ORDER
S.S. Sekhon, Member (Technical)
1. Respondents in appeal No. E/3435/99, (hereafter refers to as ZACL) are manufacturers of Argon gas. They entered into an agreement with M/s BOC, who had advanced an amount of Rs. 12 crores interest free, to ZACL before commencement of production of Argon gas, this loan was to be adjusted against supplies to M/s BOC who were to lift 100% of the production. The following points, learnt from the agreement entered, were alleged in the enumeration in the notice to cause extra commercial consideration, between ZACL and BOC and the nexus between the advances made and the sale price.
3. (a) ZACL are charging lower prices when Liquid Argon is cleared to BOC’s bottling units and higher prices when the same is cleared to BOC’s bulk customers such as TISCO, Special Steels. Ispat Profile. Shree Ishar Alloys Etc, whereas the invoices are issued in the name of BOC. A comparative chart showing the disparity in pricing when Liquid Argon is cleared to BOC and when the same is cleared to its bulk customers at a given time is enclosed as annexure “B”.
(b) The pricing- arrangement for supplies of Liquid Argon has been specified under Clause 9(a) of the agreement (Annexure A) vide which the price charged by Gujrat State Fertiliser Corporation (GSFC) to their customers is taken as the bench mark. It appears that ZACL who have installed the machinery / capital goods by investing huge amounts, just before commencement of production have kept extremely competitive prices for Liquid Argon compared to the market price by taking the GSFC price as the bench mark. In view of the fact that GSFC which is one of the oldest units, may have by now recovered the cost of machinery and may have no bearing on the cost of inputs viz. atmospheric air and waste gas from fertilizers which are dissipated in air, it appears that it is possible for ZACL to sell their products at prices as low as GSFC’s price only because of the advance taken.
(c)Para 6- BALANCE PRODUCT of the agreement (part of which is reproduced below) states that:
“Product in excess of the committed quantity to be bought and sold as aforesaid shall be offered to IOL at the price specified in this Agreement and if IOL refuse to purchase the same Zuari shall be free to dispose the same to any other party.
Provided however that such disposal of the product to any other party shall not be at prices and on terms more favourable than those applicable to IOL under this Agreement. Provided, however, that in case Zuari wishes to dispose of the balance of the product as any part thereof to any other party at prices and on terms more favourable than those applicable to IOL under this agreement. Zuari shall first offer such product to IOL at such favourable prices and terms”.
From this it can be constructed that BOC can dictate terms in regard to the price of Liquid Argon manufactured by ZACL and their mode of disposal of balance product.
It has been also observed from purchase orders etc. (Annexure “C”) that given at present whenever Liquid Argon is despatched to bulk buyers of BOC (invoices being issued in the name of BOC) a credit note for the discount of 20% is issued to BOC while Central Excise duty is paid on the full amount. Hence, it appears that the discount is never passed on ultimately to the bulk customers of BOC but that the same is ploughed back by BOC which means that the additional consideration flows back directly to BOC. The invoices do not show that any discount amount of 20%, ZACL have created an illusion that they are paying a higher Excise duty. However by paying Central Excise duty @ 20% on 20% of the discount amount, BOC is drawing much more benefit of the remaining amount of 20% of the discount amount. In a nutshell it can be said that by paying excise duty on discount amount ZACL have passed on a greater benefit to BOC. For the sake of clarity the following illustration is given:
Assessable value = Rs. 100/- (say)
Discount @ 20% on the assessable value = Rs. 20/-
Central Excise duty @ 20% on the assessable value = Rs. 20/-
Excess Central Excise duty @ : =20*20% =Rs.4/-
20% paid on discount amount :
-:
Benefit drawn by BOC = Discount amount - Central Excise duty on discount
= Rs.20/- -Rs.4/- =Rs. 16/-
Hence by paying Rs. 4/- as Central Excise duty Rs. 16/- has gone as benefit to BOC when the assessable value is assumed to be Rs. 100/-
4. In view of points (a) to (d) discussed above it appears that the advances had been taken specifically with a view to financing the manufacturing operations and to derive the benefit of a lower price. As per Section 4 of Central Excise Act 1944 one of the ingredients for determining the assessable value is that the price should be the sole consideration and that there should not be any additional consideration flowing back to the assessee either directly or indirectly. In the instant case the huge amount advanced by BOC has placed them in a category for preferential treatment in return for them to dictate the pricing. It further appears that had BOC not advanced Rs. 12 crores. ZACL would have required to borrow the amount from Banks for installation of machinery, advertisement, marketing and other requirements and the interest payable would have cut in into the cost of manufacture and consequently the assessable value. Hence notional interest earned @18% p.a. has been calculated for the period 6.10.94 to 31.3.97 and the duty liability of Rs. 88,50,466.00 on that amount is shown in Annexure “D”.
