THE COMMISSIONER OF CENTRAL EXCISE, MEERUT versus M/S. UNIVERSAL GLASS LTD., SAHIBABAD (GHAZIABAD)

Citation: [2005] 2 S.C.R. 733 · Decided: 11-03-2005 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Appeal(s) allowed

Judgment (excerpt)

THE COMMISSIONER OF CENTRAL EXCISE, MEERUT 
A 
v. 
MIS. UNIVERSAL GLASS LTD., SAHIBABAD (GHAZIABAD) 
MARCH 11, 2005 
[S.N. VARIAVA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.] 
Central Excise Act, 1944/Central Excise (Valuation) Rules, 1975-Rule 
6(b)(ii)-Excise duty-Price declaration by assessee regarding sale to a buyer 
B 
on the basis of sale to other buyers-Demand of duty by invoking Rule 6(b)(ii) C 
in absence of availability of comparable price-Finding by Revenue that 
assessee guilty of creating artificial buyers-No other manufacturer of similar 
goods available-Goods sold to other buyers were different from the goods 
sold to the buyer-Calculation of assessable value based on the profit of 
buyer and not the assessee-Tribunal held invoking of Rule 6(b)(ii) not 
justified-On appeal, held : Invoking of Rule 6(b)(ii) was justified as in the D 
facts of the case no comparable prices were available for determining the 
normal price-However, assessable value should have been calculated on the 
basis of profit of the assessee-Hence to this extent matter remitted to the 
Commissioner of Central Excise. 
Respondent-assessee was in the business of manufacturing glass E 
bottles and jars. Assessee-Company was a division of another Company 
(.JIL) which was in the business of manufacturing liquor and food 
products. Assessee-Company filed its price list for assessment purpose 
valuing the bottles supplied to JIL for captive consumption relying ut1on 
the prices charged by assessee to other companies. Revenue demanded F 
differential duty, invoking Rule 6(b)(ii) of Central Excise (Valuation) 
Rules, 1975. Comparable prices were not available and that the assessee 
had, with the intention to evade duty, willfully and deliberately filed 
incorrect price declaratio.ns. Upholding the demand, Commissioner held 
th!lt Revenue was right in invoking Rule 6(b)(ii) as it was not possible to 
determine the nearest ascertainable value of the bottles under Rule 6(b)(i). G 
The prices of bottles supplied to JIL for captive consumption could not 
be compared to the price of bottles supplied to either the franchisees of 
JIL, or to Mis ASA because the franchisees were not independent buyers 
as the packing cost was borne by JIL and they were put up to create an 
733 
H 
734 
SUPREME COURT REPORTS 
[2005] 2 S.C.R. 
A artificial market because the bottles sold to Mis. ASA were re-sold to JIL 
and it was set up by the assessee to create an artificial gate price. There 
were also no comparable manufacturers of the bottles in the vicinity in 
terms of capital investments, shape and size of the bottles etc. That in 
most of the cases, price lists were filed by the assessee either in part-I or 
B Part-II without sales in fact taking place and yet such price list were 
relied upon by the assessee for clearance of bottles to JIL. However, it 
held that the sale of bottles to other buyers would form the basis of 
ascertainable value as they were independent buyers. Hence in their case 
Rule 6(b)(ii) was not· invokable. Accordingly the duty demanded was 
reduced and confined to sales to JIL, their franchisees and to .M/s. ASA 
C by applying Rule 6(b)(ii). 
In appeal, Customs Excise and Gold (Control) Appellate Tribunal 
held that Rule 6(b)(ii) was not invokable as comparable goods were 
available; and that there could not have been intention to evade duty as 
the assessee was entitled to exemption vide Notification No. 217/86 and as 
D the goods were madvatable. 
In appeal to this Court the questions for consideratfon were-
Whether the price lists of bottles sold by the assessee to JIL for capitive 
consumption were comparable with the prices of the bottles sold to "other 
E independent buyers"; and whether the bottles made by the assessee were 
comparable with the bottles made by other manufacturers. 
Assessee inter alia contended that the costing method adopted by 
the Commissioner was faulty inasmuch as the assessable value calculated 
by him was based on the profits of JIL and not on the profits of the 
l 
t 
I 
F assessee. 
Allowing the appeal, the Court ' 
,, 
HELD : 1. Comparable goods under rule 6(b) should be, as far as 
possible, identical goods. Simply because two goods are known by the 
G same name or by the same genre, does not mean that they are comparable 
goods. Even, if they are assumed to be comparable, all relevant differences 
as far as possible should be recognized. In the present case, even if the 
capacities of the bottles sup

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