M/S. SACI ALLIED PRODUCTS LTD., U.P. vs. COMMISSIONER OF CENTRAL EXCISE, MEERUT

CIVIL APPEAL No. 5854/1999Supreme Court[2005] 3 S.C.R. 88126 April 2005Bench: 3 JudgesAuthor: S.N. VARIAVA, AR. LAKSHMANAN, S.H. KAPADIA22 pages
AI SummaryAllowed

What were the facts?

M/s. SACI Allied Products Ltd. (the assessee) sold goods to independent dealers across India, except in Uttar Pradesh where sales were made to Company 'S' at a lower price. Company 'S' was an independent manufacturer. The assessee filed two price lists: one for independent dealers and another for sales to 'S', declaring 'S's resale price as the assessable value for excise duty, as Revenue considered 'S' a related person. Following a Central Board of Excise and Customs circular stating wholesale dealers cannot be treated as different classes, Revenue issued notices proposing the highest sale price as the assessable value. The assessee filed a single price list under Section 4(1)(a) of the Central Excise Act, 1944, based on prices to independent dealers, which also covered sales to 'S'. Excise duty was paid on this basis. Revenue issued a show cause notice under the third proviso to Section 4(1)(a), proposing to use 'S's resale price as the assessable value for sales to 'S' in Uttar Pradesh, demanding differential duty. The Collector confirmed the demand under Section 4(1)(b), holding 'S' as a related person and the assessable value to be based on 'S's resale price. The Appellate Tribunal upheld the Collector's order, invoking the first proviso to Section 4(1)(a) and holding that dealers of 'S' in Uttar Pradesh constituted a different class of buyers.

What did the Supreme Court hold?

The Supreme Court allowed the appeal, holding that the Appellate Tribunal had gone beyond the scope of the show cause notice and the Collector's order by invoking the first proviso to Section 4(1)(a) of the Central Excise Act, 1944. The Tribunal cannot sustain the Revenue's case on a ground not raised by the Revenue. The Court reiterated that where sales are made to unrelated wholesale buyers and also to related buyers, the price to unrelated buyers should be adopted as the basis for excise duty even for sales to related buyers. The third proviso to Section 4(1)(a) would not apply in such a situation. Since a normal price to independent dealers was available, it should be the basis for assessing sales to 'S' as well. The Court also noted that the first proviso to Section 4(1)(a) was inapplicable because the sales to dealers in Uttar Pradesh were not made by the assessee-appellant but by 'S' after purchasing from the appellant, and the proviso specifically excludes sales to related persons. The Court emphasized that for the first proviso to apply, there must be an averment and proof of a trade practice of selling at different prices to different classes of buyers, which was absent. The Court set aside the impugned order of the Tribunal.

What were the issues?

1. Whether the Appellate Tribunal erred by invoking the first proviso to Section 4(1)(a) of the Central Excise Act, 1944, when the show cause notice and the Collector's order were based on the third proviso to Section 4(1)(a) and Section 4(1)(b) respectively, thereby going beyond the scope of the original proceedings. - Assessee's contention: The Tribunal exceeded its jurisdiction by introducing a new ground (first proviso to Section 4(1)(a)) not raised by the Revenue in the show cause notice or the Collector's order. The assessee argued that when a wholesale price to independent dealers satisfying Section 4(1)(a) is available, it should be the basis for assessing sales to related persons, and the first proviso to Section 4(1)(a) was inapplicable. - Revenue's contention: Section 4(1)(a) was not applicable as there was no comparable sale price for independent buyers in Uttar Pradesh. When goods were not offered for sale to any dealer or supplied in Uttar Pradesh except to Company 'S', the wholesale price at the depot where goods first entered the wholesale market would be the normal price under Section 4(1)(b) read with Rules 5 and 7 of the Central Excise Valuation Rules, 1975. The Revenue also argued that circulars, though binding, could be ignored if held invalid by judicial order, and that the Tribunal, having held Section 4(1)(b) inapplicable, could not then hold Section 4(1)(a) applicable. 2. Whether the price to independent dealers, satisfying the requirements of Section 4(1)(a), should be adopted as the basis for excise duty even for sales to related persons ('S'). - Assessee's contention: As stated above, the normal price to independent dealers should be the basis. The first proviso to Section 4(1)(a) was also not invokable. - Revenue's contention: As stated above, Section 4(1)(a) was not applicable due to lack of comparable sales in Uttar Pradesh.

Which sections of the Income-tax Act were involved?

Section 4(1)(a),Section 4(1)(b),Section 4(J)(a),Section 4(J)(b)

AI-generated summary — verify with the full judgment below

M/S. SACI ALLIED PRODUCTS LTD., U.P. A v. COMMISSIONER OF CENTRAL EXCISE, MEERUT APRIL 26, 2005 [S.N. VARIAVA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.] B- Central Excises and Salt Act, 1944-Section 4(J)(a) and (b)-Sale of goods by manufacturer to a company in one State and to independent dealers in other Stat~s-Sale price to the Company lower than the price charged from independent dealers-Previously resale price by the company to the dealers C declared as assessable value for payment of excise duty as the Company was treated by Revenue, as related to the manufacturer-Central Board of Excise and Customs held that dealers in different regions cannot be treated as different class of buyers-Notice by Revenue to the manufacturer to take the highest price, at which the goods were sold as assessable value-Excise duty paid on D the basis of price at which goods sold to independent dealers-Show cause notice by Revenue under third proviso to Section 4(J)(a) proposing to take resale price of company as the basis for determining assessable value and demanding differential duty-Demand confirmed by Collector holding that assessable value to be uls. 4(J)(b)-Appellate Tribunal

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