2. (a) Commissioner after hearing the appellant and considering the arises finding receipt of Large amount of interest free loan from a contract buyer is a significant fact relating to assessment and should have been specifically inform to the department. Therefore the extended period provisions for issue of duty demand have been correctly involved. He found and held-
“56. The facts in the present case have already been traced in para 1 to 4 of this order. The crucial aspects there from are recounted here below to facilitate an easier application of the Metal Box judgment passed by the Hon’ble Supreme Court to the present case.
a) ZACL is a Public Limited Company engaged in the manufacture of fertilisers, which has had no occasion previously to pay Central Excise duties, fertilisers being fully exempted.
b) In the course of manufacture of fertilisers, argon gas emerges as a byproduct.
c) Till 1989 such gas was released into the atmosphere unutilised and since there was no programme to bottle the gas for sale.
d) After 1989, upon their decision to market the same they entered into an agreement with BOC, also a Public Limited Company, engaged in selling industrial gases, to arrange for the purchase and distribution of the said argon gas.
e) BOC agreed to furnish to ZACL an interest free advance of Rs. 12 crores which was to be utilised by ZACL for and against the supplies of argon gas to BOC.
f) BOC would take care of the sales of the entire quantity of argon gas produced by ZACL either themselves or through them, to other industrial consumers.
g) The price of the argon gas when lifted directly by BOC for bottling by them and onward sale would be the price as applicable for the relevant period in terms of the rate notified by GSFC, plus an additional 10%.
h) In respect of sales to BOC’s bulk customers like TISCO etc., the price for the same product would be as negotiated by BOC with them. In such cases a discount of 20% of the value of gas supplied would be given by way of credit notes by ZACL to BOC. The Central Excise duty would however be on the full value of the argon gas supplied without any reduction from the price of the said discount of 20%.
i) The transportation would be carried out entirely by BOC by vacuum transporters both in respect of the argon gas lifted by them for their own compression, bottling and onward sale and when supplied directly to BOC’s bulk customers as per their directions. The cost of compression and bottling of the gas supplied to the bottling plants of BOC would also be borne by BOC.
j) Over the relevant period, 49.16% of the argon gas produced by ZACL was lifted, bottled and sold in retail by BOC and the other 50.84% moved directly to BOC’s bulk industrial consumers. The argon gas whether transported directly to the bulk consumers of BOC or to the bottling plants of BOC were moved by Vacuum insulated Transport Tankers. Whereas on the one hand the said bulk customers of BOC, put the gas directly from the tankers to industrial use, on the other, when moved to BOC’s bottling plants, the gas was bottled in smaller containers and marketed. The transportation cost of the gas was borne by BOC in all cases.
