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PETITIONER: INDIAN PISTON LIMITED

       Vs.

RESPONDENT: COLLECTOR OF CENTRAL EXCISE, MADRAS

DATE OF JUDGMENT30/01/1990

BENCH: KANIA, M.H. BENCH: KANIA, M.H. KULDIP SINGH (J)

CITATION:  1990 AIR  977            1990 SCR  (1) 157  1990 SCC  (1) 470        JT 1990 (1)    99  1990 SCALE  (1)79

ACT:     Central Excises and Salt Act, 1944/Central Excise Rules, 1944:  Sections 4 and lIB/Rule 233B--Excise  duty--Sales  by assessee  to distributors-Distributors treated  as  ’related persons’  by Department--Price list filed  with  protest--An appeal  distributors  held  ’independent  buyers’-Refund  on excess duty--Whether arises.

HEADNOTE:     The appellant was a manufacturer of motor vehicle  parts failing  under  Item 34-A, and components for  I.C.  Engines failing under Item 68, of the Central Excise Tariff.     The  marketing  pattern of the appellant was  that  they sold goods in the wholesale to O.E. manufacturers, Transport Undertakings and Government Bodies, and the requirements  of the replacement market were met by sale in the wholesale  to other persons who were met by sale in the wholesale to other persons who were designated by them as distributors/ primary wholesale  buyers on the basis of agreements with such  dis- tributors.     The Department took the view that sales by the appellant to its distributors would be considered as sales to ’related persons’  on account of the amendment to sec. 4 of the  Cen- tral Excises and Salt Act, 1944, which came into force  from October  1  1975, and directed the filing of  revised  price lists showing a discount of 12 1/2% from the price at  which the  goods supplied by the appellant were sold by  its  dis- tributors to independent buyers.     The appellant complied with this direction under protest taking  up the contention that the distributors were also  a class  of independent buyers, which was however rejected  by the Assistant Collector.     On  appeal  the Collector (Appeals) took the  view  that distributors  were  not  related  persons  relying  on  this Court’s decision in Union of India v. Bombay Tyres  Interna- tional Ltd., [19831 14 ELT 1896.     The  appellant then claimed refund of the excess  amount of  excise  duty paid. This was rejected  by  the  Assistant Collector  on the ground that except in respect of sales  to wholesale  distributors/primary wholesellers and O.E.  manu- facturers,  the excise duty had been paid by  the  appellant

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voluntarily.     The Customs, Excise and Gold (Control) Appellate  Tribu- nal dismissed the Appellant’s appeal. 158     In  the appeal to this Court it was contended on  behalf of  the appellant that the language of section 4(1)  of  the Central Excises Act, indicates that there could be only  one normal price for sales to independent distributors, and that as  the letter of protest sent by the appellant covered  the entire  payment  of  excise duty in those  cases  where  the normal price was fixed on the footing that the  distributors of the appellant were related persons, no question of  limi- tation  would  arise in considering the application  of  the appellant for refund.     On  behalf of the respondent, it was contended that  the protest made by the appellant must be read as limited to the cases  of sales by the appellant to the wholesale  distribu- tors/primary wholesellers and to O.E. manufacturers and that the other categories of sales must be held not to be covered by the protest. Allowing the appeal, this Court,     HELD:  (1) In view of the fact that the  distributor  of the  appellant were finally held not to be related  persons, the  excise  duty  collected in respect  of  the  difference between the price at which the goods were sold by the appel- lant  to  the distributors and the price to which  the  said goods  were sold by the distributors to  independent  buyers calculated  as  aforesaid, must be held to be  excess  duty. [162D-E]     Indian  Oxygen  Ltd.  v. Collector  of  Central  Excise, [1988] 36 E.L.T. 723, Collector of Central Excise, Madras v. Ashok  Leyland Ltd., Madras, [1987] 29 E.L.T.  530  referred to.     (2) The protests flied by the appellant clearly took  up the  contention that its distributors could not be  regarded as  related  persons and hence the protests  lodged  by  the appellant must be held to cover all cases where the price at which  the appellant sold its goods to its distributors  was not  regarded  as the normal price on the  ground  that  the distributors were related persons. [162E-F]     Indian  Cements  Ltd. v. Collector  of  Central  Excise, [1989] 2 S.C.C. 676 referred to.     (3) Rule 233B of the Excise Rules does not prescribe any particular  form of protest and hence it is not possible  to say on the basis of this rule that the appellant-assessee in this  case  must  he deemed to have paid  the  duty  without protest. [ 163E-F]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal  Nos.  1430- 36(NM) of 1987.     From  the  Judgment  and Order dated  23.4.1987  of  the Custom  Excise and Gold (Control) Appellate Tribunal,  South Regional Tri-  159 bunal,  Madras in Appeal Nos. 174, to 176 and 240 to 243  of 1986 MAS in Order No. 247 of 1987.     Anil  B. Divan, H.K. Dutt, S.  Ramasubramanium,  Krishna Srinivasan and Ms. Midula Ray for the Appellant. A.K.  Ganguli,  A.  Subba Rao and P.  Parmeshwaran  for  the Respondent. The Judgment of the Court was delivered by     KANIA,  J.  These appeals arise from a judgment  of  the

