ORDER
V.P. Gulati, Vice President
1. The issue in the appeal relates to the demand of duty in respect of Silver Oxide Zinc Batteries supplied by the appellants to the Defence. The appellants also supplied as per the facts on record, similar batteries to M/s. HAL, a Government of India Undertaking, but at a higher price. The price charged from the Defence was Rs. 33,393/- as against Rs. 53,993/- from M/s. HAL. The prices charged were in terms of the contract which were entered into by the appellants with the respective buyers. In case of supplies to the Defence, there was a stipulation that the appellants would be supplied life expired batteries and they were to retrieve silver contained in these batteries and after refining use the same for the manufacture of the batteries and they were to give a rebate to the Defence in the price to be charged per battery. The appellants while invoicing the goods to the Defence, took the value of the silver used in those batteries as was recovered from the life expired batteries at the rate of Rs. 2,500/- per kg. as against Rs. 6,666/- which was adopted for the batteries which were supplied to M/s. HAL. The reason given was that the Defence were allowed to purchase the silver from the Government of India Mint at the rate of Rs. 2,500/- per kg. and for that reason, in terms of the contract, the stipulation was that the price of the silver to be adopted for arriving at the price to be charged was to be Rs. 2,500/- per kg. It was on account of this difference in the price charged from Defence and HAL as was later found out by the authorities from the contracts, that the demand was raised.
2. The learned Advocate for the appellant pleaded that in terms of Section 4, it is the transaction value which is to be taken into reckoning and notwithstanding the fact that different prices were charged for the very same goods from M/s. HAL, the price as was paid by the Defence should form the basis of the assessable value. He has pleaded that the sale was at arms length and all the parameters of Section 4(1)(a) were satisfied and, therefore, the duty based on the price charged to the Defence was the correct duty paid. He pleaded that at the time when Section 4 was introduced, as per the object and reasons, it was stated that in order to overcome the various defects experienced in the working of the Section, it is proposed to suitably revise the valuation provision contained in Section 4 of the Act, providing, as far as practicable, for assessment of the excisable goods at the transaction value, except in areas where there may be scope for manipulation (such as sales to or through related persons) and making specific stipulation with respect to situations frequently encountered in the sphere of valuation”. He has pleaded, in this background there was no warrant to demand the duty from the appellant. He has pleaded there was no additional consideration for sale of the batteries to the Defence. He, in this connection, referred to the Government of India order reported in 1982 (10) E.L.T. 653 wherein, it had been set out that notional value was not acceptable when actual value was available. He also cited the decision reported in 1989 (43) E.L.T. 165 to highlight that the sale transaction was completed by the recovery of the amount as stipulated in the contract. He has pleaded that Section 4 does not provide for computation of the cost when the actual price was available and which has to be considered as a relevant consideration.
3. For the purpose of adopting the price of silver at the rate of Rs. 2,500/- per kg, he referred us to the decision of the Hon’ble Supreme Court reported in 1988 (38) E.L.T. 733 (S.C) = (1989) 1 SCC 335, whereunder, in Para 11, the following is set out:
“11. Therefore, from the above decisions it follows that in order to be sale taxable to duty, not only the property in the goods should pass from the contractor to the government, or the appellant in this case but there should be an independent contract – separate and distinct – apart from mere passing of the property where a party purchases or procures goods from the government. Mere passing of property from the contractor to the government would not suffice. There must be sale of goods. The primary object of the bargain judged in its entirety must be viewed. In the instant case, Clause 10 is significant as we have set out hereinbefore. For the purpose of performance, the contractor was bound to procure materials. But in order to ensure that quality materials are procured, the PWD undertook to supply such materials and stores as from time to time required by the contractor to be used for the purpose of performing the contract only. The value of such quantity of materials and stores so supplied was specified at a rate and got set off or deducted from any sum due or to become due thereafter to the contractor. Mr. Virmani, appearing for the appellant submitted before us that in the instant case, there was no such independent and separate sale. But we are unable to accept. Though, in a transaction of this type there is no inherent sale; a sale inheres from the transaction. Clause 10 read in the proper light indicates that position.”
4. The learned Advocate pleaded that there was a two way sale and the life expired battery which was supplied was in fact a sale to them and they took the value of the material at which the same was given to them for arriving at the assessable value.