57. Enquiries with regard to pricing of argon gas from other formations revealed that in Surat Central Excise I Commissionerate it was reported as being between Rs. 33 to Rs. 40 per cubic meter whereas in Bangalore Central Excise Commissionerate it fell from Rs. 27 to Rs. 24 within the span of one month. In Mumbai Central Excise II Commissionerate it was Rs. 32 per cubic meter when sold in tankers and Rs. 42 per cubic meter when sold in cylinder. The latter price is after compression and bottling. The GSFC price fixed from time to time as is relevant to this case also varied between Rs. 27 per cubic meter and Rs. 50 per cubic meter. Thus it is seen that the product was vulnerable to irregular price fluctuations. In terms of para 9 (a) of the agreement entered into by ZACL with BOC, the price payable by BOC for the sale directly to their bottling plants, was to be the GSFC notified price plus 10% thereof. No trade discount had been given by ZACL to BOC on the said 49.16% of argon gas produced and supplied to BOC’s bottling plants. The Central Excise duty has been paid on the whole value of clearance to BOC without any deductions.
58. In respect of argon gas supplied directly to BOC’s bulk industrial consumers, the price for sale was as negotiated by BOC with their – customers, upon which Central Excise duty would be paid. ZACL would however give to BOC a 20% commission by way of credit notes. What is relevant here is that the Central Excise duly had been paid on the whole value of clearances i.e. without deducting the 20% given by ZACL to BOC through credit notes. (It was explained by ZACL’s legal representative at the Personal Hearing that the 20% commission given by them to BOC, was for the latter to incur the expenditure related to transportation, compression, bottling and handling). Securing the best possible price for the product traded by them is a primary objective common to all business transactions. As such, in the two tier sales of argon gas carried out by BOC in respect of the supplies of the same by ZACL to them (i.e. one for bottling by them and onward sale and the other for direct delivery in tankers to BOC’s bulk industrial customers) what needs to be considered is whether the Central Excise duty had been paid on the correct value or on a preferential price and whether the fact of availment of advances by ZACL from BOC had in any way influenced the price, implying a flowback.
59. From the pricing pattern adopted in the two tier sale system it emerges that the price charged by ZACL to BOC for delivery to the latters bottling plants was the price that was for the time being notified by GSFC (a State Government Undertaking ) plus 10%. It was explained at the Personal Hearing that the GSFC price was mutually accepted as a standard base in views all round acceptance and for ZACL and BOC to have a criterion to go by. There was no deduction by way of discount for payment of Central Excise duty due on the product. The cost of transportation was borne by BOC, which was permissible deduction, if such transportation cost was incurred by ZACL as per Section 4(2) of the Act. The Central Excise duty paid by ZACL was on the GSFC price plus 10%. Once the gas was moved by tankers by BOC to their bottling plants, the cost of compression and bottling was borne by BOC. Since compression and bottling was also deemed to be manufacturing activity. BOC used to first avail MODVAT credit of the duty amount charged to them by ZACL and discharge their own duty liability, necessitated by their own manufacturing activity of compression and bottling.
60. In regard to sales which were directly delivered by ZACL to Boc’s bulk industrial customers, the price, as mentioned earlier, was the best negotiated price between BOC and their bulk industrial customers. The price was one which would be applicable for a specific period, such as annual etc. It was explained that such a standard price had to be agreed to, to overcome the vulnerability of this product to frequent price fluctuations. This alone could ensure that BOC’s contracts with their bulk customers had the necessary transactional viability. Such negotiated prices were changed only after the term of their respective agreements lapsed. The negotiated prices on occasions were higher than the GSFC price plus 10% and were sometimes lower than the same. Thus it is seen that the negotiated prices in all cases were not higher than the GSFC price plus 10% which was the price at which ZACL supplied the gas to BOC’s bottling plants. On occasions such as during the period 1.11.96 to 31.03.97 when the clearances were made to TISCO, shri Ishar Alloy Steels Ltd., Kalyani Steels and Ispat Profiles Ltd., during the period 1.5.96 to 30.9.96 when the clearances were made to Kalyani Steels, during the period 1.5.96 to 31.10.96 when the clearances were made to TISCO and during 1.5.96 to 30.9.96 when the clearances were made to Kalyani Steels, was lower than the GSFC’s price plus 10%. Thus it is seen that the prices negotiated by BOC with their bulk industrial consuming customers were on occasions higher than the price at which it was sold to BOC’s bottling plants (i.e. GSFC price + 10%) whereas sometimes it was lower.
