Advocates Appeared:
V. Sridharan, S.C. Mohanty,N.K. Sarkar

ORDER

Per Archana Wadhwa :

The issue involved in all these appeals is the same. As such a common order is being passed. The issue relates to the determination of the assessable value of calcined alumina transferred from appellants' factory at Damanojodi to its other factory located at Angul for the manufacture of aluminium. Out of the total production of alumina, about 50% is exported by the appellant, 44% is consumed in the production of aluminium metal in their smelter plant at Angul by way of transfer of stock in part VI price list and the balance amount is sold to M/s. BALCO who is also a manufacturer of aluminium metal in the public sector and small quantities of alumina are also sold to casual buyers at the factory gate. For sale of alumina to the buyers at the factory gate the appellants filed a price list in part-I with remark that - "this price list is applicable to only supply of calcined alumina to customers lifting small quantities without formal purchase order."

2. The Department's contention is that the price at which the alumina was sold to the independent buyers at the factory gate should be treated as a normal price under the provisions of Section 4 (1)(a) and should be adopted as assessable value for inter-plant transfer. The assessees' submission on the other hand is that having regard to the negligible quantity purchased by these buyers at the factory gate, the price thereof cannot be called as wholesale price. The sales to these buyers were sporadic in nature without any regularity or consistency and as such they cannot be treated as ordinary sale in the course of wholesale trade. They have further contended that the sale made at the factory gate to one class of buyer would not be the assessable value for all clearance as is the settled law. It is submitted by their Advocate Shri V. Sridharan that there are more than one class of buyers which would come into play and as such Section 4 (1)(a) price is inapplicable in such case. He submits that value of the captive consumption removal has to be determined under Section 4 (1)(b) read with Rule 6 (b)(i) of the Central Excise Valuation Rules. He submits that there are two prices available under Rule 6 (b)(i) - the price charged from casual buyers and price charged from M/s. BALCO. He submits that BALCO is a manufacturer of aluminium like the appellants but the casual buyers are all non-aluminium manufacturers but are manufacturers of refractories. As such no comparison can be made to the price charged from these small time casual buyers who are not even aluminium manufacture, the final product, for which alumina is mostly used. He submits that the bulk buyers and casual buyers are two different class of buyers and different prices charged from them are justified. He submits that if at all the sale price of the appellants has to be adopted as the assessable value for captively consumed alumina the price at which the goods were being sold to BALCO would be more appropriate. In support of his above submissions he relies upon a number of judgment of the various authorities. On the other hand Shri N.K. Sarkar, learned JDR appearing for the Revenue submits that if the assessee is covered by the provisions of Section 4 (1)(a) the provisions of Section 4 (1)(b) are inapplicable. He submits that the factory gate sale being available, the same would apply to the captively consumed items notwithstanding the percentage of such sale. Section 4 (1)(a) used the expression 'buyer' which can be of any type and need not be a particular type of buyer similarly situate to the assessee. He distinguishes the judgment relied upon by the appellants by submitting that the same were rendered in peculiar circumstances and the ratio thereof is not applicable to the instant case.

3. We have considered the submissions of both the sides. The appellants have submitted a chart showing total quantity manufactured by them, quantity transferred to their smelter unit at Angul, quantity exported, quantity sold to BALCO and sales made to casual buyers. As per this break-up 44% is being consumed captively by them in Angul, 55% is being exported, .34% is being sold to M/s. BALCO and .06% is being sold to different casual buyers. The question for determination as to whether this small percentage of sales to various units can be taken as representative sale of the alumina in the course of wholesale trade so as to adopt the prices of the same as assessable value of alumina for the purpose of captive consumption. In the year 1987-88, out of the total quantity of 1,61,407 MTs only 9.801 MTs have been sold to different buyers more or less, same is the situation in the other years. It is not disputed before us that these casual buyers are not manufacturers of aluminium but are manufacturers of refractories and need a very small quantity of alumina on rare occasions and not on regular basis. These buyers come for spot purchase and as contended by the Advocate the price cannot be taken as of representative character of the price.

4. In the case of Godrej Soaps Ltd. Vs. C.C.E. - 1999 (35) RLT 303 (T) = 1999 (111) ELT 374 (T) it was held that 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.

5. Similarly in the case of Metal Box India Ltd. Vs. C.C.E., Madras - 1995 (75) ELT 449 (SC) the Hon'ble Apex Court observed in para 12 of their judgment that the buyer who purchases small quantities of goods may stand in different class as compared to a buyer who purchases 90% of manufactured goods. He would certainly form a separate and distinct class.

6. In the case of SAIL Vs. C.C.E., Jamshedpur - 1997 (19) RLT 219 = 1997 (90) ELT 502 (T) - Bulk of goods were being transferred to sister plants of manufacturing company at special discount. The Tribunal held that quantum of discount normally granted to the purchaser of bulk quantity of such goods is reasonable to be allowed while making comparable adjustment in determining the value under Rule 6 (b)(i). This observation was made after considering the fact that the appellants sell the goods to independent buyers in quantity which can be regarded as small quantity.

7. Similarly in the case of Knit-Foulds Private Ltd. Vs. C.C.E., Chandigarh - 1997 (18) RLT 679 = 1998 (100) ELT 470 (T), while determining the value for captively consumed goods it was observed that if they are industrial consumers who purchased the goods in bulk, the price charged to them should be the price for valuation of captively consumed goods.

