1976 (12) TMI 181 - HC - Central Excise

Summary

Issues Involved:
1. Assessable amount of excise duty under Section 4(a) of the Central Excises and Salt Act, 1944.
2. Legality of including post-manufacturing costs and selling expenses in the assessable value for excise duty.
3. Validity of the orders and demand notices issued by the Central Excise authorities.

Detailed Analysis:

1. Assessable Amount of Excise Duty under Section 4(a) of the Central Excises and Salt Act, 1944:

The primary question in these applications is the determination of the assessable amount of excise duty under Section 4(a) of the Central Excises and Salt Act, 1944, prior to its amendment in 1973. The petitioner's business involves manufacturing and selling cigarettes and smoking tobacco, with sales made to distributors on a principal-to-principal basis. The petitioner argues that the wholesale prices charged to distributors should be the sole consideration for excise duty assessment, excluding any post-manufacturing costs and selling expenses.

2. Legality of Including Post-Manufacturing Costs and Selling Expenses in the Assessable Value for Excise Duty:

The petitioner challenges the orders and demand notices issued by the Central Excise authorities, which included post-manufacturing costs and selling expenses in the assessable value for excise duty. The petitioner contends that excise duty should only be levied on the manufacturing cost plus manufacturing profit, excluding any post-manufacturing costs and selling profits. This argument is supported by Supreme Court decisions in A.K. Roy v. Voltas Ltd. and Atic Industries Ltd. v. H.H. Dave, which establish that excise duty should be based on the "wholesale cash price" at arm's length, excluding post-manufacturing costs and selling profits.

3. Validity of the Orders and Demand Notices Issued by the Central Excise Authorities:

In C.W.J.C. 939/74, the petitioner seeks to quash the orders dated 4th April 1974, 8th May 1974, and 14th June 1974, which disallowed the deduction of post-manufacturing costs and selling expenses from the price charged to wholesale dealers. The petitioner also seeks to quash the demand for additional excise duty of Rs. 36,90,056.57. Similarly, in C.W.J.C. 1203/74, the petitioner challenges the provisional assessments and demand notices for additional excise duty of Rs. 27,43,015.40, which included post-manufacturing costs and expenses. In C.W.J.C. 1252/74, the petitioner challenges the orders approving the inclusion of post-manufacturing costs and expenses in the assessable value.

The court held that the respondents exceeded their jurisdiction by including post-manufacturing costs and selling expenses in the assessable value for excise duty. The court quashed the impugned demands and directed the respondents to reassess the excise duty in accordance with the principles laid down by the Supreme Court, excluding post-manufacturing costs and selling profits from the assessable value.

Conclusion:

The court allowed all three writ applications, quashing the orders and demand notices issued by the Central Excise authorities. The cases were remitted back to the competent Excise Authority to reassess the excise duty in accordance with the law, excluding post-manufacturing costs and selling profits from the assessable value. No order as to costs was made in the circumstances of the cases.