Disposition: Appeal allowed

ORDER

Jyoti Balasundaram, Member (J)

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 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 a 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 made at the factory gate to dealers and also that the vehicles are transferred from the factory to 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, since 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. Commissioners 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 sales therefrom. The appellants agitated the issue of assessment of RSOs clearances at the normal price as 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 Honble Patna High Court seeking issue of direction to the 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 Honble 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 and 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 then 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 Honble 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 some 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 asseesable 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 thereunder, 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:-

1. Shri A.P. Arya, Sr. Vice President Rs. 1000/-

(2) Shri S.Muzumdar, former DGM(Finance) Rs. 750/-

(3) Shri P.K. Sinha, Sr. Manager(Finance) Rs. 500/-

(4) Shri A.Mishra, Deputy Manager, Rs. 250/-

Hence these appeals.

3. We have heard both sides and record our findings as under:-

(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 purposed 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 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 its 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 or 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 of all the classes 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 that 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. v. CCE [1998 (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 from depots. The adjudicating authority has gone by the decisions 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 adopted for other class of buyers by treating buyers through consignment agents as a separate class of buyers at the factory gate. However, we note that in the case of CMC (India) Ltd. v. CCE Ahmedabad [1997 (95) ELT 255], 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 decisions in 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 not applicable and applied the decision of the Supreme Court decision in the case of Indian Oxygen Ltd. [: 1988(36)ELT723.(S.C). 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 ld. Consultant for the Revenue on the Tribunals Larger Bench decision in the case of CCE v. Taparia Tools Ltd. [: 2001(131)ELT 306 is misplaced. In that case, 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 or dealer in 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 case, 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 local levies 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 prices 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 from 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 v. Bharat Aluminium Co. Ltd. (BALCO) (Final Order No. 331/03 NB(A) dated 4.7.2003, wherein the 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 Toolss decision did not lay down as a principle 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 bythe 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 goods 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 CBECs 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 that 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 there 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 Tribunals order in the case of Bharat Aluminum Co.Ltd. supra which dismissed the Revenues 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 at the factory gate takes place only to dealers in Bihar. The evidence on the basis of which his finding has 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 Commissioners order. The details are as under:-

S.No.

Name of the Party

Place

Serial No

Date of despatch

Invoice Number Date

Amount (Rs.)

















