1. The appellants herein are engaged in the manufacture of Chassis of Motor Vehicles in their factory at Jamshedpur since 1954. With the levy of Central Excise duty on Motor Vehicles under Tariff Item 34 of the Central Excise duty on Motor Vehicles under Tariff Item 34 of the erstwhile Central Excise Tariff Schedule in 1956, the appellants were paying excise duty on all their clearances of Motor Vehicle Chassis (herein after referred to as MVCs) irrespective of the category of the customer/location, based on its Net Dealer Price (hereinafter referred to as NDP) charged for sales made at its factory gate, even in respect of vehicles stock transferred from the factory to various Regional Sales Offices (herein after referred to as RSOs) from where sales were made eventually to the dealers/buyers. In the middle of September, 1975, the appellants filed price lists in terms of the proposed new Section 4 of the Central Excise Act introduced in October, 1975, indicating that the sales are being mae at the factory gate to dealers and also that the vehicles are transferred from the factory of RSOs for sales therefrom, and requested the Asstt. Commissioner to approve payment of duty based on NDP as is applicable to concerned RSO after deducting the cost of transportation. Vide letter dated 30.9.1975, the appellants claimed that duty on clearances to RSOs should also be levied at the prices applicable on wholesale rate, sinces sales were effected in the course of wholesale trade to dealers at the factory namely, dealers in the State of Bihar. The price lists for clearances to dealers in Bihar were approved by the Asstt. Commissioner's letter dated 1.10.1975. The Asstt. Commissioner also approved separate set of price list filed for clearances to RSOs directing payment of excise duty on NDP charged by RSOs for sales made from RSOs. Thus the price for dealers in Bihar was not made applicable for removals to RSOs for eventual sale therefrom. The appellants agitated the issue of assessment of RSOs clearances at the normal price a is applicable for dealers in the State of Bihar for whom clearances are directly made from the factory, but without any success, before the Central Excise Authority and therefore, they filed Writ Petition No. 704 of 1976 before the Hon'ble Patna High Court seeking issue of direction to Excise Authorities to take the wholesale cash price ex-works as the value for levying excise duty of MVCs sold to RSOs. On 5.1.77,the petition was allowed, the Revenue filed an application for certificate for leave to appeal under Article 133(1) of the Constitution; the same was rejected by the Patna High Court by its order dated 28.2.78; the Revenue filed SLP No. 3989 of 1978 on 24.4.78 before the Hon'ble Supreme Court which by its order dated 23.4.89, dismissed the SLP. The price lists filed from 1975 to Feb. 1983 declaring NDP charged from the dealers at the factory were approved by the department an duty was paid based on this value even for transfers to RSOs. However, from March, 1983, onwards price lists filed by the appellants were not approved as above and the price lists were directed to be approved provisionally from 3.3.83. The appellants were directed to file separate price lists in respect of sales through RSO. The appellants ten filed a Writ Petition No. 802/88 before the Patna High Court praying for issue of writ of prohibition, prohibiting the department from in any manner provisionally assessing the price lists on the ground of any enquiry in the prices of MVCs sold by them from RSO and praying for approval of price lists without considering the sale price from RSOs. The petition was allowed on 27.9.88 and the High Court directed the department to approve the price lists without any delay and held that the normal price charged on the dealers from the factory gate would be the assessable value of the MVCs. This order was set aside by the Hon'ble Supreme Court by its order dated 10.11.1997, wherein the Court directed the Asstt. Commissioner to carry out the assessments after such enquiries as he considered necessary for the purpose. Pursuant to the order of the Supreme Court, statements of several officers of the appellants and also of same dealers were recorded by the department and investigations took place.
2. On the basis of investigations, a show cause notice dated 7.3.2001 was issued proposing recovery of Rs. 1,07,80,57,188/- as basic duty and Rs. 66,99,837/- towards automobile cess on the ground that the price at which the MVCs are sold from RSOs should be based on the value for removals to RSOs (no demand was raised in respect of factory gate sales) and proposing recovery of Rs. 45,66,60,000/- towards excise duty and Rs. 29,51,000/- towards automobile cess by inclusion of charges for pre-delivery inspection and expenses incurred by the dealer and after-sales service charges and warranty carried out by the dealers to the customer in the assessable value of the MVCs. The notice also proposed penal action on the appellants company under rule 173Q etc.
and on 4 employees of the company under Rule 198 of the Central Excise Rules. The notice was contested. The Commissioner who adjudicated the notice confirmed the demands raised there under, imposed penalty equal to duty on the company and confirmed the demand and interest and he also imposed penalties of the following amounts on the following persons: - (a) Demand for Rs. 108.47 crores (approx.) on sales made from the depot.