61. In respect of the negotiated prices to the bulk customers of BOC a commission to the extent of 20% of the value of the clearances was paid by ZACL to BOC. The departmental implication is that since this 20% was paid by credit notes by ZACL to BOC, it would tantamount to a disguised flow back. It is relevant to acknowledge here that BOC had borne the cost of transportation, handling, insurance etc. Of the gas which was the trading part of their business activity of dealing in industrial gases. The commission of 20% therefore has to be seen as the bonafide commercial expectation of a manufacturer cum dealer of industrial gases. The litmus test therefore would be to see whether there has been a lowering of value for the purpose of Central Excise duty payment. This is not the case because the Central Excise duty liability has been discharged by ZACL on the full undiscounted value of the gas supplied by ZACL to BOC’s bulk customers, without claiming the 20% commission as a trade discount.
62. It is also relevant to mention that the agreement stipulates interalia that the advance furnished by BOC to ZACL was interest free. The amount advanced had to be utilised as payment for periodic supplies of argon gas. In terms of Clause 12(b) of the agreement if there was a break in the supply, interest on the balance amount would have to be paid by ZACL to BOC. This is a credible proviso in the agreement to conclude that the advance had been paid by BOC, above all, for regular supplies of the gas by ZACL, which is an acceptable parameter as being within normal course of wholesale trade. This apart, the other fact of some relevance is that the advanced amount had to be fully utilised by ZACL for their supplies of argon gas to BOC within 3 years agreement itself was valid for 10 years. Thus for seven years of agreement, there would have been supplies without the cover of any advance. The conclusion that inevitably gets drawn from this is that BOC was indeed in need of a regular supplier of argon gas for which their commercial assurance was the fact of furnishing an advance payment for 3 years for the uninterrupted supply of their argon gas requirement. The advance amount was meant to be utilised by a new entrant in the field of argon gas production, who could while utilising the amount for setting up the requisite plant, would also be bound to making supplies only to or through BOC. The pricing pattern discussed at length in the proceeding paragraphs, which shows that there has not been a lowering of price to couch the fact of availment of the advance, indicates that the transaction were well within the compass of wholesale trade.
63. It needs to be mentioned that over the relevant period, the value of clearances of argon gas supplied to BOC’s bottling plants was of Rs. 5,07,81,084/- for 15,37,378.40 standard cubic meters. Over the same period the value of the said gas to BOC’s bulk industrial consumers was of Rs. 5,29,48,475/- for 15,90,054.70 standard cubic meters. It is thus seen that mere is an excess of Rs. 21,67,391/- in the value of supplies made to the bulk customers compared to what was supplied to BOC’s bottling plants. In other words, there was a value difference between the two was only of 2.09% which cannot be said to be unusual, given the inherent feature of this product namely large scale and irregular fluctuations in prices as borne out by the statistics furnished by the other field formations. This findings can be better appreciated by the fact that even when the prices charged to the same customer vary, each such price can be accepted provided such different prices are dictated by the sale and market conditions, such as timing, quantity of products sold and market prices at the relevant point in time.
64. The benchmark to adjudge whether notional interest on advances availed can be included in the assessable value or not in terms of the Hon’ble Supreme Courts Metal Box judgment, is thus to see whether the availment of the advance by ZACL caused them to lower the prices of their products to BOC. BOC is a Public Limited Company, completely independent of ZACL in regard to business interests, and is in the business solely of bottling and / or marketing industrial gases. The product itself namely argon gas arising during the manufacture of fertilizers normally escapes into the atmosphere unless liquefied, bottled and marketed as has been done here. It is perhaps for this reasons that as ascertained from other Commissionerates where liquid argon gas is manufactured, the whole sale prices of this product appears to be vulnerable to frequent fluctuations of price. In such a situation for a, company like BOC which is solely engaged in the wholesale business of supplying industrial gases the fixing of a standard price as a determinant (such as the 10% in excess of the GSFC prices here) is an inevitable commercial consideration and would seem to conform to the requirements arising in the normal course of wholesale trade of this particular product. In view of the foregoing, if this aspect has been specifically provided for in the agreement, it cannot be interpreted as BOC having influenced the prices of ZACL’s products on account of advances furnished by them to ZACL and becomes more clear, when the characteristics of the product and the variability of its prices are viewed in conjunction.
