1800 (1) TMI 3 - HC - Central Excise

Summary

Issues Involved:
1. Legality of excise duty recovery.
2. Inclusion of tin-container and freight costs in the valuation for excise duty.
3. Exhaustion of remedies under the Central Excise and Salt Act, 1944.
4. Jurisdiction of Civil Courts in matters under the Central Excise and Salt Act, 1944.

Issue-wise Detailed Analysis:

1. Legality of Excise Duty Recovery:
The respondents filed a suit contending that the Union of India had illegally recovered certain amounts as excise duties under the Central Excise and Salt Act, 1944. The trial court decreed in favor of the respondents, ordering a refund of Rs. 60,334.44. The respondents argued that the excise duty was improperly levied on a higher price, which included the cost of tin-containers and freight, thus inflating the value of the vegetable products.

2. Inclusion of Tin-Container and Freight Costs:
The respondents disputed the inclusion of the cost of tin-containers and freight in the valuation for excise duty. They contended that these costs should be deducted before the levy of excise duty. The appellants argued that the vegetable oil could not be sold without the container, making the packaging an ancillary part of the manufacturing process. However, the court noted that the product, hydrogenated vegetable oil, could be transported in bulk containers and sold without tin-containers. The court emphasized that only the value of the excisable product itself should be considered, excluding post-manufacturing costs like packaging and freight. The court referred to the Supreme Court's judgment in A.K. Roy v. Voltas Limited, which stated that excise duty should be levied only on the manufacturing cost and profit, excluding post-manufacturing expenses.

3. Exhaustion of Remedies under the Central Excise and Salt Act, 1944:
The appellants contended that the respondents had not exhausted the remedies provided by the Act, such as filing an appeal under Section 35 and a revision under Section 36. They also argued that the suit was barred under Section 40 of the Act, which provided immunity for acts done in good faith under the Act. However, the court found that the levy of excise duty on the value of the tin-container and freight was not warranted by the Act, making it an illegal levy. The court held that Section 40 did not bar a suit for recovery of an amount levied illegally as duty.

4. Jurisdiction of Civil Courts:
The appellants argued that the jurisdiction of civil courts was barred by Section 40 of the Act. However, the court referred to the Supreme Court's decision in Dhulabhai v. State of M.P., which stated that the jurisdiction of civil courts is not excluded unless there is an express bar or the statute provides an adequate remedy. The court concluded that Section 40 did not bar the jurisdiction of civil courts, as it only provided immunity for acts done in good faith under the Act. The court affirmed the trial court's decree and dismissed the appeal with costs.

Conclusion:
The court held that the inclusion of the cost of tin-containers and freight in the valuation for excise duty was illegal. It affirmed the trial court's decree ordering a refund to the respondents. The court also held that the suit was maintainable, and the jurisdiction of civil courts was not barred by the Central Excise and Salt Act, 1944. The appeal was dismissed with costs.