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

2. Briefly stated the facts are as follows:  The respondent herein filed two price lists -- one bearing No. 29/P-II/TISCO/91-92 and another bearing No. 8/P-II/TISCO/91-92. Both the price lists were in respect of balls and roller bearings of various specifications. The first price list contained the prices at which the respondent Company proposed to sell in the wholesale market. The second price list contained the prices at which they proposed to sell the same items to M/s Tata Engineering and Locomotive Company (in short TELCO), M/s Tata Robins Frazer Ltd. and M/s Stark Motors. In the second price list the price to M/s Tata Robins Frazer Ltd. and M/s Stark Motors was shown to be the same as the wholesale price however the price to M/s Tata Engineering and Locomotive Company was shown to be lower.  3. A show cause notice was issued to them as to why the prices to TELCO should not be fixed at the same price as in respect of the sale to the wholesale market and to the other two companies.  4. The appellant filed a reply to the show cause notice. Unfortunately, neither side has placed this reply on record of this Court. However, from the order of the Assistant Collector dated 30-3-1992 it appears that the only contention taken was that the price in Part II was as per the contract and therefore it should not be approved at the same rate as the price in Part I. It also appears, from the order, that at the personal hearing a further contention was taken that there were two types of customers viz. trade and original equipment manufacturers. It was contended that in the case of traders, Part I price was charged whereas in the case of original equipment manufacturers the price on the basis of contract was being charged. The Assistant Collector held, and in our view correctly, that for application of S.4(1)(a) of the Central Excises and Salt Act, 1944, the Company had to show that there was a normal trade practice and that TELCO was a different class of buyer. Material had to be placed to show these aspects. Merely on the basis of contracts it could not be said that TELCO was a different class of buyer. The Assistant Collector noted that all the three companies were industrial companies which were original equipment manufacturers. No material appears to have been placed to show why different price was sought to be charged from TELCO only.  5. The respondent went in appeal to the Collector (Appeals). The memo of appeal is not before us. However, the submission made before the Collector (Appeals) has been set out in his order. The only submission which appears to have been made was that TELCO was a different class of buyer and that therefore they were entitled to charge a different price from TELCO. The Collector (Appeals) allows on the following reasoning:On close study, I find that the appellant had submitted the impugned price lists in Part II meant for sale at 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.

Reasoning:
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.