65. From the reasons spelt out in my findings from para 49 to 64 preceding it is held that there is no nexus established between the fact of ZACL having availed of interest free advances from BOC and the price of ZACL’s products to BOC in consequence. There is also no other covert flow back necessitating the requirement of addition of notional interest to the assessable value of the said argon gas.” (Underlining supplied)
(b) Revenue in this appeal has taken the following grounds-
(i) Commissioner has not appreciated the nature of arrangements and terms and conditions of manufacture of Argon Gas by ZACL for supply to M/s . BOC which clearly show that the prices charged were not from principal to principal and were influenced by the various considerations including the advance which had been extended by M/s. BOC. As per the agreement M/s. ZACL was required to sell and M/s. BOC to purchase the Argon Gas in Liquid form manufactured by ZACL at its factory in Goa and the product was to be made available by ZACL to BOC for re-sale or for BOC’s own use or for such other purposes as BOC may at its sole discretion decide. M/s. ZACL was selling the entire material to BOC and deliveries were made to BOC’s botting unit and to BOC’s bulk customers in accordance with the prices being fixed / negotiated by BOC. In case the delivery were to the bulk customers of BOC, ZACL were paying 20% of the contacted amount to BOC as per the agreement. Thus a direct benefit was being given to BOC for sale to other customers at orders of BOC primarily because the BOC had advanced interest free loan to ZACL. Commissioner has not appreciated that this advance had a bearing and nexus to the sale price at which the product was being delivered to BOC’s bottling unit which price was less than the price at which the product was delivered to the bulk customers. Thus, besides the prices of the product being lower in case of deliveries t BOC’s bottling unit, direct cash benefit was also flowing from ZACL to BOC amounting to 20% of the ARP and within around two and a half years alone more than one crore had been paid by M/s. ZACL to M/s BOC on this account. The Commissioner, therefore, erred in arriving at the finding that there was no additional consideration flowing from ZACL to BOC and that the interest free advance has no nexus or effect on the assessable value at which the goods were being cleared for delivery of BOC’s bottling units.
(ii) Commissioner has not appreciated that the ZACL had no independence and free will to fix prices for the gas supplied to its various customers and the price mechanism was influenced and predetermined by the special arrangements made at the instance of M/s. BOC because of huge interest free advance extended by it to ZACL, The prices at which the goods were sold to BOC for delivery to bottling units were less than the prices at which the product was being delivered to BOC’s bulk customers is only reflective of the fact that BOC had control on prices charged by ZACL and the fact that the advance had influenced the prices. In view of this, the Commissioner ought to have re-determined the assessable value and confirmed the demand raised against M/s. ZACL in the above show cause notice.
(iii) It is also not correct to state that the 20% commission given by ZACL to BOC was for the latter to incur expenses relating to transportation, compression, bottling and handling etc. The Commissioner erred in accepting the assessee’s contention in this regard. He has not appreciated the fact that for delivery to bulk customers no expenses were incurred by BOC in relation to compression, bottling and handling etc. It was direct delivery by ZACL to the customer. As regards the transportation charges, they were separately accounted for and payable as per the contract. As per the agreement the prices for such delivery to customers was to be the ARP of the product realised by BOC from its customers less 20% thereof excluding delivery, collection and facilities charges, taxes, duties and other levies. The Commissioner ought to have appreciated that the transportation and facilities charges were not part of this 20% but had direct nexus with the advance given by BOC to ZACL.
