1974 (9) TMI 108 - HC - Central Excise

Issues Involved:

1. Legality of levying excise duty on post-manufacturing costs and profits.
2. Claim for refund of excise duty collected on post-manufacturing costs and profits.
3. Determination of wholesale cash price under Section 4 of the Central Excises and Salt Act, 1944.
4. Jurisdiction of the excise authorities in levying duty.
5. Application of the Supreme Court's judgment in the Voltas case.
6. Alleged unjust enrichment by the petitioner.
7. Compliance with procedural rules under the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Legality of levying excise duty on post-manufacturing costs and profits:

The petitioner, ELMI, contended that excise duty should be levied only on the manufacturing costs and manufacturing profits of the goods, as per Section 4 of the Central Excises and Salt Act, 1944. ELMI argued that the excise duty levied on the basis of the price list of customer-companies, which included post-manufacturing costs such as selling costs and profits, was illegal. The court noted that excise duty is payable on the wholesale cash price of the manufactured goods, which should include only the manufacturing costs and manufacturing profits, excluding post-manufacturing costs and profits.

2. Claim for refund of excise duty collected on post-manufacturing costs and profits:

ELMI sought a refund of Rs. 1,98,40,969.67, claiming that this amount was illegally collected as excise duty on the basis of the sale price of customer-companies. The court observed that the petitioner had collected the excise duty from its wholesale dealers and allowing a refund would result in unjust enrichment. The court held that refund of any sum illegally collected presupposes a loss suffered by the assessee, and allowing a double reimbursement or compensation is equally bad as double taxation.

3. Determination of wholesale cash price under Section 4 of the Central Excises and Salt Act, 1944:

The court emphasized that the wholesale cash price for the purpose of levying excise duty should consist of manufacturing costs and manufacturing profits only. The excise officers must make proper inquiries and approve the price list in accordance with the statutory rules under Chapter VIIA of the Central Excise Rules, 1944. The court directed that pending applications relating to the levy of excise duty under Section 4(a) should be dealt with in accordance with the principles laid down in the Voltas case, which excludes post-manufacturing costs and profits.

4. Jurisdiction of the excise authorities in levying duty:

The court found that the excise officers had jurisdiction to levy duty under Section 4(a) based on the returns filed by the petitioner in accordance with the prescribed forms. The court noted that there was no definite averment in the petition that the wholesale cash price for all past years should consist of a definite amount of manufacturing costs and profits. The court held that the excise officers could not be said to have acted in excess of their jurisdiction, and the writ jurisdiction could not be invoked unless the excise authorities passed the impugned orders of assessment in breach of Section 4 or statutory rules.

5. Application of the Supreme Court's judgment in the Voltas case:

The petitioner relied on the Supreme Court's judgment in the Voltas case, which held that excise duty should be levied on the wholesale cash price comprising manufacturing costs and manufacturing profits only. The court noted that the principles laid down in the Voltas case do not apply to the facts of the present case, as the sales between the petitioner and its customer-purchasers were not made in the normal course of business. The court distinguished the facts of the Voltas case from the present case and held that the orders of assessment could not be quashed.

6. Alleged unjust enrichment by the petitioner:

The court found that the petitioner had already collected the excise duty alleged to have been paid in excess from its wholesale dealers, and allowing a refund would result in unjust enrichment. The court held that unjust enrichment amounts to fraud, and the principles of waiver and acquiescence would not apply.

7. Compliance with procedural rules under the Central Excise Rules, 1944:

The court observed that the petitioner had complied with the procedural rules under the Central Excise Rules, 1944, including filing the price list for approval and maintaining a current account with the Reserve Bank of India. The court directed that the excise authorities must approve the price list in accordance with the statutory rules and make the assessment known to the assessee for payment of duty.

Conclusion:

The court discharged the Rule Nisi subject to the direction that the respondents will deal with the pending applications relating to the levy of excise duty under Section 4(a) in accordance with the principles laid down in the Voltas case. The court held that the orders of assessment could not be quashed, and the petitioner could not be allowed to realize the excess excise duty again from the respondents. All interim orders were vacated, and there was no order as to costs. The petitioner was given the liberty to take recourse to any other remedy permissible in law.

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