8. In the case of National Rayon Corpn. Ltd. Vs. C.C.E. (Appeals) - 1984 (15) ELT 201 (T), it was observed that as per common commercial practice to give preferential treatment in the matter of pricing to buyers who lift larger quantities vis-a-vis to buyers who purchase in smaller lots, the assessee's action in adopting the lower selling price at which the goods were being sold to bulk buyers was upheld.

9. In the case of D.C.W. Ltd. Vs. C.C.E. - 1992 (62) ELT 153 (T) it was held that industrial consumers are a class of buyers and the factory gate price approved under Pt.-II price list in respect of industrial consumers who are a class of buyers is deemed to be the normal price.

10. The ratio of all the above decisions is to the effect that the stray sales made to customers who are not similarly situate cannot be considered as a normal factory gate selling price under the main clause of Section 4 and that there can be different class of buyers for which different factory gate sale price may prevail. As is undisputed on record that the sales to casual buyers are only in small percentage and are very rare, these sales cannot take the character of representative assessable value so as to adopt the same for the purpose of ascertaining the assessable value of the captively consumed goods. It is also admitted by the Revenue that these buyers are not manufacturers of aluminium for which alumina is the main raw material, but they are a manufacturer of refractories and need small quantity of alumina for use in their factory. On the other hand we find that alumina is also being sold to M/s. BALCO though under contract and Pt.-II price list was filed for the same. M/s. BALCO is similarly situate as the appellants i.e. they also require alumina for the manufacture of aluminium. As such it can be safely concluded that the appellants and M/s. BALCO make a separate class of buyers as has been held in the case of D.C.W., the price filed in Part II in respect of a particular class of buyers shall be deemed to the normal price for the purpose of Section 4 (i)(a). As such we hold that the price at which the calcined alumina, loose as well as packed was being sold to M/s. BALCO can appropriately be adopted as a price for the captively consumed alumina. We order accordingly.

11. The appellants have raised another objection in respect of one of their price list No. 2/87 effective from 28.4.87. The said price list was approved by the Asstt. Collr. by a speaking order on 2.5.89 vide which the price declared by the appellants was raised by adopting the price at which the appellants purchased the alumina from M/s. INDAL for a short period. No appeal was filed against the above order by either side. As such the appellants' contention that the said approval of the price list had become final and it was not open to the Department to restart the process by way of issuance of show-cause notice on 22.8.89 proposing to revise the approval of the price list No. 2/87 with retrospective effect. On this issue we find that the Constitution Bench of the Hon'ble Supreme Court in their judgment in the case of C.C.E. Baroda Vs. Cotspun Ltd. - 1999 (34) RLT 709 have held that no short-levy can be said to have occurred when the duty was being paid on the basis of the approve C/List. Applying the ratio of the said decision to the facts of the instant case and to the provisions of Rule 173C, which are analogous to Rule 173B we hold that no duty can be demanded from the appellants in respect of Price List No. 2/87 with retrospective effect. We also note show-cause notice was issued on 22.8.90, the price list No. 2/87 had ceased to be in force as another price list No. 5/90 dt. 30.7.90 had been filed by the appellants by that time. As such we hold that the show-cause notice dated 22.8.90 seeking to modify the approved price list was not sustainable.

12. The appellants had taken a plea that during the period 1.3.89 to 15.3.95 alumina was exempted from payment of duty under Not. No. 217/86 if used within the factory of production or any other factory of the same manufacturer subject to the observance of Chapter X procedure. Learned Advocate submitted that Chapter X Procedure was followed by them from 20.4.89 to 24.7.89 but thereafter the same was not followed as the Department was not permitting the credit of modvat of duty paid on the inputs used in alumina which was being further used in the manufacture of aluminium in the appellants' sister unit. It was submitted that the dispute in the said unit was resolved by the Tribunal's decision in their own case as reported in 1997 (95) ELT 331. It was the contention of the learned Advocate that irrespective of their having not followed the procedure of Chapter X they would still be entitled to the benefit of Not. No. 217/86 for the above period as has been held in the case of Thermax Vs. C.C.E. - 1992 (61) ELT 352 and by the Bombay High Court in Solar Pesticides Vs. UOI - 1992 (57) ELT 201 as also by the C.B.E. C. Circular dated 27.7.87 which is to the effect that the benefit of concession should be granted when even intended use of material can be established by other evidence.

13. We find in the present case that there is no dispute about the fact that the calcined alumina manufactured in appellant's factory at Damanojodi was being used for the manufacture of aluminium in the appellants' another unit at Angul. As such the same would be entitled to the benefit of Not. No. 217/86. We find force in the appellants' argument that Chapter X procedure was not followed by them because the Department had not allowed them to avail modvat credit in respect of the inputs used in the manufacture of calcined alumina and were not allowing them to utilise the said credit for discharge of duties on their final product that is aluminium manufactured in their Angul Unit. Otherwise also there being no dispute about availability of substantive benefit, non-compliance with the procedural aspect cannot result in denial of the benefit of Notification to the appellants. Accordingly we hold that the appellants were entitled to the benefit of the said Notification for the period after 1.3.89 and prior to 15.3.95.

14. Accordingly the issues raised in all these appeals are answered as follows:

(i) The price at which the calcined alumina, loose as well as packed, is being sold to M/s. BALCO shall be adopted as an assessable value of calcined alumina being transferred to their sister unit;

(ii) No demand of duty can be raised in respect of the price list No. 2/87; and

(iii) Benefit of Not. No. 217/86 is available to the appellants for the period after 1.3.89 and prior to 15.3.95.

All the appeals are disposed of accordingly.