1978 (8) TMI 80 - HC - Central Excise

Valuation - Validity - Inclusion of Post-manufacturing expenses - Excise duty - Scope - Constitution of India

Issues Involved:
1. Validity and legislative competence of Section 4 of the Central Excises and Salt Act, 1944, as amended.
2. Interpretation of "duty of excise" under Entry 84 in List I of the Seventh Schedule of the Constitution.
3. Validity of the orders passed by the Department under the amended Section 4.

Issue-wise Detailed Analysis:

1. Validity and Legislative Competence of Section 4:
The petitioner challenged the amended Section 4 of the Central Excises and Salt Act, 1944, arguing it was ultra vires Section 3 of the Act and beyond Parliament's competence. The Court examined whether Section 4 was in conflict with Section 3, which provides for the levy of excise duty on goods manufactured or produced in India. The Court noted that Section 3 does not define "duty of excise" to mean duty on a value consisting solely of manufacturing cost and profit. Instead, Section 3 states that duties of excise shall be levied and collected in a manner prescribed. Section 4, as a machinery section, details the methodology for determining the value for excise duty, which includes post-manufacturing expenses. The Court concluded that Section 4 is not ultra vires to Section 3 and both sections can coexist. The Court also found that Section 4 is within the legislative competence of Parliament under Entry 84 of List I of the Seventh Schedule of the Constitution.

2. Interpretation of "Duty of Excise":
The petitioner contended that "duty of excise" under Entry 84 in List I of the Seventh Schedule should only include manufacturing cost and profit, excluding post-manufacturing expenses. The Court referred to various judgments, including those of the Federal Court and the Privy Council, to highlight the broad and flexible nature of the term "duty of excise." The Court noted that the term could include taxes at various stages of production and distribution before reaching the consumer. The Court emphasized that the amended Section 4, which considers post-manufacturing expenses, does not conflict with the constitutional provision. The Court concluded that the expression "duty of excise" is wide in scope and can include post-manufacturing expenses, making Section 4 valid and within Parliament's legislative competence.

3. Validity of the Department's Orders:
The petitioner challenged the orders passed by the Assistant Collector of Central Excise, arguing they were illegal and without jurisdiction because they included post-manufacturing expenses in the valuation for excise duty. The Court noted that the orders were passed in compliance with the amended Section 4 and the Central Excise (Valuation) Rules, 1975. The Court found that the orders were not nullities and could be corrected through the statutory appeal process provided under the Act. The Court emphasized that the determination of whether certain expenses should be included in the valuation is a matter for the departmental authorities to decide, subject to appeal.

Conclusion:
The Court dismissed the writ petition, holding that:
1. Section 4 is not ultra vires to Section 3 and is within the legislative competence of Parliament.
2. The expression "duty of excise" under Entry 84 in List I of the Seventh Schedule is broad enough to include post-manufacturing expenses.
3. The orders passed by the Department were valid and in conformity with the Act and the rules, and the petitioner should seek remedy through the statutory appeal process.

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