ORDER
Gowri Shankar, Member (T)
1. The respondent had filed a price list in Part I for the compressors manufactured by it. It also filed price list in Part II for the same kind of compressors showing the price lower by assessable value Rs. 150 per compressor than in the Part I price list for sales to bulk buyers. Notice was issued proposing disallowance of the lower price on the ground that the bulk buyers did not constitute a different class of buyer and cannot be distinguished from other wholesale buyers, there cannot be more than one price for the same class of buyer. The notice was alleged that the claim for lower price, that the bulk buyers purchased a substantial quantity had not been justified. The Asstt. Collector declined to accept the assessee’s contention that the price was on account of the fact that the bulk buyers constituted a different class because of the quantity of compressors that they purchased, and higher purchases in the past than other buyers. He confirmed the proposal in the notice.
2. On appeal on the order the Collector (Appeals) accepted the contention of the assessee that the bulk buyers were a different class and that the lower price was permissible. Hence this appeal.
3. The Departmental Representative explains the reasoning in the appeal. This is that the normal price applicable to wholesale dealer should be made applicable to this bulk buyers and that the Collector (Appeals)’s conclusion that there can be more than one class of dealers is erroneous.
4. The Advocate for the respondent contends that the bulk buyers are distinguishable from the other kind of buyers for reasons of region and geography, meeting competition and higher quantities to be purchased and purchased in the past by them. He further contends that the appeal itself is not maintainable because it refers to discount. It is not a discount but reduction in prices that the manufacturer gave. He says that there is no allegation either in the notice or the appeal that a difference in the price is not due to commercial consideration. He cites the following decisions in support. Indian Rayon Industries v. C.C.E. -1994 (73) E.L.T. 25, Goramal Hariram v. C.C.E. -1994 (69) E.L.T. 269, Sriram Food & Fertilizers v. C.C.E. -1996 (85) E.L.T. 34, Hydrokrimp AC. Pvt Ltd. v. C.C.E. -1996 (81) E.L.T. 162.
5. We are not able to accept the contention that the appeal is not maintainable for the reason it speaks of discount. It does, indeed refer to discount but so does the order of the Collector (Appeals). It would be reasonable to say that the authorities have not considered the matter the reduction in price as discount, as it really ought to be understood as reduction from the list price available either generally or on fulfillment of prescribed condition. The show cause notice alleged that the reduction appear to be nothing but to be a discount. The Collector (Appeals) and department appeals have referred it as discount.
6. We are also not able to perceive the existence of any rational or commercial consideration for the reduction of price. The total number of bulk buyers is 20. Of these three each are in Delhi and Madras, two each at Bangalore and Secunderabad, one each in Indore, Surat, Ahmedabad, Rajkot, Cochin, Vijayawada, Guntur, Coimbatore and Yaman. It is not disputed that there are dealers other than bulk buyers at these places. We are also not able to see any geographical consideration between the buyers and bulk buyers located within the same geographical region and often in the same town. There is nothing to lead us believe that the difference between the bulk buyers and other buyers is on account of greater quantity of goods purchased by them. The notice itself refers to variation in quantity between 52 tons and 1541 tons (during 1990-1991) purchased by these buyers. The contention that another manufacturer M/s. Sriram Refrigeration Industries Ltd., Hyderabad may have been permitted to have lower price for their bulk buyers is not relevant, such a price has not been produced and it is not possible to say the same considerations obtained there as is obtained here. That consideration is not relevant in deciding the legal admissibility of the lower price.
7. The Collector (Appeals)’s has relied upon the Tribunal decision in Goramal Hariram v. C.C.E. – 1994 (69) E.L.T. 269 to say that it is up to the assessee to have different class of buyers. There can be no dispute with that conclusion, however he has overlooked the criteria laid down in the decision, which has been repeated in many others. While it is open to the assessee to classify buyers according to commercial consideration, the classification has to be rational and identifiable based purely on commercial consideration and it cannot be arbitrary. We have already indicated that it is not possible to see the existence of any rational or commercial consideration to distinguish the bulk buyers from any other buyers.
8. The first three decisions cited by the respondent relate to the permissibility of a discount to dealers based on different dealers. That criteria does not apply to the fact of the case. The last reiterates the view of the Supreme Court judgment in Basant Industry v. Addl. Collector-1996 (81) E.L.T. 176 that “it is essential to bear in mind the fact in the business world considerations of a relationship with the customer are also relevant factor.” The existence of such business relationship has also not been established.
9. We are accordingly of the view that the Collector (Appeals) order has to be set aside and restore the Asstt. Collector’s order.