Case: Commissioner Of Central Excise, Calcutta Vs. Tisco Ltd

different prices to different classes of buyers. It is a fact that the expression class of buyers is not defined under S.4 of the said Act. But keeping in view the definition of wholesale trade in terms of S.4(4)(e) it can be held that dealers, industrial consumers, government, local authorities, etc. constitute different class of buyers. As per stipulations of S.4(1)(a)(i) if an assessee sells its goods at different prices to different classes of buyers such prices would be deemed to be the normal prices of such goods if such buyers are not related persons. I like to stress on the connotation, not being related person within the bracket immediately after different classes of buyers stipulated in S.4(1)(a)(i), and with a view to deny the facility of having Part II prices, the approving authority should have some clinching evidence to the effect that such buyers are related persons. In the purported case the Assistant Collector could not establish any relationship between M/s TELCO and the appellant. Moreover, whether a particular buyer constitutes a class of buyers or not will depend upon trade practice. Each buyer is a class within itself since he can be distinguished from other buyers. Hence, prices charged to a buyer treating it as a different class of buyers should be normal prices until and unless there is evidence to hold that such buyer is a related person of the assessee. 6. We are unable to agree with the reasoning. Merely because parties are not related persons does not mean that each buyer becomes a class within itself. The normal rule, under S.4, is that the value which shall be deemed to be the price at which such goods are ordinarily sold by the assessee in the wholesale trade, where the buyer is not a related person and the price is the sole consideration for sale. Admittedly, in this case the normal price was the price in List 1. This was the price at which the goods were proposed to be sold in the wholesale trade. The proviso to this section is an exception to the general rule. The proviso comes into play in cases (a) where there is a normal practice in the wholesale trade in such goods, and (b) such goods are sold by the assessee at different prices to different, classes of buyers. To claim benefit of this proviso, a trade practice must be averred and shown to exist and it must be shown that there is a different class of buyer. As set out above, the Collector (Appeals) notes: Whether a particular buyer constitutes a class of buyers or not, will depend upon the trade practice. 7. Yet the Collector (Appeals) then ignores the fact that there is no averment nor proof of any trade practice. Further, the observations of the Collector (Appeals) that the price charged to a buyer treating it as a different class of buyer should be the normal price unless there is an evidence to hold that such buyer is a related person of the assessee, is a wrong proposition of law. Cogent reasons must be shown as to how the buyer is a different class of buyer. There can be various reasons why a buyer becomes a different class of buyer. A bulk purchaser or persons situated in different locations or different industries, for example, one being a car manufacturing industry and another being a heavy duty machinery manufacturing industry or a third being an electric motor manufacturing industry could all be different classes of buyers. But these are facts which must first be averred and then proved. It is only on the basis of facts averred and shown that a conclusion can be reached that the sale is to a different class of buyer. In this case except for broadly stating that the sale is to a different class of buyer, the Collector (Appeals) has not given any reason as to how he concludes that TELCO was a different class of buyer. The only reason for concluding that TELCO was a different class of buyer appears to be because a different price was charged from it. That by itself is not sufficient. On the facts of this case it is clear that there was no material to show that TELCO was a different class of buyer. 8. The appellant herein carried the matter in appeal to the Tribunal which appeal has been dismissed by the impugned judgment. The impugned judgment is virtually a one paragraph judgment which reads as follows: 4. After hearing the learned JDR, we observe that the Commissioner (Appeals) in the impugned order has observed that if an assessee sells their goods at different prices to different classes of buyers, such prices would be deemed to be normal prices of such goods, if such buyers are not related persons; that the Assistant Commissioner could not establish any relationship between M/s TELCO and the assessee. The Commissioner (Appeals) also observed that whether a particular buyer constitutes a class of buyers or not, will depend upon the trade practice. Each buyer is a class by itself since he can be distinguished from other buyers. The Commissioner (Appeals), therefore, set aside the Assistant Commissioners order. The very fact is that the law provides for filing of different prices for different classes of buyers and also the different forms for filing the price lists. There is no reason not to accept the price filed in Part II until and unless it is shown that the low prices have been charged on extraneous circumstances. 9. The Tribunal, has laid down a general proposition of law. But it has not applied its mind whether that law can be applied to the facts of this case. The Tribunal also does not indicate how and what material was there to show that TELCO was a different class of buyer. 10. Both the orders of the Collector (Appeals) and the Tribunal are unfortunately bereft of any reasoning. Neither of them can be sustained.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]6. We are unable to agree with the reasoning. Merely because parties are not related persons does not mean that each buyer becomes a class within itselfThe proviso comes into play in cases (a) where there is a normal practice in the wholesale trade in such goods, and (b) such goods are sold by the assessee at different prices to different, classes of buyers. To claim benefit of this proviso, a trade practice must be averred and shown to exist and it must be shown that there is a different class of buyerThat by itself is not sufficient. On the facts of this case it is clear that there was no material to show that TELCO was a different class of buyerTribunal, has laid down a general proposition of law. But it has not applied its mind whether that law can be applied to the facts of this case. The Tribunal also does not indicate how and what material was there to show that TELCO was a different class of buyerBoth the orders of the Collector (Appeals) and the Tribunal are unfortunately bereft of any reasoning. Neither of them can be sustained.