4. The entire basis of the demand is the Supreme Court decision in the case of MRF [1995(77)ELT 433] which has been followed by the Commissioner by holding that the buyers at the depots are different classes of buyers from the buyers at the factory gate. In the MRF case, clearances were made at the factory gate to Government buyers and the rest of the production was transferred to depots from where they were sold to dealers in the course of wholesale trade. The relevant extract from the judgement is reproduced below :- Sri Nariman has an alternate, and a simpler, solution. He suggests that all the aforesaid exercise can be avoided if the department accepts the price at which the assessee sells its goods to the government at the gate as the normal price of all the goods sold for the purpose of Section 4(1)(a). He submits that it is not the case of Revenue that the sales to the government are not normal or genuine transactions. It is also not suggested, he says, that the price at which the goods are sold to the government is not the normal price in the course of wholesale trade. In such a situation, the most convenient _ convenient from the point of view of the Revenue as well as the assessee _ course would be to treat the price at which the goods are sold to the government as the normal price within the meaning of Section 4(1)(a). In fact, the learned counsel says, that it should be the only method. " "26. With respect to the alternative argument of Sri Nariman, we must say that no direction can be given to the authorities to adopt the price at which the assessee sells it goods to the government as the price in respect of its total sales. Firstly, by virtue of proviso (i) to Section 4(1)(a)., the Government would be a class by itself and the price charged to it would be relevant only to the goods sold to it. So far as depot sales are concerned, they are to a different class of classes of buyers and in respect of the goods sold to them, the price charged to each of such class of buyers would be the normal price. The price charged to one class of buyers cannot, therefore, be directed to be adopted as the price in respect o all the clauses of buyers. Since the position under the old Section 4 and new Section 4 is held to be the same, this holding holds good for both periods." In the present case, dealers buying goods at the factory gate and those buying from the depots are buying goods from the appellants on the same terms and conditions and under the identically worded dealership agreement. in such a situation, the MRF decision is not applicable. We note that in the case of Transpek Industry Ltd. [2002(146)ELT 423], the Tribunal after considering the MRF judgement, rejected the contention of the department that buyers who bought goods from consignment agents of the assessee are a separate class of buyers from those who bought goods at the factory gate of the assessee. The relevant portion of the above decision reads as under :- "..... We have heard both sides. we find that the Commissioner has discussed 3 fold sale patterns viz. (i) contract sale (2) ex-factory sale to individual buyers and (3) clearances to consignment agents and held hat sales were through consignment agents and therefore, the normal price can be considered at the place of consignment agents and not at the factory gate. We are unable to agree with the conclusion in view of the decision of the Apex court in the case of Indian Oxygen Ltd. Vs CCE [1988 (36) ELT 723 (SC)] in which it has been held that when ex-factory price exists and is ascertainable, that is to be taken as the basis of value under section 4 of the CEA, even for the goods, sold the decision of the Supreme Court in the case of M/s. MRF Ltd. [1995 (77) ELT 433 (SC)] wherein the Apex Court has held that normal price for one class of buyers is not to be adepted for other class of buyers by treating buyers through consignment agents as a separate class of buyers at the factory gate. however, we not that in the case of CMC (India) ltd. Vs CCE Ahmdabad [1997 (95) ELT 255 (Tri)], the Tribunal has held that buyers of the factory gate and buyers through consignment agents do not constitute separate class of buyers. In this view of the matter, the decision i the case of Indian Oxygen (supra) will be directly applicable as a factory gate price is available in this case. In the light of the case law discussed above, we set aside the impugned order and allow the appeal." 5. Similarly, in the case of J.K. Helene Curtis Ltd. [2003(153)ELT 440] the Tribunal held that when the assessee sells its production at the factory gate and the sale price of the goods sold at the factory is not disputed, the goods sold through the regional depots should also be assessed on the basis of the factory gate price. The Tribunal held that the Supreme Court decision in the MRF was into applicable and applied the decision of the Suprme Court decision in the case of India Oxygen Ltd. [1988(36)ELT723.(SC)]. In the present case the factory gate price is not disputed as seen from the fact that no demand has been raised in respect of the factory gate sales to dealers. Therefore, the ratio of the transpek Industry Ltd and J.K. Helene Curtis Ltd. orders are squarely applicable to the facts of the present case.