5. Pleading on limitation, he pleaded that the appellants were clearing the goods based on invoice value in terms of Rule 173C(11). He has pleaded, in the invoice the appellant had shown the rebate that was to be allowed in terms of the contract and the RT-12 returns were also filed and finalised. He has pleaded, the only thing held against the appellant is that they have not filed the contracts which provided for the price at which the value of silver has to be reckoned. He has pleaded that the non-supply of the contract cannot be considered as a reason for suppression of facts with intention to evade payment of duty. His plea is they did not consider that the contract was relevant for excise purposes. He, in this connection, referred us to the show cause notice, wherein, it had been stated that the batteries of similar nature had been charged at a higher price. He has pleaded that the department was aware, therefore, that batteries of the same kind had been cleared at a lower price. He further pleaded that the duty to be paid was on account of the Defence and the appellants cannot be taken to have derived any benefit by paying a lower duty.
6. The learned SDR for the department pleaded that the sale price was not the sole consideration as the appellants had been supplied with the life expired batteries and the silver was provided to them at a lower rate and on account of this lower rate of the silver which was charged from them, the appellants worked out the sale price based on this lower rate of the silver which was held to be payable for the silver which was retrieved from the life expired batteries. He has pleaded that the lower price charged was on account of the supply of the life expired batteries. He has pleaded that the value had to be reflective of the true cost of the material and it could not be a conceptional value. He further pleaded, while arrangement for the adjustment of the price on account of supply of life expired batteries were reflected in the invoice, there was no indication as to the weight of the silver taken into reckoning for the purpose. He has pleaded that suppression was there with intention to evade payment of duty.
7. We have considered the pleas made by both the sides. We observe that as per the allegation in the show cause notice, the appellants had supplied the same type of batteries at differential prices to the Defence and M/s. HAL. The goods were sold to M/s. HAL at Rs. 53,993/- as against Rs. 33,993/- to the Defence. The appellants’ claim is that sales to both the customers were at the transaction value meaning thereby the price at which they actually invoiced the goods to both the parties. However, we find the consideration for charging lower price from the Defence was the supply of the silver to the appellants through the medium of life expired batteries which were dismantled to retrieve the silver and which was purified and used in the batteries supplied to the Defence. The price adopted for the silver content which was retrieved and used in the batteries supplied was not an open market price of silver, but the price which was determined by the Defence ” and which price, it has been stated, was the price at which the Defence could get the silver from the Mint.
8. We observe that the price worked out by the appellants adopting the lower silver price i.e. at the rate of Rs. 2,500/- per kg. against the open market price of Rs. 6,666/- was a notional workout. So far as the appellants are concerned, they could not get the silver on their own at this price. The price as was worked out from charging the Defence was as per the dictates of the Defence and it would make no difference to the appellants if they had indicated even a lower price as the appellants were getting the silver through the medium of life expired batteries from the Defence and they had made no payment for this silver. If Defence had indicated a price of Rs. ISO/- per kg, the appellants would have adopted that and as they were indicating the amount for the job work that they were doing i.e. making the battery by use of the silver supplied to them. It could not mean, therefore, that any price which is indicated by the Defence can be taken as reflective of the true value of the silver. In terms of Section 4, the price that is to form the basis for assessment is the price at which the goods in the ordinary course of business could be sold. The sale to Defence in the background cannot be taken to be the sale in the ordinary course of business. It was a special arrangement and a notional price of silver was adopted and which cannot, therefore, be taken as a transaction in the ordinary course of business. It is the price which is chargeable in the open market conditions that is to form the basis for assessment. It is seen that the price of comparable goods was available. The price as was adopted in terms of the contract with the Defence was by a special arrangement, it could not be accepted in terms of Section 4. The learned lower authority has rightly, therefore, held that this price was not acceptable and price based on the comparable goods was to be adopted.
9. Coming now to the limitation aspect, it is observed that it has been set out in the show cause notice that the appellants were clearing the similar batteries to the HAL at a higher price and the RT-12 returns had been filed and finalised and the invoices had also been filed with the RT-12 returns. The learned lower authority, it is seen has observed that the invoices were based on the purchase order and contracts issued by the Defence. It was only when the contracts were seen by the authorities, it came to know about the arrangement for charging the lower price.
10. We observe that what has to be seen is whether the appellants had suppressed the facts with intention to evade payment of duty and whether the department was made aware of the differential price being charged by them. We observe that the learned lower authority has not adverted to the information in regard to the clearance of the batteries to M/s. HAL and whether it could be read from the invoices to HAL that the very same batteries which was being cleared to the Defence was cleared to HAL at a higher price. The learned lower authority has also not referred to the appellants’ plea that the duty was to be paid on account of the Defence and they would not have gained anything by paying a lower rate of duty. The learned lower authority has not examined the limitation aspect with respect to the above factors and other factors on record. We, therefore, hold that this aspect has to be looked into in depth and to this extent the learned lower authority’s order is not proper.
11. We, therefore, for the limited purpose of examination of the limitation aspect, remand the matter to the lower authority for de novo consideration and decision after affording the appellants an opportunity of hearing.
12. The appeal is thus decided in the above terms.