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Customs, Excise and Gold (Control) Appellate Tribunal (South Regional Bench) at Madras.     The  facts necessary for the disposal of  these  appeals are as follows.     The  appellant is a manufacturer of motor vehicle  parts falling  under  Item 34-A of the Central Excise  Tariff  and components  for  I.C. Engines falling under Item 68  of  the said Tariff. The period with which we are concerned in these appeals is the period from October 1, 1975 to July 21, 1984. The  marketing pattern of the appellant was that  they  sold goods  in  the wholesale to  O.E.  manufacturers,  Transport Undertakings and Government Bodies. The requirements of  the replacement market were met by the appellant by sale in  the wholesale to other persons who were designated by the appel- lant  as distributors/primary wholesale buyers on the  basis of  agreements  with  such distributors.  The  amendment  to section 4 of the Central Excises and Salt Act, 1944 (herein- after  referred to as "the Central Excises.Act")  came  into force  from  October  1, 1975 and, as from  that  date,  the Department took the view that sales by the appellant to  its distributors  would be considered as sales to  related  per- sons.  The Department, therefore, directed the appellant  to file price lists in Part IV in the form prescribed for sales to  related persons. The appellant filed the price lists  in Part II, Part IV and Part VI. The price lists filed in  Part II related to sales to industrial buyers, Government  Bodies and so on who were admittedly not related persons  regarding the appellant. These price lists were duly approved’. It was regarding  the  price  lists filed under Part  IV  that  the Assistant  Collector  on  the basis of  the  aforesaid  view directed the appellant to file revised price lists showing a discount  of 12-1/2% from the price at which the goods  sup- plied  by the appellant were sold by their  distributors  to independent buyers. The appellant complied with this  direc- tion  under protest taking up the contention that  the  dis- tributors  were  also a class of  independent  buyers.  This claim was rejected by the Assistant Collector, who took  the view that the distributors 160 were  related persons and hence the prices charged by  these distributors  to  their purchasers should be  taken  as  the assessable value. This was contested by the appellant before the Collector (Appeals) who by his order dated July 27, 1984 took  the view that the distributors were not  related  per- sons, on the basis of the decision of this Court in the case of Union of India & Ors. v. Bombay Tyres International Ltd., [1983] 14 E.L.T. 1896. The appellant applied for a refund on the ground that the excise duty had been collected from  the appellant on the footing that the distributors were  related persons and that, in view of the finding that the  distribu- tors  were not related persons, the excess amount should  be refunded to it. This contention was rejected by the  Assist- ant  Collector and on the ground that except in  respect  of sales  to  wholesale distributors/primary  wholesellers  and O.E.  manufacturers,  the excise duty had been paid  by  the appellant voluntarily. Against this decision, the  appellant preferred an appeal to the Tribunal. The Tribunal,  however, confirmed the view of the Assistant Collector on the  ground that  the other modes of sale like depot  transfers,  retail sales, direct dealer sales, sales to transport  undertakings and  sales to Government bodies like transport  undertakings had  not  figured  as issues for  determination  before  the excise authorities and the protest made by the appellant was only  in respect of the assessable value regarding the  said two  categories of sales to wholesale distributors/  primary

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wholesellers  and  to O.E. manufacturers. On  the  basis  of these conclusions, the Tribunal dismissed the appeal of  the appellant:  The  present appeals are directed  against  this decision of the Tribunal.     It  was submitted by Mr. Divan, learned counsel for  the appellant,  that the decision of the Tribunal was  erroneous and  liable  to  be set aside as, for purposes  of  levy  of excise  duty on the sales in question only one price can  be treated  as the normal price and, as the  distributors  were held  not to be related persons, it was the wholesale  price at  which the goods were sold by the appellant to  the  dis- tributors which must be held to be the normal price. It  was pointed out by him that all the circumstances show that  the payment  of excise duty was made under protest and that  the returns  were  originally  filed only on the  basis  of  the single  normal price, namely, the price at which  the  goods were  sold  by the appellant to  its  distributors.  Learned counsel drew our attention to the provisions of section 4 of the Central Excises Act. The relevant part of section 4 runs as follows: "4. Valuation of excisable goods for purposes of charging of duty of excise--(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference 161 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  asses- see to a buyer in the course of wholesale 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." We  are not concerned with the proviso to this  section  for the purposes of this appeal. Learned counsel submitted  that the language of section 4(1) suggests that there can be only one normal price for sales to independent distributors.     Learned  counsel for the appellant also drew our  atten- tion to the decision of this Court in Indian Oxygen Ltd.  v. Collector  of Central Excise, [1988] 36 E.L.T. 723.  It  has been  observed  by this Court in that  judgment  as  follows (para 6 of the said report): "It  is  necessary to reiterate that  value  for  assessable goods  must be determined in term of section 4 of  the  Act. The said section 4(1) provides that where 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 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 wholesale  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."     It  may be noted that in the present case there  was  no contention  that  there was any consideration for  the  sale other than the price.     In  India Cements Ltd. v. Collector of  Central  Excise, [1989] 2 S.C.C. 676 a Division Bench of this Court has taken the view that no particular form is prescribed for making up of  protest. In that case, the Court took the view  that  an ordinary reading of the letter sent by the appellant  showed that  the appellant was not accepting the liability  without protest  and in view of this, the letter must be held to  be in the nature of a protest. The Division Bench further  held that  in view of this, the question of limitation  does  not arise for refund of the duty (para 10 of the said report).