6. The reliance placed by the Id. Consultant for the Revenue on the Tribunal's Larger Bench decision in the case of CCE vs Taparia Tools Tld. [2001(131)ELT 306 ] is misplaced. In that case, M/s. Taparia Tools Ltd. were selling their product at the factory gate to independent buyers and they were also clearing goods to their depots and selling there from at different prices. On the basis of evidence placed on record, they claimed that the dealers at different places were different classes of buyers. The Tribunal observed that the question whether a wholesale buyer of dealer is a separate class of buyer or not, is a question of fact which has to be decided on appreciation of the entire evidence. In our view, this decision does not lay down the principle of law that in all cases, dealers' buying from the depots should be treated as class of buyers different from those buying at the factory gate. In the present case, there is no factual basis to treat dealers in different States as separate class of buyers - the terms and conditions of sale are identical for dealers located in various States, there is no uniform maximum retail price inclusive of local tax for the appellants' goods through out the country; the basic price to the dealers and dealers basic price to customers are always prior to levy of local tax and local sales tax and other locallevies are charged extra and are to the buyers' account and are shown separately in the invoice raised by the appellants on their dealers.
Thus, this is not a case where there is one fixed retail price inclusive of local tax throughout India and the purchase price varies from State to State depending upon the location of the dealer. In other words, the location of the dealer and the local tax element payable by him has no bearing on the prices charged by the appellants from their dealer for sales of motor vehicles and in these circumstances, no basis exists for treating dealers in different states as different class of buyers. While it is true that the net dealer price at the depot is slightly higher than the net dealer price at the factory gate, the difference is explained as entirely due to the cost of transportation, insurance and temporary local registration charges of Rs. 30/- and in addition a small amount is included in the ex-depot price to cover the operative expenses incurred by the depot. In other words, the landed cost to the dealer at his premises will be the same when he buys the goods directly from the factory or from the depot and this would also go to show that in the present case, the dealers in different States belong to the same class of buyers.
7. We also find that Taparia Tools decision cited supra has been considered in the case of CCE vs. Bharat Aluminium Co. Ltd. (BALCO) (Final Order No. 331/03 NB(A) dated 4.7.2003, wherein he department contended that the dealers at depot of BALCO are different classes of buyers from the dealers buying the goods at the factory gate, on the basis of the Larger Bench decision in Taparia Tools Ltd. The Tribunal considered the issue and rejected the above submission of the Revenue on the grounds that (i) The Taparia Tool's decision did not lay down as a principal that dealers buying the goods at depot of a manufacturer and dealers buying at factory gate are to be treated as different classes of buyers and (ii) in any event the department is bound by the circular dated 25.1.90 wherein it was clarified by the Board that the dealers buying from the factory gate and dealers buying from the depot cannot be treated as different classes of buyers.
8. In view of the above, we hold that the factory gate price is applicable even for gods transferred to the regional sales depots of the appellants and reject the finding of the Commissioner that such goods are to be assessed on the basis of the price at which they were eventually sold from the RSO.9. The finding of the Commissioner is also contrary to the CBEC's circular dated 25.1.90 which clarifies that dealers situated in different places cannot be treated as different classes of buyers. The circular was relied upon by the Commissioner who did not follow the same, by observing hat the situation is changed after the verdict of the Apex Court in the case of MRF. However, the appellants are correct in contending that the above circular is binding upon the Revenue in the light of the Apex Court decision in Dhiren Chemicals [2002(143)ELT.19] wherein the court held that although, the expression "on which duty of excise has already been paid" which was the issue in dispute was interpreted by the Court in favour of the Revenue, if thee are circulars which have been issued by CBEC placing different interpretation thereupon, that interpretation will be binding upon the Revenue, and in the light of the Tribunal's order in the case of Bharat Aluminium Co. Ltd. supra which dismissed the Revenue's contention on the same basis.
