Per Gowri Shankar :

The appeal has been taken up for disposal with the consent of both sides after waiving deposit.

2. The appellant manufacture, inter alia a brand of soap named 'Cinthol Fresh'. M/s. Marico Industries (Marico for short) is a manufacturer of coconut oil sold under the brand name Parachute. This manufacturer decided to supply free of charge along each bottle of Parachute oil sold, a cake of Cinthol Fresh soap. For this purpose, it purchased from the appellant 1,084 MT of the soap. The order was placed on 13.11.97 for supply of the entire quantity before end of January 1998.

3. The appellant filed for goods to be cleared a declaration of price in which it claimed as the assessable value Rs. 582/- for 15 kgs. of soap. The department found that the assessable value declared by the appellant for sales to its dealers varied depending upon the location of the dealer between Rs. 1210.46 and 1083.49. Enquiries with the appellant as to the justification for the lower price to Marico having denied any response. Notice was issued proposing enhancement of the assessable value based on as 126.46 for 15 kg. and proposing penalty under Section 11AC of the Act. In its reply to the notice, the appellant pointed out that Section 4 of the Act permitted the existence of different price for the same goods at different places sold; and Marico Industries, the price was sole consideration for the sale to Marico. The Case law was extensively cited. It was contended that there was no intent to evade payment of duty and therefore, Section 11AC would not apply. The Commissioner did not accept this contention. He emphasized the failure of the assessee to furnish the cost data or other justification for the lower price and did not find enough circumstances to justify the reduction in price in excess of 50% for goods supplied to Marico Industries. He said that the contract dubious, order fictitious and the appellant's intention mala fide. He confirmed the demand for duty, imposed penalty equal to the duty under Section 11AC and interest under Section AC was also demanded.

4. The advocate for the appellant contended that he has two contentions. He says first that Marico Industries is a different class of buyer, not being a wholesale dealer. It would be more in the nature of an industrial consumer. Section 4 of the Act permits the existence of different price for different class of customer. He says further that the supply of 1084 MT within two months period is vastly in excess of supply to any wholesale dealer. No wholesale dealer purchased that quantity during the relevant period more than 500 kgs. and the amount total of any single dealer did not exceed 50 MT. This difference justified the considerably lower price to sale to Marico.

5. The departmental representative adopts the reasoning in the impugned order.

6. Marico Industries was not a wholesale dealer of goods manufactured by the appellant. It purchased the soap from the appellant for free distribution, no doubt as an incentive to buyers of Parachute oil manufactured by it. It was therefore not in the same class of buyer as wholesale dealers. Clause (i) of the proviso to Section 4 (1) (a) recognizes the legality of different price for different class of buyer for the same product where there is a practice of sale at different price to buyers of different classes. Commercial consideration that would apply to the sale of goods to one class of buyer may not apply to buyer in another class. The existence of different price for Marico Industries therefore, was in accordance with the law.

7. The supply to Marico Industries was of a quantity, in one transaction about 2000 times more than any wholesale buyer purchased at one time. This supply made in two months exceeded more than twenty times the supply made in a year to a wholesale dealer. This difference in quantity duty would justify the lower price since bulk buyer and smaller buyer fall in a different class Metal Box India Ltd., 1995 (6) R