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162     It  was submitted by learned counsel for  the  appellant that  in the present case the letter of protest sent by  the appellant,  on  a commonsense reading thereof,  covered  the entire  payment  of  excise duty in those  cases  where  the normal price was fixed on the footing that the  distributors of the appellant were related persons and submitted that  in view  of this no question of limitation would arise in  con- sidering  the application of the appellant for  refund.  The learned  counsel drew our attention to the decision  of  the Special  Bench of the Tribunal in Collector of  Central  Ex- cise, Madras v. Ashok Leyland Ltd., Madras, [1987] 29 E.L.T. 530  where on similar facts a Special Bench of the  Tribunal had  taken the view that even removals for captive  use  and retail  sales had to be assessed at the normal price  avail- able at the time and place of removal from their main  deal- ers. The contention of the Department in that case that  the removals were not the subject matter of the original adjudi- cation by the Assistant Collector and hence the  assessments had become final, was rejected.     In  our opinion, the submission on behalf of the  appel- lant is well-founded. In view of the fact that the distribu- tors  of the appellant were finally held not to  be  related persons  regarding the appellant in cases where excise  duty has been levied on the footing that the distributors of  the appellant were related persons and hence, the price at which the  goods  were sold to them could not be regarded  as  the normal price and the excise duty collected in respect of the difference between the price at which the goods were sold by the appellant to its distributors and the price at which the said  goods  were sold by the  distributors  to  independent buyers, calculated as aforestated, must be held to be excess levy.  The protests filed by the appellant clearly  took  up the  contention that its distributors could not be  regarded as  related  persons and hence the protests  lodged  by  the appellant must be held to cover all cases where the price at which  the appellant sold its goods to its distributors  was not  regarded  as the normal price on the  ground  that  the distributors were related persons.     It was submitted by Mr. Ganguly, learned counsel for the respondent,  that the protest made by the appellant must  be read  as limited to the cases of sales by the  appellant  to its wholesale distributors/primary wholesellers and to  O.E. manufacturers  and that the other categories of  sales  like stock  transfers,  clearances to retail  sellers  and  other wholesale  sales to purchasers other than distributors  must be held not to be covered by the protests. He placed  strong reliance  on  the  observation of this  Court  in  Assistant Collector of Central Excise & Ors. v. Madras Rubber  Factory Ltd. & Ors., [1987] 27 E.L.T. 553 163 (S.C.)  where it has been held (page 20 of the report)  that the  different prices can be normal prices for the  purposes of the determination of the assessable value of an  article. In  that  case,  however, it must be  appreciated  that  the separate  price  lists in respect of supplies  made  to  the Government and other departments were filed by the assessee, the  Madras Rubber Factory, distinct and different from  the price  lists  in relation to dealers and it  was  held  that since different price lists for different classes of  buyers are  specifically  recognised under proviso (i)  of  section 4(1)  of the Central Excises Act, therefore, merely  because the  product is sold at a lower price to the Government  and its department that does not enable the MRF to contend  that the difference in price with reference to an ordinary dealer

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and  the  Government is a discount to  the  Government.  The difference  in  price is not a discount  but  constitutes  a normal price for the Government as a class of buyers and  no deduction on this Head is admissible. It was, in these facts and circumstances, that the aforesaid conclusion was arrived at  and it has no application to the case before us  because it  has  not been shown to us that a distinct  or  different price  list was filed regarding any particular  category  of buyers in respect of the sales in question.     Mr. Ganguly next drew our attention to Rule 233B of  the Central Excises Rules, 1944 which lays down the procedure to be followed when duty is paid under protest. The  provisions of  this rule, however, are of no relevance here because  it has  not been pointed out to us as to how the appellant  has failed to observe this rule in any particular regard so that the provisions of clause 8 of the rule can come into effect. This rule does not prescribe any particular form of  protest and  hence  it is not possible to say on the basis  of  this rule that the appellant-assessee in this case must be deemed to have paid the duty without protest.     In  the result, the appeal is allowed. The order of  the Tribunal  is set aside and it is held that the  assessee  is entitled  to refund where excise duty has been assessed  and collected from the assessee at a higher rate on the  footing that the wholesale distributors of the assessee were persons related  to it, that is, in respect of the other  categories of  sales, namely, retail sales, sales to dealers, sales  to State Transport Undertakings and export clearances. Looking, however,  to the facts and circumstances of the case,  there will be no order as to costs of the appeals. The orders  for costs already made shall, however, stand. N.V.K.                                          Appeal   al- lowed. 164