1

Himatsingka Auto Enterprises

Banderdewa

GGO 56878

2.9.82

AD/VC 02018

7.5.82

752380

2

Himatsinqka Auto Enterprises

Banderdewa

GGO 56879

2.9.82

AD/V/C 02095

31.5.82

902857

3

Himatsingka Auto Enterprises

Banderdewa

GG056690

23.6.82

AD/V/C 03041

21.6.82

601905

4

Himatsingka Auto Enterprises

Banderdewa

GG056880

2.9.82

AD/V/C 04045

20.7.82

300953

5

Himatsingka Auto Enterprises

Banderdewa

GG056881

2.9.82

AD/V/C 04046

20.7.82

315907

6

Himatsingka Auto Enterprises

Banderdewa

GG56882

2.9.82

AD/V/C 04047

20.7.82

752380

7

Himatsingka Auto Enterprises

Banderdewa

GG057227

11.11.82

AD/V/C 05231

31.8.82

149355

8

Himatsingka Auto Enterprises

Banderdewa

GG057234

11.11.82

AD/V/C 05194

31.8.82

143163

c

Himatsingka Auto Enterprises

Banderdewa

GG057233

11.11.82

AD/V/C 05193

31.8.82

150426

10

Himatsingka Auto Enterprises

Banderdewa

GG057232

11.11.82

AD/V/C 05142

31.8.82

300953

11

Himatsingka Auto Enterprises

Banderdewa

GG057231

11.11.82

HD/V/C 05064

19.8.82

143963

12

Himatsingka Auto Enterprises

Banderdewa

GG057228

11.11.82

AD/V/C 06043

16.9.82

752281

13

Himatsingka Auto Enterprises

Banderdewa

GG057230

11.11.82

AD/V/C 06186

28.4.82

294577

14

Himatsingka Auto Enterprises

Banderdewa

GG057229

11.11.82

AD/V/C 06276

30.9.82

300953

15

Himatsingka Auto Enterprises

Banderdewa

GG057235

11.11.82

AD/V/C 07042

15.10.82

300952

16

Himatsingka Auto Enterprises

Banderdewa

GG057237

11.11.82

AD/V/C 07163

19.10.82

150476

17

Himatsingka Auto Enterprises

Banderdewa

GG057236

11.11.82

AD/V/C 07164

19.10.82

450476

18

Himatsingka Auto Enterprises

Banderdewa

GG057233

11.11.82

AD/V/C 07264



451428

19

Himatsingka Auto Enterprises

Banderdewa

GG057278

17.12.82

AD/V/C 08029

11.11.82

300953

20

Himatsingka Auto Enterprises

Janderdewa

GG057279

17.12.82

AD/V/C 08129

17.11.82

451429

21

Himatsingka Auto Enterprises

Banderdewa

GG057280

17.12.82

AD/V/C 08221

25.11.82

311554



22

Himatsingka Auto Enterprises

Banderdewa

GG057281

17.12.82

AD/V/C 08274

30.11.82

300752

23

Himatsingka Auto Enterprises

Banderdewa

GG061837

19.8,83

AD/V/C 09104

16.12.82

700952

24

Himatsingka Auto Enterprises

Banderdewa

GG061838

19.8.83

AAD/V/C 09105

16.12.82

150477

25

Himatsingka Auto Enterprises

Banderdewa

GG059801

7.6.83

AO/V/C 09287

31 12.82

143963

26

Himatsingka Auto Enterprises

Sanderdewa

GG059802

7.6.83

AD/V/C 09288

31.12.82

300932

27

Himatsingka Auto Enterprises

Banderdewa

GG059803

7.6.83

AD/V/C 09289

31.12.82

456429

28

Himatsingka Auto Enterprises

Banderdewa

GG059659

10.5.83

AD/V/C 10062

8.1.83

143763

29

Himatsingka Auto Enterprises

Banderdewa

GG059660

19.8.83

AD/V/C 10186

25.1.83

451929

30

Himatsingka Auto Enterprises

Banderdewa

GG059661

19.5.83

AD/V/C 11040

15.2.83

300952

31

Himatsingka Auto Enterprises

Banderdewa

GG0597662

19.5.83

AD/V/C 11064

28.2.83

601905

32

Himatsingka Auto Enterprises

Banderdewa

GG059804

7.6.83

AD/V/C 12100

16.6.83

143762

33

Himatsingka Auto Enterprises

Banderdewa

GG05980S

7.6.83

AD/V/C 12018

24.3.83

752381

34

Himatsingka Auto Enterprises

Banderdewa

GG0598Q6

7.6.83

AD/V/C 12244

25.3.83

431428

35

Sanqhi Motors (Bombay) Ltd

Bombay

Y843983

9.6.81

584/82

21.7.82

160496

36

Andaman Motors (P) Ltd

Andamans

T162386

29.3.82







37

Andaman Motors (P) Ltd

Andamans

Tl 62385

20.3.82







38

Andaman Motors (P) Ltd

Andamans

T162389

20.3.82

8082

15.11.82

162629

39

Andaman Motors (P) Ltd

Andamans

T162392

20.3.82

8083

10J1.82



40

Andaman Motors (P) Ltd

Andamans

T162398

29.3.82







41

Andaman Motors (P) Ltd

Andamans

T16239

29.3.8.

9212

31.12.82

169725

42

Andaman Motors (P) Ltd

Andamans

T162394

29.3.82

9273

3). 12.82

169725

43

Andaman Motors (P) Ltd

Andamans

Tl 62397

29.3.82







44

Andaman Motors (P) Ltd

Andamans

T165006

26.8.82







45

Doddanavar Brothers

Belgaum

G263176

26.8.82



16.8.82

225123

46

Sundaram Automobiles

Akola

Y313621



8053

11.11.8

602743



47

Himatsingka Auto Enterprises

Subansisi

GG069288









48

Himatsingka Auto Enterprises

Subansisi

GG069289

1.8.84

100114

2.5.84

184297

49

Himatsingka Auto Enterprises

Subansisi

GG069290

1.8.84

100115

2.5.84

154097

50

Himatsingka Auto Enterprises

Subansisi

GG069291

1.8.84

100116

2.5.84

158097

51

Himatsingka Auto Enterprises

Subansisi

GGOG9592

30.9.84

100266

8.6.84



52

Himatsingka Auto Enterprises

Subansisi

GG073686

19.4.85

100716

25.7.8

116487

53

Himatsingka Auto Enterprises

Subansisi

GG073687

19.4.85

100684

24.7.84

116487

54

Himatsingka Auto Enterprises

Subansisi

^GG073688

19.4.85

100652

18.7.84

116487

55

Himatsingka Auto Enterprises

Subansisi

GG073689

19.4.85

100650

17.6.84

116487

56

Himatsingka Auto Enterprises

Subansisi

GG073690

19.4,85

100620

12.7.8"