10. It is also relevant to note that the entire basis of holding that buyers at the factory gate are a different classes of buyers at the depot is based upon the conclusion that sales a the factory gate takes place only to dealers in Bihar. The evidence on the basis of which his finding bas been arrived at consists of statements of various officers of the appellants, viz. Shri A. Mishra, Deputy Manager, Shri P.K.Mishra, Sr. Manager and Mr. Rajesh Singal, Sr. Sales Officer at the RSO. On the other hand, details of sales made at the factory gate to dealers outside Bihar were available in the Commissioner's order. The details are as under :-S. Name of the Party Place Serial No Date of -------- InvoiceNo despatch --- ------- Amount1 Himatsingka Auto Enterprises Banderdewa GGO56878 2.9.82 AD/VC 02018 7.5.82 7523802 Himatsingka Auto Enterprises Banderdewa GGO56879 2.9.82 AD/VC02096 31.5.82 9028573 Himatsingka Auto Enterprises Banderdewa GGO56690 23.6.82 AD/VC03041 21.6.82 6019054 Himatsingka Auto Enterprises Banderdewa GGO56880 2.9.82 AD/VC04045 20.7.82 3009535 Himatsingka Auto Enterprises Banderdewa GGO56881 2.9.82 AD/VC04046 20.7.82 3159076 Himatsingka Auto Enterprises Banderdewa GG56882 2.9.82 AD/VC04047 20.7.82 7523807 Himatsingka Auto Enterprises Banderdewa GGO57227 11.11.82 AD/VC05231 31.8.82 1493558 Himatsingka Auto Enterprises Banderdewa GGO57234 11.11.82 AD/VC05194 31.8.82 1431639 Himatsingka Auto Enterprises Banderdewa GGO57233 11.11.82 AD/VC05193 31.8.82 15042610 Himatsingka Auto Enterprises Banderdewa GGO57232 11.11.82 AD/VC05142 31.8.82 30095311 Himatsingka Auto Enterprises Banderdewa GGO57231 11.11.82 AD/VC05064 19.8.82 14396312 Himatsingka Auto Enterprises Banderdewa GGO57228 11.11.82 AD/VC06043 16.9.82 75228113 Himatsingka Auto Enterprises Banderdewa GGO57230 11.11.82 AD/VC06186 28.4.82 29457714 Himatsingka Auto Enterprises Banderdewa GGO57229 11.11.82 AD/VC06276 30.5.82 30095315 Himatsingka Auto Enterprises Banderdewa GGO57235 11.11.82 AD/VC07042 15.10.82 30095216 Himatsingka Auto Enterprises Banderdewa GGO57237 11.11.82 AD/VC07163 19.10.82 15047617 Himatsingka Auto Enterprises Banderdewa GGO57236 11.11.82 AD/VC07164 19.10.82 45047618 Himatsingka Auto Enterprises Banderdewa GGO57238 11.11.82 AD/VC07264 45142819 Himatsingka Auto Enterprises Banderdewa GGO57278 11.11.82 AD/VC08029 11.11.82 30095320 Himatsingka Auto Enterprises Banderdewa GGO57279 11.11.82 AD/VC08129 17.11.82 45142921 Himatsingka Auto Enterprises Banderdewa GGO57280 11.11.82 AD/VC08221 25.10.82 31155422 Himatsingka Auto Enterprises Banderdewa GGO57281 11.11.82 AD/VC08274 30.11.82 30075223 Himatsingka Auto Enterprises Banderdewa GGO61837 19.8.83 AD/VC09104 16.12.82 70095224 Himatsingka Auto Enterprises Banderdewa GGO61838 19.8.83 AD/VC09105 16.12.82 1507125 Himatsingka Auto Enterprises Banderdewa GGO59801 7.6.83 AD/VC09287 31.12.82 14390326 Himatsingka Auto Enterprises Banderdewa GGO59802 7.6.83 AD/VC09288 31.12.82. 30093227 Himatsingka Auto Enterprises Banderdewa GGO59803 7.6.83 AD/VC09289 31.12.82 45642928 Himatsingka Auto Enterprises Banderdewa GGO59659 10.5.83 AD/VC10062 8.1.83 14376329 Himatsingka Auto Enterprises Banderdewa GGO59660 19.8.83 AD/VC10186 25.1.83 45192930 Himatsingka Auto Enterprises Banderdewa GGO59661 19.5.83 AD/VC11040 15.2.83 30095231 Himatsingka Auto Enterprises Banderdewa GGO597662 19.5.83 AD/VC11064 28.2.83 60190532 Himatsingka Auto Enterprises Banderdewa GGO59804 7.6.83 AD/VC12100 16.8.83 14376233 Himatsingka Auto Enterprises Banderdewa GGO59805 7.6.83 AD/VC12018 24.3.83 75238134 Himatsingka Auto Enterprises Banderdewa GGO59806 7.6.83 AD/VC12244 25.1.83 43142835 Sanghi Motors (Bombay) Ltd Bombay Y843983 9.6.81 584/82 21.7.82 16049636 Andaman Motors (P) Ltd Andamans T162386 29.3.8237 Andaman Motors (P) Ltd Andamans T162385 20.3.8238 Andaman Motors (P) Ltd Andamans T162389 20.3.82 8082 15.1.82 16262939 Andaman Motors (P) Ltd Andamans T162392 20.3.82 8083 10.11.8240 Andaman Motors (P) Ltd Andamans T162398 29.3.8241 Andaman Motors (P) Ltd Andamans T16239 29.3.82 9212 31.12.82 16972542 Andaman Motors (P) Ltd Andamans T162394 29.3.82 9273 31.12.82 16972543 Andaman Motors (P) Ltd Andamans T162397 29.3.8244 Andaman Motors (P) Ltd Andamans T165006 26.8.8245 Doddanavar Brothers Belgaum G263176 26.8.82 16.8.82 22512346 Sundaram Automobiles Akola Y313621 8053 11.11.82 60274347 Himatsingka Auto Enterprises Subansisi GGO6928848 Himatsingka Auto Enterprises Subansisi GGO69289 1.8.84 100114 2.5.84 18429749 Himatsingka Auto Enterprises Subansisi GGO69290 1.8.84 100115 2.5.84 15409750 Himatsingka Auto Enterprises Subansisi GGO69291 1.8.84 100116 2.5.84 15809751 Himatsingka Auto Enterprises Subansisi GGO69592 30.9.84 100266 8.6.8452 Himatsingka Auto Enterprises Subansisi GGO73686 19.4.85 100716 25.7.84 11648753 Himatsingka Auto Enterprises Subansisi GGO73687 19.4.85 100684 24.7.84 11648754 Himatsingka Auto Enterprises Subansisi GGO73688 19.4.85 100682 18.7.84 11648755 Himatsingka Auto Enterprises Subansisi GGO73689 19.4.85 100650 17.6.84 11648756 Himatsingka Auto Enterprises Subansisi GGO73690 19.4.85 100620 12.7.84 21693457 Himatsingka Auto Enterprises Subansisi GGO73691 19.4.85 100581 9.7.84 21693458 Himatsingka Auto Enterprises Subansisi GGO73685 19.4.85 100886 14.8.8459 Himatsingka Auto Enterprises Subansisi GGO73692 19.4.85 100865 11.8.84 11648760 Himatsingka Auto Enterprises Subansisi GGO73693 19.4.85 100864 11.8.84 11648761 Himatsingka Auto Enterprises Subansisi GGO73694 19.4.85 100837 10.8.84 11648762 Himatsingka Auto Enterprises Subansisi GGO73695 19.4.85 100791 2.8.84.
11648763 Himatsingka Auto Enterprises Subansisi GGO75327 1.8.85 101196 13.8.84 21693564 Himatsingka Auto Enterprises Subansisi GGO75326 1.8.85 101165 7.9.84 21693565 Himatsingka Auto Enterprises Subansisi GGO75325 1.8.85 101240 19.9.84 11726266 Himatsingka Auto Enterprises Subansisi GGO75324 1.8.85 101239 19.9.84 11726267 Himatsingka Auto Enterprises Subansisi GGO75323 1.8.85 101220 14.9.84 11726268 Himatsingka Auto Enterprises Subansisi GGO75322 1.8.85 101219 14.9.84 11726269 Himatsingka Auto Enterprises Subansisi GGO75321 1.8.85 101203 13.9.84 11726270 Himatsingka Auto Enterprises Subansisi GGO75320 1.8.85 101172 8.9.84 11726271 Himatsingka Auto Enterprises Subansisi GGO73696 19.4.85 101170 8.9.84 11726272 Himatsingka Auto Enterprises Subansisi GGO73697 19.4.85 101121 8.9.84 11726273 Himatsingka Auto Enterprises Subansisi GGO73577 26.2.85 101629 29.10.84 21693574 Himatsingka Auto Enterprises Subansisi GGO73145 28.1.85 101712 8.11.84 15900875 Himatsingka Auto Enterprises Subansisi GG073146 24.1.85 101703 8.11.84 15409876 Himatsingka Auto Enterprises Subansisi GGO73147 24.1.85 101702 8.11.84 15409877 Himatsingka Auto Enterprises Subansisi GGO73148 24.1.85 101701 8.11.84 15409878 Himatsingka Auto Enterprises Subansisi GGO73149 24.1.85 101704 8.11.84 15409879 Himatsingka Auto Enterprises Subansisi GGO73150 24.1.85 101706 8.11.84 21693580 Himatsingka Auto Enterprises Subansisi GGO73576 26.2.85 101705 8.11.84 21693581 Himatsingka Auto Enterprises Subansisi GGO73578 26.2.85 102046 10.12.84 15487282 Himatsingka Auto Enterprises Subansisi GGO73579 26.2.85 102098 14.12.84 15487283 Himatsingka Auto Enterprises Subansisi GGO73580 26.2.85 102029 6.12.84 15409884 Himatsingka Auto Enterprises Subansisi GGO75332 1.8.85 103601 28.3.85 22723085 Himatsingka Auto Enterprises Subansisi GGGO75331 1.8.85 103600 28.3.85 22723186 Himatsingka Auto Enterprises Subansisi GGO75330 1.8.85 103599 28.3.85 22723087 Himatsingka Auto Enterprises Subansisi GGO75329 1.8.85 103598 28.3.85 22723088 Himatsingka Auto Enterprises Subansisi GGO75328 1.8.85 103597 28.3.85 22723089 