the Central Excise Act is available, then that price should be treated as the assessable value even in respect of sales to related persons also.

Headnote:Central Excise and Salt Act, 1944—Sections 4(4)(c) and 4(1)(a)—Valuation of excisable goods for purposes of charging of duty of excise—Related person—Where sales are made by assessee to wholesale buyers who are unrelated and also to buyers who are related—Price to unrelated buyers should be adopted as the basis for payment of excise duty even in respect to sales to related buyers—Appellant company manufacturing detergent powder and allied products in State of Uttar Pradesh sells its goods from the factory to dealers spread throughout the country—Appellants sold goods in State of Uttar Pradesh to a company called ‘Syndet’ at a price which was lower than the price at which appellants sold the product outside Uttar Pradesh—Syndet sold the goods to its dealers in Uttar Pradesh at a price which was higher than the price at which appellants sold the product outside Uttar Pradesh—35 of the goods are sold to independent dealers and 65 of the goods are sold to Syndet by appellants—Appellants paid excise duty for sales made to Syndet also at the price charged by appellants from independent dealers situated all over the country—Collector passed an order to the effect that Syndet is a related person, therefore, excise duty is to be paid by appellants based on the price at which goods are resold by Syndet to its dealers in State of Uttar Pradesh—Tribunal upheld the order of Collector by holding that Syndet’s price to its dealers should be the value under first proviso to Section 4(1)(a) in respect of sales made by appellants to Syndet—Whether impugned order of the appellate Tribunal is sustainable—(No).

       Held : In the instant case, the proceedings were initiated against the appellants by the respondent-Collector on the ground that Syndet, to whom the appellants sold the goods in Uttar Pradesh, should be treated as a related person of the appellants in terms of Section 4(4)(c) of the Act and, therefore, in respect of sales made by the appellants to Syndet, excise duty should be paid on the basis of Syndet’s resale price to its dealers in terms of third proviso to Section 4(1)(a) of the Act. In other words, according to show cause notice and the order of the respondent-Collector, since Syndet is related to the appellants, excise duty should be paid for sales to Syndet in terms of third proviso to Section 4(1)(a) of the Act, i.e. based on Syndet’s resale price to its dealers. (Para 13)

       The appellate Tribunal, by the impugned order, has upheld the order of the respondent-Collector, however, on a totally new and different basis which was never the case of the Department either in the show cause notice or in the impugned order. (Para 15)

       Thus according to the appellate Tribunal, since the dealers in Uttar Pradesh who purchased the goods from Syndet, and independent dealers in other parts of the country to whom the appellants directly sold the goods are different class of buyers, appellants’ price to the independent dealers cannot be taken as the basis for assessing appellants’ sales to Syndet in Uttar Pradesh. This finding of the appellate Tribunal is based on first proviso to Section 4(1)(a) of the Act. While the show cause notice and the order of the Collector proceeded on the basis of the invocation of third proviso to Section 4(1)(a) of the Act, the appellate Tribunal for the first time in the impugned order has sustained the proceedings on the basis of first proviso to Section 4(1)(a) of the Act. It was argued that the first proviso to Section 4(1)(a) of the Act was never invoked by the Department either in the show cause notice or in the impugned order and it was for the first time that the appellate Tribunal in the impugned order has sought to sustain the impugned order by invoking the first proviso to Section 4(1)(a) of the Act. It is thus seen that the Tribunal has gone totally beyond the show cause notice and the order of the Collector, which is in permissible. The appellate Tribunal cannot sustain the case of the Revenue against the appellants on a ground not raised by the Revenue either in the show cause notice or in the order. (Para 16)

       Since in the present case, normal price to independent dealers is available, same should be treated as the basis for arriving at the assessable value in respect of sales to Syndet also. (Para 19)