Judgment:
1. The respondent is absent in spite of notice of hearing. There is no request for adjournment. We have heard Shri M. Ali, learned JDR.2. The dispute arose in relation to the price list No. 472/88-89 effective from 10-11-1988 filed by the respondent, declaring the value of TV Model 555 NR as Rs. 4,900/- attracting concessional rate of duty Rs. 1,500/- as per Notification 68/96. The concessional rate of duty was not applicable in case the value of the unit exceeds Rs. 5,000/-.
The price list was approved under the Central Excise Rules, 1944. It was found that all the TV sets manufactured by the respondent were being sold to M/s. Beltek Electronics and that the buyer was incurring expenses for advertisement, sales promotion, sales incentives etc. but these elements were not included in the assessable value by the respondent. It was also found that the price of some of the components shown in the cost data furnished by the respondent was lower than the real price paid by the respondent. If these two defects in the assessable value were rectified, the assessable value would exceed Rs. 5,000/- per set and duty of Rs. 2,000/- per set would be payable.
Accordingly show cause notice dated 2-11-1989 was issued proposing to approve the price list with a direction that the duty of Rs. 2,000/- was payable. The notice also required the respondent to show cause as to why differential duty of Rs. 500/- per set on TV sets cleared during the period from 10-11-1988 to 28-2-1989 should not be recovered under Section 11A of the Central Excise Act, 1944 and penalty should not be imposed. The respondent appeared and contested the notice on merits and also on the ground of limitation. The Assistant Collector approved the price list as proposed and directed differential duty of Rs. 500A per set to be paid for the sets cleared during the said period. He also imposed a penalty of Rs. 1,000/-.
3. In appeal, the Collector (Appeals) held that the price list was based on a valid contract entered into on principal to principal basis; that there was no evidence adduced by the department to reject the contract price and therefore, the assessable value should be based on contract price and not on the basis of cost data. The Collector also held that notice was barred by time and that respondent had not been asked to furnish B2 bond. This order is now challenged by the department.
4. Going by the facts in the orders passed by the original authority and the Appellate authority, it is clear that the respondent had entered into a contract with the buyer for manufacture and sale of TV sets at Rs. 4,900/- per set besides Excise duty. Evidently, the respondent was required to provide cost data and furnished such data.
Show cause notice was issued on the basis of the value of some of the component items appearing in one or two gate passes of the appellants for those components. Going by the average price of some of the components shown in the gate passes, the Assistant Collector concluded that in the cost data, the value of the components has been depressed to the extent of Rs. ISO/- per set. If this amount is added to the figure of Rs. 4,900/-, the assessable value per set would be more than Rs. 5,000/-. It was also found that the buyer of goods was incurring expenses for advertisement, sales promotion and same should be added to the assessable value. If this be correct, the assessable value would exceed Rs. 5,000/-.
5. We fail to see the logic of going by the cost data in a case where the appellant was manufacturing and selling TV sets on contract. The department has on case that the price stipulated in the contract exceeded Rs. 5,000/-. Admittedly, the price stipulated was Rs. 4,900/-.
The department did not go into the question whether this price was genuine or not, but instead, called for cost data and picked holes in the data so furnished. The appeal Memorandum refers only to discrepancies in the value of some of the components shown in the cost data.
6. Shri M. Ali, contended that if the total cost of the components was Rs. ISO/- more than the cost shown in the cost data, the respondent could not have sold the TV sets at Rs. 4,900/- per set but would have sold at a price of Rs. 5,050/- per set to cover the differential value of components. Price fixation is a complicated exercise resting on various facts, one of which may be the rate of tax or the rate of duty.
By fixing the price at Rs. 4,900/- that is giving up a part of the profit, the buyer would be paying Rs. 500/- less as duty than the duty which would have been charged if the net price exceeded Rs. 5,000/-.
The department never challenged the genuineness of the price fixed in the contract. In the absence of such allegation or evidence the department could not have enhanced the assessable value.
7. The goods were manufactured with the brand name of the buyer. Sales by the buyer could not affect the manufacturer since the manufacturer had the advantage of the contract for supply of a specified number of TV sets. Therefore, the expenses incurred by the buyer for advertisement, sales promotion, etc. cannot be recovered as additional consideration from the buyer to the manufacturer and the same could not have been added to the assessable value.
8. For the reasons stated above, we confirm the impugned order and accordingly dismiss the appeal.