ORDER
C.N.B. Nair, Member (T)
1. The order impugned in these appeals has demanded duty of over Rs. 15.6 lakhs from the appellant, M/s. Janardhan Plywood Industries Ltd. and has also imposed penalties on the appellant manufacturing unit as well as on its Managing Director and Vice President. It has also imposed penalties on M/s. Kwality Agencies and M/s. Prakash Enterprises. Facts relevant to the dispute are that the appellants, M/s. Janardhan Plywood Industries Ltd. is a small scale industry manufacturing flush doors, block boards and commercial plywood. They sell their products to various dealers including M/s. Kwality Agencies and M/s. Prakash Enterprises. Goods received by M/s. Prakash Enterprises get sold to D.G.S. & D. at rate contracts. Similarly, part of the goods received by M/s. Kwality Agencies also get sold to Govt. departments. The manufacturer was paying duty on the goods so sold to D.G.S. & D. and Govt. departments at the prices at which they sell the goods to these two dealers. The impugned order has held that duty should have been paid at the prices at which the D.G.S.& D. and the Govt. departments purchased the goods. The duty demand is as a consequence of this finding.
2. It has been submitted in the appeals that the transactions between the appellant manufacturer and the two dealers are sales. Further, the manufacturer does not receive any portion of the payments made by D.G.S.& D. or the Govt. departments to the two dealers. The appellants, therefore, submit that there was no justification in treating the dealers as agents of the manufacturer and taking the prices at which they sold the goods as the assessable value. With particular reference to M/s. Prakash Enterprises, our attention was drawn to the finding in the impugned order itself that the transaction between the appellant manufacturer and M/s. Prakash Enterprises is in terms of an agreement dated 27-3-1995. However, assessments were not made on the basis of this agreement on the ground that according to a previous agreement dated 25-7-1994, M/s. Prakash Enterprises were only to be an agent of the appellant manufacturer and the later agreement dated 27-3-1995 has to be rejected on the basis for the transaction because copy of this agreement had not been furnished to the DGS&D which awarded the contract on 9-6-1995. The learned counsel for the appellants also took us through the relevant agreements and also pointed out that the appellants had clearly explained to the Commissioner in the reply to the show cause notice that the agreement of 1994 regarding agency had been superseded by the later agreement dated 27-3-1995. According to this agreement, the relationship between the manufacturer and M/s. Prakash Enterprises was that of principal to principal. The dealer purchased the goods and paid for the same to the manufacturer. The further sale and amount realised on it from the DGS&D was no concern of the manufacturer. The learned counsel, therefore, submitted that the duty demand of Rs. 12,59,669.00 in regard to sale to M/s. Prakash Enterprises was not tenable at all.
3. With regard to sale to M/s. Kwality Agencies, who supplied the goods to U.P. Avas Evam Vikas Parishad, it was submitted that the transaction with M/s. Kwality Agencies was also on principal to principal basis. M/s. Kwality Agencies purchased the goods from several manufacturers and the appellant was only one of them. The goods purchased from other manufacturers were sold by M/s. Kwality Agencies to the Govt. undertaking at an agreed price. The Commissioner has held M/s. Kwality Agencies to be an agent of the manufacturer appellant on the basis of agreement dated 19-7-1993. The learned counsel has submitted that, even though this agreement referred to the appellant as suppliers, it did not alter the basic nature of the relationship. The goods were purchased on outright sale basis by M/s. Kwality Agencies and were in turn sold at the contracted price to the Govt. departments. No part of the price or profit arising from the sale to Govt. departments, namely, Parishad was received by the appellant manufacturer from M/s. Kwality Agencies. The learned counsel, therefore, submitted that notwithstanding the way the contract was worded, the case is required to be decided based on the substance of the transactions. He further submitted that, in any event, there was no justification for treating the price paid by the Parishad as the assessable value for the goods. That value necessarily included the taxes, transportation and other charges which went into the total cost. Therefore, the duty demand is required to be scaled down to make the same based on the ex-factory price.
4. Heard the learned Departmental Representative. He submitted that the later agreement between M/s. Prakash Enterprises and the appellant manufacturer had not been brought to the notice of the DGS&D. Therefore, DGS&D would have proceeded on the basis of the earlier agreement. In that view of the matter, M/s. Janardhan Plywood Industries Ltd. remained the supplier to the DGS&D. With regard to the demand on the goods transacted through M/s. Kwality Agencies, learned D.R. submitted that the agreement itself made it clear that the appellant manufacturer was the supplier. Therefore, M/s. Kwality Agencies could only be treated as their agent.
5. We have perused the records and have considered the rival submissions. We find that the agreement dated 27-3-1995 was clearly in supersession of the previous agreement of 1994. The DGS&D contract was awarded to M/s. Prakash Enterprises only after the later agreement. According to the March 1995 agreement, the transaction between the appellant manufacturer and M/s. Prakash Enterprises was clearly as seller and buyer. It is clear from the invoices also covering the transactions. The appellants had also placed all these facts before the adjudicating authority. The adjudicating authority has rejected all the facts covering the transactions of the agreement merely on the observation that copy of the later agreement had not been filed with DGS&D. This was clearly not permissible. The agreement as well as the invoices make it clear that the relationship between the appellant manufacturer and M/s. Prakash Enterprises was on principal to principal basis. The manufacturer had no concern with how M/s. Prakash Enterprises disposed of the goods bought by them. Nor did they benefit in any way from the DGS&D contract price. In the circumstances, it has to be held that the duty demand of Rs. 12,59,669.00 made with regard to sale to DGS&D by M/s. Prakash Enterprises is not sustainable. The same is accordingly set aside. With regard to the sale to the Parishad by M/s. Kwality Agencies, a perusal of the agreement shows that the appellant manufacturer was treated as the supplier. Therefore, prima facie there is a case for treating M/s. Kwality Agencies as an agent of the manufacturer. However, decision on the issue has to be after verification of all the relevant factors, mainly whether the transfer of the goods to M/s. Kwality Agencies was a sale and whether the appellant manufacturer was in any way gaining from the further transfer of the goods to the Parishad. We find that the transactions have not been examined from this aspect in the impugned order. In any case, as the price paid by Parishad included many elements other than the ex-factory value of the goods, it was required that suitable deductions are allowed from the purchase price of Parishad while fixing the assessable value. Duty paid by the appellant manufacturer could be a part of the price paid by the Parishad. We, therefore, feel that this part of the demand is required to be reconsidered after taking into account all the relevant factors and materials. This part of the demand is, therefore, remanded for fresh consideration and adjudication after giving the appellants an opportunity to present their case during the adjudication proceedings. In the facts of this case, imposition of penalties on the appellants and other parties was not justified. Accordingly, penalties imposed are set aside. Appeals are disposed of in the above terms.