216934

57

Himatsingka Auto Enterprises

Subansisi

GG073691

19.4.85

100581

9.7.84

216934

58

Himatsingka Auto Enterprises

Subansisi

GG073685

19.4.85

100886

14.8.84



59

Himatsingka Auto Enterprises

Subansisi

GG073692

19.4.85

100865

11.8.84

116487

60

Himatsingka Auto Enterprises

Subansisi

GG073693

19.4.85

100864

11.8.84

116487

61

Himatsingka Auto Enterprises

Subansisi

GG073694

19.4.85

100837

10.8.84

116487

62

Himatsingka Auto Enterprises

Subansisi

GG073695

19.4.85

100791

2.8.84

116487

63

Himatsingka Auto Enterprises

Subansisi

GG075327

1.8.85

101196

13.0.84

216935

64

Himatsingka Auto Enterprises

Subansisi

GG075326

1.8.85

101165

7.9.84

216935

65

Himatsingka Auto Enterprises

Subansisi

GG075325

1.8.83

101240

19.9.84

117262

66

Himatsingka Auto Enterprises

Subansici

GG075324

1.8.85

101239

19.9.84

117262

67

Himatsingka Auto Enterprises

Subansisi

GG075323

1.8.85

101220

14.9.84

117262

68

Himatsingka Auto Enterprises

Subansisi

GG075322

1.8.85

101219

14.9.84

117262

69

Himatsingka Auto Enterprises

Subansisi

GG075321

1.8.85

101203

13.9.84

117262

70

Himatsingka Auto Enterprises

Subansisi

GG075320

1.8.85

101172

8.9.84

117262



71

Himatsingka Auto Enterprises

Subansisi

GG073696

19.4.85

10117C

8.9.84

117262

72

Himateingka Auto Enterprises

Subansisi

GG073697

19.4.85

101121

8.9.84

117262

73

Himatsingka Auto Enterprises

Subansisi

GG073577

26.2.85

101629

29.10.84

216935

74

Himatsingka Auto Enterprises

Subansisi

GG07345

28.1.85

101712

8.11.84

159008

75

Himatsingka Auto Enterprises

Subansisi

GG073146

24.1.85

101703

8.11.84

154098

76

Himatsingka Auto Enterprises

Subansisi

GG073147

24.5.85

101702

8.11.84

154098

77

Himatsingka Auto Enterprises

Subansisi

GG073148

24.1.85

101701

8.11.84

154098

78

Himatsingka Auto Enterprises

Subansisi

GG073149

24.1.85

101704

8.11.84

154098

79

Himatsingka Auto Enterprises

Subansisi

GG073150

24.1.85

101706

8.11.84

216935

80

Himatsingka Auto Enterprises

Subansisi

GG073576

25.2.85

101705

8.11.84

216935

81

Himatsingka Auto Enterprises

Subansisi

GG073578

26.2.85

102046

10.12.84

154872

82

Himatsingka Auto Enterprises

Subansisi

GG073579

26.2.85

102098

14.12.84

154872

83

Himatsingka Auto Enterprises

Subansisi

GG073580

26.2.85

102029

6.12.84

154098

84

Himatsingka Auto Enterprises

Subansisi

GG075332

1.8.85

103601

28.3.85

22/230

85

Himatsingka Auto Enterprises

Subansisi

GG075331

1.8.85

103600

28.3.85

227231

86

Himatsingka Auto Enterprises

Subansisi

GG075330

1.8.85

103599

28.3.85

227230

87

Himatsingka Auto Enterprises

Subansisi

GG075329

1.8.85

103598

28.3.85

227230

88

Himatsingka Auto Enterprises

Subansisi

GG075328

1.8.85

103597

28.3.85

227230

89

Himatsingka Auto Enterprises

Subansisi

GG075339

1.8.85

103635

29.3.85

166969

90

Himatsingka Auto Enterprises

Subansisi

GG075349

1.8.85

103798

31.3.85

167548

91

Himatsingka Auto Enterprises

ubansisi

GG075348

1.8.85

103797

31.3.85

167548

92

Himatsingka Auto Enterprises

ubansisi

GG075351

1.8.85

103801

31.3.85

160711

93

Himatsingka Auto Enterprises

ubansisi

GG075350

1.8.85

103800

31.3.85

160711

94

Himatsingka Auto Enterprises

ubansisi

GG075338

1.8.85

103629

29.3.85

160132

95

Himatsingka Auto Enterprises

ubansisi

GG075337

1.8.85

103628

29.3.85

160132

96

Himatsingka Auto Enterprises

ubansisi

GG075336

1.8.85

103627

29.3.85

160132



97

Himatsingka Auto Enterprises

Subansisi

GG075335

1.8.85

103626

29.3.85

160132

98

Himatsingka Auto Enterprises

Subansisi

GG075334

1.8.85

103625

29.3.85

160132

99

Himatsingka Auto Enterprises

Subansisi

GG075333

1.8.85

103624

29.3.85

160172

100

Himatsingka Auto Enterprises

Subansisi

GG075343

1.8.85

103649

30.3.85

160132

101

Himatsingka Auto Enterprises

Subansisi

GG075342

1.8.85

103648

30.3.85

160132

102

Himatsingka Auto Enterprises

Subansisi

GG075341

1.8.85

103647

30.3.85

160132

103

Himatsingka Auto Enterprises

Subansisi

GG075340

1.8.85

103646

30.3.85

160132

1M

Himatsingka Auto Enterprises

Subansisi

GG075347

1.8.85

103718

31.3.85

159004

105

Himatsingka Auto Enterprises

Subansisi

GG075346

1.8.85

103717

31.3.85

159004

106

Himatsingka Auto Enterprises

Subansisi

GG075345

1.8.85

103716

31.3.85

159004

107