Himatsingka Auto Enterprises Subansisi GGO75339 1.8.85 103635 29.3.85 16696990 Himatsingka Auto Enterprises Subansisi GGO75349 1.8.85 103798 31.3.85 16754891 Himatsingka Auto Enterprises Subansisi GGO75348 1.8.85 103797 31.3.85 16754892 Himatsingka Auto Enterprises Subansisi GGO753251 1.8.85 103801 31.3.85 16071193 Himatsingka Auto Enterprises Subansisi GGO75350 1.8.85 103800 31.3.85 16071194 Himatsingka Auto Enterprises Subansisi GGO75338 1.8.85 103629 29.3.85 16013295 Himatsingka Auto Enterprises Subansisi GGO75337 1.8.85 103628 29.3.85 16013296 Himatsingka Auto Enterprises Subansisi GGO75336 1.8.85 103627 29.3.85 16013297 Himatsingka Auto Enterprises Subansisi GGO75335 1.8.85 103626 29.3.85 16013298 Himatsingka Auto Enterprises Subansisi GGO75334 1.8.85 103625 29.3.85 16013299 Himatsingka Auto Enterprises Subansisi GGO75333 1.8.85 103624 29.3.85 160172100 Himatsingka Auto Enterprises Subansisi GGO75343 1.8.85 103649 30.3.85 160132101 Himatsingka Auto Enterprises Subansisi GGO75342 1.8.85 103648 30.3.85 160132102 Himatsingka Auto Enterprises Subansisi GGO75341 1.8.85 103647 30.3.85 160132103 Himatsingka Auto Enterprises Subansisi GGO75340 1.8.85 103646 30.3.85 160132104 Himatsingka Auto Enterprises Subansisi GGO75347 1.8.85 103718 31.3.85 159004105 Himatsingka Auto Enterprises Subansisi GGO75346 1.8.85 103717 31.3.85 159004106 Himatsingka Auto Enterprises Subansisi GGO75345 1.8.85 103716 31.3.85 159004107 Himatsingka Auto Enterprises Subansisi GGO75344 1.8.85 103715 31.3.85 159004108 Himatsingka Auto Enterprises Subansisi GGO69287 1.8.85 100112 2.5.84 150097109 Andaman Motors (P) Ltd Port Blair T174933 8.3.84 100831-33 10.8.84 522368110 Andaman Motors (P) Ltd Port Blair T172461 29.10.83 100526 5.7.84 166820111 Andaman Motors (P) Ltd Port Blair T172453 29.10.83112 Andaman Motors (P) Ltd Port Blair T172464 29.10.83113 Andaman Motors (P) Ltd Port Blair T172462 20.10.83114 Andaman Motors (P) Ltd Port Blair T174926 8.3.87115 Himatsingka Auto Enterprises Subansisi GG124703 24.12.92 101601 30.11.85 381221116 Himatsingka Auto Enterprises Subansisi GG170760 9.11.97 102613 3.8.85 132639117 Himatsingka Auto Enterprises Subansisi GG124702 24.12.92 100799 29.8.85 136802118 Himatsingka Auto Enterprises Subansisi GG124701 24.12.92 48860119 Himatsingka Auto Enterprises Subansisi GG120759 9.11.92 148437120 Himatsingka Auto Enterprises Banderdewa GG124705 24.12.92 101985 22.12.86 285312121 Himatsingka Auto Enterprises Banderdewa GG124704 24.12.92 1101769122 Himatsingka Auto Enterprises banderdewa GG110622 30.8.91 7594075 11. In addition, according to the dealership agreement, it is clear that dealers can buy either from the factoryor from the depot. The Commissioner doe not dispute that sales were made at factory gate even to dealers outside Bihar and he has rejected the above fact only on the ground that the appellants have not indicated the percentage of such sales (sales to dealers outside Bihar) out of the total sales, as seen from the following finding :- "On close analysis of their submissions in this regard it is noticed that they have given the names of three dealers namely (I) Himatsingha Auto Enterprises. Banderdewa, (2) Andman Motors (P) Ltd. Port Blair and (3) Sunder Automobiles, Akola to whom they had effected their sale, without giving any particulars of the quantum of sale, in percentage of their total clearance. Further I have also noticed that during 1982-83 said sales were effected to the dealers No.(1), (2) & (3) above during 1984-85 to dealers No. (1) & (2) only, in 1985-6 to dealer No. (1) only, in 1986-87 dealer No. (1) only in 1989-90 dealer No. (1) only and in 1990-91 dealers No.