ORDER
S.L. Peeran, Member (J)
1. All these three appeals raise a common question of law and facts and hence they are all taken up together for disposal as per law. The appellants are all manufacturers of bulk drugs falling under Chapter Heading 29 of CETA 1985. The products are assessed to Central Excise Duty on ad valorem basis. The allegation against the appellants are that they have not paid the Excise Duty on the maximum sale price of bulk drugs specified in the first Schedule of Drugs Price (Control) Order 1995 as fixed from time to time by the Central Government in exercise of the powers conferred under Section 3 of the Essential Commodities Act, 1995 read with para (3) and (9) of the Drug Price (Control) Order. It was alleged that the price has to be assessed in terms of 4(l)(a)(ii) of CE Act, wherein it lays down that such maximum prices shall be the normal price of the said bulk drugs at the time of clearance for the purpose of payment of Central Excise Duty. As they had paid the duty at their selling price, the same was not a terms of Section 4 and there was a short payment in the matter and hence the larger period was invoked and demands have been confirmed.
2. It is contention of the appellants’ Counsel that this very issue was agitated before the Larger Bench in the case of IPCA Laboratories v. CCE and the Larger Bench has clearly given a detailed finding holding that the duty has to be paid on the basis of the price at which the goods are sold and not at the maximum price fixed under relevant law. The Revenue had taken a contention that the issue is covered by the judgment of the Apex Court rendered in the case of Aluminium Industries Ltd. v. Collector of CE 1998 (99) 486 (SC). However, the Larger Bench has found that this Apex Court judgment is clearly distinguishable. The learned Counsel submits that the Tribunal has given categorical findings as to why the duty has to be paid on the basis of the selling price and not at the maximum price fixed under the Drug Price (Control) Order (DPCO). He also submits that the demands are barred by time as the issue was fully within the department’s notice and the department had approved the prices. He also submits that the Commissioner of Central Excise, Hyderabad by OIO No. 27/2001 dated 19.11.2001 accepted their contentions on time bar and dropped the proceedings. In the order, he has referred to the Ministry’s letter dated 5.7.2001 in F. No. 232/70/1999 addressed to the Office In the C&AG of India conveying the opinion of Law Ministry wherein they opined that ‘the manufacturer was at liberty to sell his goods at a price lower than the maximum price and the normal price may vary from case to case’. He submitted a detailed written submission, drawing support from the judgment of the Supreme Court. He also relied on the several judgements of the Tribunal and the Supreme Court to contend that the demands are barred by time.
3. On the other hand, the learned SDR filed a written submission from the Revenue in which they have reiterated the findings given by the Commissioner in the impugned order. The learned SDR submitted that in terms of law, the maximum price has to be accepted and the duty has to be paid on the maximum price as laid down in Section 4 of the Act. He also submitted that the decision of the Apex Court in the Aluminium Industries Ltd. v. CCE (supra), applies to the facts of the case and, therefore, the Bench is required to take a difference view in the matter.
4. On a careful consideration of the submissions and perusal of the entire case law, we are of the considered opinion that the matter was taken by the Larger Bench on the same issue and the Larger Bench decided the issue in favour of the assessee and held that the duty has to be demanded only on the price on which the goods were sold and not on the maximum price fixed under DPCO. The judgment of the Larger Bench rendered in the case of IPCA Laboratories v. CCE has been distinguished. The findings recorded in para 3-10 are reproduced below, which clearly apply to the facts of these cases.
3. In order to resolve the dispute between the parties as to whether the appellant has to pay duty on the actual price at which the drugs are cleared by or at the maximum price fixed under DPCO, it is necessary to examine the scope of Section 4(1)(a)(ii) of the Central Excise Act. Three decisions of this Tribunal, namely, Orchid Chem & Pharmaceuticals Ltd. v. CCE, Chennai ; Vera Laboratories Ltd. v. CCE, Visakhapatnam 2001 (47) RLT 1059; and Commissioner of Central Excise, Vadodara v. Abbot Laboratories (I) Ltd. 2001 (139) ELT 319 and Kapran Ltd. v. CCE, Pune . Relevant provisions of Section 4 of Central Excise Act read as follows:
4. Valuation of excisable goods for purposes of charging of duty of excise – (I) where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be–
(a) the normal price thereof that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of whole-sale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale:
Provided that-
(ii) Where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then notwithstanding anything contained in Clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price the thereof;
4. In Panchsheel Organics a Bench of this Tribunal did not follow the ratio of the decision in Orchid Chem & Pharmaceuticals Ltd. taking the view that the issue is covered by the decision of the Supreme Court in Aluminium Industries Ltd. v. CCE, Bhubaneswar . It is contended on behalf of the appellant before us that in Panchsheel Organics the Tribunal has not correctly understood the scope of the decision of the Supreme Court in Aluminium Industries Ltd. In Aluminium Industries Ltd. the assessee was found to have realized the price in respect of aluminium rods in excess of the price fixed under a notification issued under Price Control Order. Duty was demanded on the higher price realized by the assessee. The assessee contended that the price fixed under the Price Control Order in force is to be treated as normal price of the goods for the purpose of valuation under Section 4(1)(a) and not the higher price realized by the assessee. The above contention was accepted by the Supreme Court. It was held that if there is a Price Control Order in force, it is expected that the goods would ordinarily be sold at the controlled price. It was further observed that the point is placed beyond any doubt by the proviso (ii) to Section 4(1)(a) of the Central Excise Act, 1944. The Apex Court held that by virtue of this proviso a legal fiction has been created. The price fixed under any law for the time being in force has to be taken as the normal price of the goods and, therefore, in the instant case the price fixed by the notification dated 18th October, 1978 will have to be taken as the normal price of the aluminium rods manufactured by the appellant.
