1975 (9) TMI 55 - HC - Central Excise

Valuation - If assessable value not ascertainable - - Listed price - Alternative remedy - Scope of - Excise duty - Realisation of from customers

Issues Involved:
1. Determination of assessable value of chemicals under the Central Excises and Salt Act, 1944.
2. Applicability of clause (a) or clause (b) of Section 4 of the Act for determining assessable value.
3. Inclusion of post-manufacturing expenses and selling profit in the assessable value.
4. Availability of alternative remedy under Section 35 of the Act.
5. Theory of unjust enrichment and its impact on relief under Article 226 of the Constitution.

Detailed Analysis:

1. Determination of Assessable Value of Chemicals:

The petitioner, a manufacturer of Rubber Processing Chemicals, challenged the determination of the assessable value of these chemicals under the Central Excises and Salt Act, 1944. The chemicals became excisable under Item 65 of the First Schedule of the Act effective from April 1, 1973. The petitioner submitted a price list for approval and cleared the chemicals provisionally, calculating the assessable value by deducting post-manufacturing expenses and selling profit from the list price.

2. Applicability of Clause (a) or Clause (b) of Section 4 of the Act:

The Assistant Collector of Central Excise concluded that clause (a) of Section 4 was not applicable as the wholesale cash price was not ascertainable. This determination was based on several factors, including the marketing organization, agreements depicting overriding control by the petitioner, equalized prices throughout India, and the absence of a separate profit and loss account for the sales organization. The court upheld this conclusion, stating that the finding was not based on irrelevant material or a perverse finding of fact.

3. Inclusion of Post-Manufacturing Expenses and Selling Profit:

The court emphasized that excise duty is a tax on the manufacture of goods and should be based on manufacturing cost and profit. It held that post-manufacturing expenses and profits should not be included in the assessable value, whether under clause (a) or clause (b) of Section 4. The Assistant Collector's order to include listed price without any deductions, along with freight and packing charges, was found to be in violation of the Supreme Court's decisions in Voltas Ltd. and Attic Industries cases.

4. Availability of Alternative Remedy:

The petitioner did not resort to the alternative remedy of appeal under Section 35 of the Act. However, the court noted that the existence of an alternative remedy is not a bar to granting relief under Article 226 of the Constitution. Given the error of law and the court's decision to entertain the application, it was deemed inappropriate to refuse relief based on the availability of an alternative remedy.

5. Theory of Unjust Enrichment:

The respondents argued that the petitioner had realized excise duty from its customers and should be denied relief based on unjust enrichment. The court rejected this argument, stating that the theory of unjust enrichment applies to both the taxpayer and the tax collector. It emphasized that the state should not levy taxes that it is not permitted to under the law. Therefore, the petitioner should not be refused relief on this ground.

Conclusion:

The court set aside the Assistant Collector's order determining the assessable value of the chemicals, except for the applicability of clause (b) of Section 4. The respondents were directed to reassess the value in accordance with the law, excluding post-manufacturing expenses and profits. The petitioner was instructed to deposit the excess excise duty realized from customers in a separate bank account and provide particulars to the respondents. The rule was made absolute to the extent indicated, with no order as to costs.

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