(1) & (2) only. Such kind of incomplete submission without any statistical data is not acceptable to prove that their so called ex-factory sale price was applicable for their sale to the dealers of other states outside Bihar. Rathe they had made a futile effort by shieving their records to give the name of only three dealers in order to substantiate their submissions, which is not sufficient to me to accept." 12. The records in the form of invoices etc. also clearly show that goods were sold at the factory gate to dealers outside Bihar also, and not only to dealers in Bihar, and the documentary evidence will over-ride the oral evidence in the form of officers' statements. We, therefore, hold that the Commissioner's finding that sales at factory gate took place only to dealers in Bihar is erroneous.
13. Regarding the the plea of res judicata, the appellants are correct in contending that the decision of the Hon'ble Patna High court dated 5.1.77 in Writ Petition 704/1976 and upheld by the Supreme Court by its order dated 23.4.79 holding that the price at which the goods were sold at the factory gate should be adopted for ex-RSOs sales and rejecting the Revenue's stand that gods sold through RSOs should be assessed on the basis of ex-RSOs price less transportation charges, operates as res judicata In the present impugned order, the Commissioner has observed that the principles of res judicata is not applicable as new facts have come into light viz. that sales at the factory gate wee made only to dealers in Bihar. However, this is not a new facts as even in the Patna High Court, both sides proceeded on that factual basis. The High Court judgement also noticed that slightly higher price was charged at depot and therefore, it is not open to the department to contend before us that the slightly higher price charged at depot is a new fact.
Therefore, the earlier judgement of the High Court cannot be ignored and the Supreme Court decision dated 10.11.97 repotted in 1997(96) ELT 209 S.C. reversing the Patna High Court's subsequent order dated 27.9.88, by which the Court set aside the action of the department of issuing show cause notice by agitating the ex-RSOs price for goods cleared from the factory of the stock transferred to RSOs, does not affect the position as the Supreme Court reversed the High Court's order essentially on the ground that the High Court could not interfere in a writ petition in the case of provisional assessment, before facts are gathered by the department. In other words, the reversal of the High Court order dated 27.9.88 was essentially on the ground of alternate remedy available to the assessee.
14. In the light of the above discussions, we hold that the demand of Rs. 108.47 crores is not sustainable and accordingly set aside the same. As the entire demand is being set aside, we do not consider the alternate argument regarding quantification.
(b) Demand of over Rs. 5 crores on account of after-sales service charges, pre-delivery inspection chargs (PDI) and warranty charges.
The show cause notice alleges that the assessment various should at, as follows :- "(A) In respect of MVCs which were sold to the Dealers of Bihar at the Ex-factory NDP price for deliver at the Factory : In such cases, the ex-factory NDP price was not the sole consideration of sale. Hence in such cases the assessable value should be based on the aggregate of such ex-factory NDP price and the money value of the following additional considerations flowing from the dealers to the TELCO, in terms of section 4(1)(b) of the said Act read with rule 5 of the Central Excise (Valuation) Rules, 1975 :- (i) In the case of PDI and After Sale Service, prior to 1.4.98, the amount equivalent to the prevaling "Labour Rates" prescribed by the TELCO themselves from time to time, and (ii) in the case of warranty, prior to 1.10.98, the amount to the extent of 50% o the prevailing ":Labour Rates", prescriebd by the TELCO themselves from time to time.