Himatsingka Auto Enterprises

Subansisi

GG075344

1.8.85

103715

31.3.85

159004

108

Himatsingka Auto Enterprises

Subansisi

GG069287

1.8.85

100112

2.5.84

150097

109

Andaman Motors (P) Ltd

Port Blair

T174933

S.3.84

100831-33

10.8.84

522368

110

Andaman Motors (P) Ltd

Port Blair

T172461

29.10.83

100526

5.7.84

166820

111

Andaman Motors (P) Ltd

Port Blair

T172453

29.10.83







112

Andaman Motors (P) Ltd

Port Blair

T172464

29.10.83







113

Andaman Motors (P) Ltd

Port Blair

T172462

20.10.83







114

Andaman Motors (P) Ltd

Port Blair

T174926

8.3.87







115

Himatsingka Auto Enterprises

Subansisi

GG124703

24.12.92

101601

30.11.85

381221

116

Himatsingka Auto Enterprises

Subansisi

GG170760

9.11.97

102613

3.8.85

132639

117

Himatsingka Auto Enterprises

Subansisi

GG124702

24.12.92

100799

29.8.85

136802

118

Himatsingka Auto Enterprises

Subansisi

GG124701

24.12.92





748860

119

Himatsingka Auto Enterprises

Subansisi

GG120759

9.11.92





148437

12C

Himatsingka Auto Enterprises

Banderdewa

GG124705

24.12.92

101985

22.12.86

285312

121

Himatsingka Auto Enterprises

Banderdewa

GG124704

24.12.92





1101769

122

HimatsingkaAuto 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 factory or from the depot. The Commissioner does 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 notices 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 sales, 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 1985-86 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. Rather they had made a futile effort by shieving their records to give the names 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 Commissioners finding that sales at factory gate took place only to dealers in Bihar is erroneous.

13. Regarding the plea of res judicata, the appellants are correct in contending that the decision of the Honble 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 Revenues stand that goods sold through RSOs should be assessed on the basis of exRSOs 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 gates were 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 reported in : 1997(96)ELT 209 S.C. reversing the Patna High Courts 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 Courts 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 asseessee.

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 that alternate argument regarding quantification.

(b) Demand of over Rs. 45 crores on account of after-sales service charges, pre-delivery inspection charges (PDI) and warranty charges.

The show cause notice alleges that the assessable value should be arrived at, as follows:-

"(A) In respect of MVCs which were sold to the Dealers of Bihar at the EX-factory NDP price for delivery 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 additiional 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 Services, prior to 1.4.98, the amount equivalent to the prevailing "Labour Rates", prescribed by the TELCO themselves from times to times, 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.

(B) In respect of MVCs which were sold to the Dealers of outsider 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 Sales 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"

and the impugned order confirms the demand as above.

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 values 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 appel filed by the Revenue against the Tribunals 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 note that although the show 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. Similarly, in respect of warranty service, money was recovered from the selling dealer 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 Commissioners(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 counter 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 providing free after sales service. After considering the issue and looking into the owners 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 Pune factory is similar to one in the present case and therefore, applying the ratio of the Tribunals earlier order, as upheld by the Supreme Court, we hold that this duty demand is not sustainable. Further, we note that the Revenues 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(111)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.