2014 (5) TMI 384 - SC - Central Excise

Duty demand - Demand of differential duty - Difference in price of tractors and duty paid - Assessee contends that the difference in price has been on account of freight, after sale service charges, dealer s margin, expenses in respect of marketing, selling etc - Held that - In Collector of Central Excise v. M/s. Indian Oxygen Ltd., 1988 (7) TMI 58 - SUPREME COURT OF INDIA , referring to the decision in Union of India v. Bombay Tyre International Ltd. 1983 (10) TMI 51 - SUPREME COURT OF INDIA , this Court held that in the light of the aforesaid principles it has to be borne in mind that any activity ancillary to but not incidental to the manufacture cannot be included as part of the activity for the manufacture. Any income either in the form of interest on deposits, notional or real earned on the deposit etc. would not be the price for the manufacture though they might be profits or gains, if any, of any ancillary or allied venture. Assessee failed to bring the ascertainable price of the tractor, cost of transportation to depot, etc. to the notice of the High Court. The assessee simply challenged the show-cause notices on the ground that the amended Section 4 is not applicable. The High Court without looking into the relevant fact, only on the ground that sub-clause (iii) to Section 4(b) was subsequently added by amendment including depot , premises of consignment agent or any other place or premises from where the excisable goods were to be sold after their clearance from the factory, declared the notices illegal and set aside the same. Even the matter was not remanded back to competent authority allowing the assessee to bring to its notice normal price , in course of wholesale trade, place of removal of tractors, transportation charges, etc. There is no option but to set aside the impugned judgment dated 13th September, 2002 passed by the High Court - The case is remitted to the competent authority granting liberty to the assessee to forward a copy of each of the show-cause replies already filed within four weeks. Assessee is also given liberty to produce relevant evidence in support of its claim - Decided in favour of Revenue.

Issues Involved:
1. Validity of the show-cause notices issued for short payment of excise duty.
2. Determination of the assessable value of goods sold from depots.
3. Application of Section 4 of the Central Excise and Salt Act, 1944.
4. Inclusion of various charges in the assessable value.
5. Remand of the matter to the competent authority for further evidence.

Issue-wise Detailed Analysis:

1. Validity of the Show-Cause Notices:
The judgment addresses the appeal against the High Court's decision to set aside two show-cause notices issued by the Superintendent of Central Excise. These notices pertained to the alleged short payment of excise duty under Section 11A of the Central Excise and Salt Act, 1944. The Supreme Court found that the High Court was not justified in interfering at the stage of issuance of show-cause notices. The High Court should have allowed the matter to be adjudicated by the competent authority.

2. Determination of the Assessable Value of Goods Sold from Depots:
The show-cause notices alleged that the assessee sold duty-paid stocks from their sales depots at higher prices, which should be considered as the assessable value. The High Court had ruled that the department was not justified in demanding excise duty based on the higher prices at which the tractors were sold from the depots. However, the Supreme Court noted that the assessee failed to provide the ascertainable price of the tractors and the cost of transportation to the depots to the High Court. The Court emphasized the need for these details to determine the correct assessable value.

3. Application of Section 4 of the Central Excise and Salt Act, 1944:
The Supreme Court highlighted the provisions of Section 4 as it stood during the relevant period (1982-1985). Section 4(1)(a) defined the "normal price" as the price at which goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal. The Court referred to the interpretation of Section 4 in previous judgments, including Union of India v. Bombay Tyre International Ltd. and Asstt. Collector of Central Excise v. Madras Rubber Factory Ltd., to elucidate that the value should be based on the price charged by the manufacturer in a transaction at arm's length.

4. Inclusion of Various Charges in the Assessable Value:
The show-cause notices alleged that the assessee did not include charges such as after-sales service, dealer's margin, marketing and selling expenses, and excess freight in the assessable value. The Supreme Court noted that the High Court did not consider these allegations adequately. The Court emphasized that any income ancillary to the manufacture, such as interest on deposits, should not be included in the assessable value.

5. Remand of the Matter to the Competent Authority for Further Evidence:
The Supreme Court found that the High Court erred in not remanding the matter back to the competent authority for further investigation. The Court remitted the case to the competent authority, granting liberty to the assessee to forward a copy of each of the show-cause replies already filed and to produce relevant evidence in support of its claim. The competent authority was directed to pass appropriate orders in accordance with the law.

Conclusion:
The Supreme Court set aside the High Court's judgment dated 13th September 2002, and remitted the case to the competent authority for further proceedings. The appeal was allowed, and the assessee was granted the opportunity to present additional evidence to support its claims.

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