(iv) The Commissioner has supported his decision by a finding that during certain period clearances affected to some of the bulk customers were lower than the price at which the goods were being delivered to BOC’s bottling unit viz. GSFC’s prices plus 10%. In this regard, the Commissioner has failed to appreciate the fact that the prices for delivery to bulk customers were being negotiated by BOC. The mere fact that one or two customers got deliveries at lower than the sale price to BOC for delivery to their bottling units does not prove that the advance has not influenced the sale price to BOC. It was not that ZACL has negotiated the sale prices themselves with the bulk customers. When the goods were to be delivered to the BOC’s bottling units there was one sale price and when the goods were being delivered to other bulk customers there was another sale price and in most of the cases the latter scale price was higher than the former and both the prices were fixed/negotiated by BOC. Therefore, during some period even if any stray sales to one or two customers at a price lower than the Boc’s price for delivery to bottling units were there, Commissioner should have appreciated that these could not be taken to give a categorical finding that the sale-price to BOC for delivery to bottling unit was not less than the sale price for delivery to bulk customers. He should have appreciated the fact that even in case where the delivery was to bulk customers, 20% of the amount was passed on to BOC and the BOC was thus deriving a direct cash benefit out of such sales. The Commr. Therefore, erred in his finding that the commission of 20% was a bonafide commercial transaction between them.
(v) The Commissioner failed to appreciated that, except in a few stray instances, in all cases the sale price to BOC for delivery to bottling units was lower than the sale price fixed by BOC for delivery to other bulk customers. Both the sales price at any given point of time were always fixed/negotiated by BOC. One price is less than the other. Besides, BOC was also deriving a cash benefit out of sales to their customers. All these facts above that M/s. BOC were deriving benefits from ZACL only because they had advanced interest free amount of 12 crores before commencement of the production and M/s. ZACL were as a quid proguo obliged to sell their products to BOC only and also as per the agreement ZACL was not required to sell their products to any other customers at the terms more favourable than BOC. Besides purchasing the product for their bottling units at a lower price, BOC was also getting 20% on their sales to bulk customers. All these benefits accruing to BOC can only be attributed to the fact of advancing a huge amount to M/s . ZACL who have admittedly been utilising these funds/money to finance their purchases and for their various day-today operations. Further as per the agreement this finance has to be adjusted against the supplies being made by ZACL to BOC in specified manner. The Commissioner, therefore, erred in not considering all these circumstances in their totality. On the other hand the Commissioner picked one or two stray transactions to one or two bulk customers and ignored majority of transactions to other customers during the same period which were at a higher price than price at which during the same period the product was sold to BOC for delivery to bottling units. (A chart to illustrate this is enclosed as Annexure-‘B’). The Commissioner ought to have rejected the assessee’s contention that the prices negotiated by BOC with their bulk customers were lower than the prices at which it was sold to BOC’s bottling units.
(vi) Commissioner has not appreciated that in the present case both the prices i.e. one for the bulk buyer (BOC) for his own use and second for other buyers were fixed/negotiated by BOC. The lower price for delivery to BOC’s own bottling units was fixed keeping in view advantage of notional interest for the advance extended to M/s. ZACL which was being used for evoking capital. Whereas other customers were in a different class and on the price charged to them, proper duty was paid by ZACL value for assessment for sale to BOC for their own use was not determined properly. The Commissioner therefore, ought to have appreciated the nature of transactions and modus operandi adopted by ZACL and BOC to evade payment of correct amount of duty and redetermined prices for duty purposes taking due note of notional interest as proper in the show cause notice.