(B) In respect of MVCs which were sold to the Dealers of outside Bihar at the ex-RSO NDP price for delivery at the RSO : In such cases, the ex-RSO NDP price was not the sole consideration of sale. Hence in such cases the assessable value should be determined in terms of section 4(1)(b) of the said Act read with rule.5 of the Central Excise (Valuation) Rules, 1975. Accordingly, in such cases, the assessable value should be based on the aggregate of such ex-RSO NDP price and the money value of the following additional considerations flowing from the dealers to the TELCO, by applying the principles laid down in the rule 5 of the Central Excise (Valuation) Rules, 1975:- (i) in the case of PDI and After Sale Services, prior to 1.4.98, the amount equivalent to the prevailing :Labour Rates", prescribed by the TELCO themselves from time to time, and (ii) in the case of Warranty, prior to 1.10.98, the amount to the extent of 50% of the prevailing "Labour Rates", prescribed by the TELCO themselves from time to time" 15. At the outset, we note that in the appellants' own case relating to their Pune factory in identical circumstances, the Tribunal has held that such charges cannot be included in the assessable value of motor vehicles cleared by the appellants. This decision is reported at 2000(121)ELT 224 and upheld by the Supreme Court on 13.3.2001 when the appeal filed by the Revenue against the Tribunal's order was dismissed.
The issue is also covered by several decisions of the Tribunal such as Philip India Ltd. [1997(91)ELT 541] and Mahindra & Mahindra [1998(25)RLT 547]. We also not that although the sow cause notice alleges that the appellants had collected certain amounts towards PDI charges from their dealers, the statement annexed to the notice itself would show that no amount has been collected by the dealers which is retained by the appellants. The statement of Shri S.L. Jajodia, Sr.
Manager (Customs Services), Telco Ltd. Jamshedpur recorded on 23.2.2000 brings out that the appellants had not collected and retained any amount from dealers towards the price of the vehicle. The factual position is that when PDI is carried out by the dealer who does not sell the vehicle, he is paid both for labour charges and the materials irrespective of date of sale (1.4.98). However, prior to 1.4.98 the full payment of labour charges paid to such dealer was debited to the dealer who actually sold the vehicle. Similary, in respect of warranty service, money was recovered from the selling dealers only to be paid to the servicing dealer, and no amount was retained by the appellants.
An identical question was raised in respect of identical agreement entered into by the appellants with their dealers in respect of their Pune factory. The Asstt. Commissioner held that the recovery of expenses on account of labour cost by the assessee from the selling dealer, irrespective of customer availing such free after sales services from any other service dealer or service station results in flow back of additional monetary consideration to the assessee to the extent of labour charges of free after sales services. He held that the value of such consideration was to be added to determine the assessable value of the vehicles manufactured and cleared by the appellants (which is the similar finding in the present case). the Commissioner (Appeals) having upheld the adjudication order, the appellants had filed an appeal before the Tribunal which by its order cited supra, set aside the order of the lower Appellate Authority after considering the submissions of the Revenue regarding flow back to the assessee and rejecting the same. The Revenue filed an appeal to the Supreme Court; the appellants filed a countor affidavit explaining their marketing pattern, after sales service and PDI provided by the dealers, specifically submitting that they did not collect any amount from the dealers for proving free after sales service. After considering the issue and looking into the owner's manual and service book and other relevant papers, the Apex court dismissed the Revenue appeal as it was not satisfied that there was any payment in regard to labour for the free service rendered by the dealers to motor vehicles manufactured by the appellants. We find that the dealership agreement considered by the Tribunal earlier for the appellants's Pune factory is similar to one in the present case and therefore, applying the ratio of the Tribunal's earlier order, as upheld by the Supeme Court, we hold that this duty demand is not sustainable. Further, we note that the Revenue's contention that after sales service and PDI charges were incurred by the dealers out of the margin provided by the manufacturer and therefore, the same were incurred by the dealers on behalf of the manufacturers, has been rejected by the Tribunal in the case of Mahindra & Mahindra [1998(25)RLT 547] which was upheld by the Apex Court vide order dated 15.3.1999 reported at 1999(11)ELT A 126(SC). We, therefore, set aside the demand on this account.
16. The interest levied under Section 11AB of the Central Excise Act and penalty under Rule 173Q imposed upon the appellants company as also the penalties imposed upon the other persons under Rule 198 are set aside in view of our above findings.
17. In the result, we set aside the impugned order and allow the appeals.