5. Learned Counsel for the appellant points out that what was under consideration before the Hon’ble Supreme Court was the price fixed for a commodity. But in Panchsheel Organics, as also in the present case, what has been fixed is the maximum price of the bulk drug. The prohibition under the DPCO is not to sell such bulk drugs above the maximum price so fixed. There is no mandate that manufacturer shall not price the drugs below the maximum price fixed under DPCO. Therefore, according to the appellant the ratio of the decision in Aluminium Industries was wrongly applied by this Tribunal in Panchsheel Organic. It is also submitted that when there ‘is no fixed price prescribed but only a maximum price under DPCO, any price below the maximum will be the price fixed under DPCO. Therefore, even applying the ratio of Aluminium Industries it has to be taken that appellants price of the bulk drug is the price fixed under DPCO and, therefore, has to be treated as normal price as provided under Section 4(1)(a)(ii) of the Central Excise Act. Learned Counsel for the appellant referred to the decision of the Hon’ble Supreme Court in Delhi Cloth & General Mills Co. Ltd. in support of his contention.
6. It is contended on behalf of the Revenue that in the light of the amended Section 4(l)(a)(ii) the ratio of the decision in Delhi Cloth & General Mills Co. Ltd. can have no application to the present case. It was also submitted that the decisions of this Tribunal in Panchsheel Organic and Kopran Ltd. have laid down the correct law by applying the ratio of the decision of the Supreme Court in Aluminium Industries and, therefore, the contention raised by the appellant herein has only to be rejected.
7. We find merit in the contention raised by the appellant. No doubt Kopran Ltd. has been correctly decided on the basis of the ratio of the decision in Aluminium Industries. In the above case the assessee had recovered from its buyers for sale of goods amounts in excess of the maximum price fixed. Following Aluminium Industries the Tribunal held that the price fixed by DPCO will be the assessable vahie and not the amount that was actually paid. But, in Panchsheel Organic fats were different. As in the present case price realized by the assessee was less than the maximum price fixed under DPCO. While following the ratio of the decision in Aluminium Industries, the Bench (one of us was party to the decision) did not notice the fact that the notification dated 18th October 1978 fixed the price of Aluminium Rods and not the maximum price. In respect of bulk drugs where maximum price is fixed under DPCO, manufacturer can price their goods at any price below the maximum. This will be the effect of prescribing a maximum price. If that be so, any price below the maximum price will be a price fixed under relevant law. The appellant is therefore fully justified in contending that duty demand can be only on the price realized by it which is below the maximum price fixed.
8. In Vera Laboratories Ltd. v. CCE, Visakhapatnam, South Zonal Bench at Chennai of this Tribunal has also taken the view that the ratio of Aluminium Industries will not be applicable when the assessee sold the drugs at a price lesser than the maximum price fixed under DPCO. Similar view was taken in CCE, Vadodara v. Abbot Laboratories Ltd. also. We are in full agreement with the view taken in these two decisions.
9. In the light of the above discussion, we hold that duty demand raised on the appellant taking maximum price fixed under DPCO as the normal price cannot be sustained. Since no other issues are involved in this appeal, we are disposing of the appeal itself.
10. The order passed by the Commissioner (Appeals) is set aside and the appeal stands allowed.
5. On a further consideration, we also notice that the Department was fully aware of the facts on merits and the Commissioner himself has dropped the proceedings against the appellants in OIO CE No. 27/2001 dated 19.11.2001. He has also taken into consideration the Law Ministry’s opinion which has been noted in the Ministry’s letter dated 5.7.2001 wherein it has been clearly laid down that manufacturer was at liberty to sell his goods at a price lower than the maximum price ad normal price may vary from case to case. In view of this circumstances, we have to hold that the demands are also barred by time. The appellants succeed both on merit and on time bar and the appeals are allowed.
(Operative portion of this Order was pronounced in open court on conclusion of hearing.)