(vii) The Commissioner should not only have confirmed the duty to the tune of Rs. 88,50,466/- but also should have imposed penalty under Rule 173Q of Central Excise Act or under Section 11AC at least equal to the amount demanded in the SCN issued on 8.8.97 i.e. much after the enactment of Section 11AC on 28.9.96. There is also, no doubt, that there was suppression of facts by the party, M/s. ZACL, as they did not disclose to the department the material fact of notional interest earned on advance of Rs. 12 crores recovered from Mrs. BOC nor did they mention this fact in any manner, whatsoever, in their relevant monthly RT-12 returns and invoices.”
c) Issue to be determined is whether the interest free advance created a nexus by lowering of price for assessment if not, what was the monetary value to be added for such consideration.
3. After hearing both sides and considering the materials and the issues involved it is found –
a) The issue of interest free advances and the notional interest thereon could be added or not for the determination of value under Section 4 (1)(b) of the Central Excise Act,1944 read with Valuation Rules is now well settled by the decision of the apex court in the case of Commissioner of Central Excise Mumbai III v. I.S.P.L. Industries Ltd. (2003 (154) ELT 356 wherein the apex court after referring to the decision of the Supreme Court in the case of Metal Box India Ltd. 1995 (75) ELT 449 (SC) & VST Industries 1998(97) ELT 395 SC and considering the Board’s instruction dt.22.6.98 on such liabilities, held –
“11. It is clear that the mere fact of making an interest free advance by a buyer to the manufacturer, by itself will not be a sufficient ground to reload the assessable value with notional interest. It would be necessary for the revenue to show that such advances has influenced price of the goods. There may be different reasons for taking advances, as indicated above in the earlier part of this judgment. Learned Counsel For the appellant submits that all that the revenue has to show is that interest free advance has been made by the buyer to the manufacturer which would lead to a presumption that it is to the advantage of the manufacturer having influenced the fixation of price as well. We, however, fail to appreciate the submission made on behalf of Revenue for drawing a presumption in that fixation of price is influenced by such an advance…” (Under lining supplied)
Therefore, in the facts of this case, the presumption to be drawn that the advance influenced the price fixed as per the agreement, was influenced due to the interest free nature of such advance, cannot be sustained. Proof and evidence is required of the price being influenced.
b) The price as per the agreement is to be related to a bench mark price of Price of Sale of M/s Gujarat State Fertilizer & Chemicals (GSFC) to their Customers vide Clause 9 (a) of the agreement. No material is brought out, how BOC and /or ZACL could have influenced that Bench Mark Price of a State Government Undertaking far away from Goa, for lack of such evidence, the revenue’s case is required to be dismissed.
c) The adjudicator has determined that at times the sale to Bulk consumers was at price higher or lower than prices to M/s BOC on GSFC formula plus 10% and also that the credit notes issued by ZACL to BOC for sets to Bulk Buyers would not be flow back since BOC had borne the cost of transportation, handling etc as trading part of business and duty liability was discharged by ZACL without claiming 20% commission paid to BOC. Thus a rationale exists, which cannot lead to conclude that sale to Bulk Buyers was at higher prices while sale to BOC was rigged lower price. In any case, the Bulk Buyer was a different class of Buyer that BOC who is a Trader, from the finding arrived in para 63 by the adjudicator, it is apparent he has analysed the values different in the two classes to be only 2.09% which was due to price fluctuation the product and nothing has been brought out in the appeal that it was not so. The grounds taken by Revenue, are without any material on record to substantive the same. No material is found to upset the adjudicator’s findings in the grounds taken.
d) The duty demand is not being upheld due to lack of material and evidence to find and establish a nexus between the advances taken and the sale of Argon gas to BOC on prices of GSFC plus 10%. The contracted prices would therefore be value as per Section 4(1) (a) of the Central Excise Act 1944 and resort to Section 4(1) (b) is not called for in this case. There is no case or cause for invoking the penal clause.
4. In view of the findings arrived, the appeal is required to be ordered to be dismissed.
5. Appeal No. E/3438/99 also filed by Revenue in the case of same Respondents on same issue for a different period is also required to be dismissed for the same reasons as herein.
6. The two appeals ordered to be dismissed accordingly.
(Pronounced in Court on 26.08.2002)