1979 (11) TMI 103 - HC - Central Excise

Summary

Issues Involved:
1. Determination of assessable value under Section 4 of the Central Excises and Salt Act, 1944.
2. Inclusion of a 2% local levy in the assessable value.
3. Interpretation of "wholesale cash price" under Section 4(a).
4. Limitation aspect in issuing demand notices.

Issue-wise Detailed Analysis:

1. Determination of Assessable Value Under Section 4 of the Central Excises and Salt Act, 1944:
The primary issue was whether the 2% local levy charged by the petitioner should be included in the assessable value of tyres for excise duty purposes. The petitioner argued that the wholesale price should be based on sales made in other parts of India, which constituted 91% of their total sales, rather than the 9% sales in Greater Bombay. The court rejected this argument, stating that Section 4(a) requires the wholesale cash price to be ascertained at the time of removal of the products from the factory, eliminating freight, octroi, and other charges involved in transportation, irrespective of the sales volume in different regions.

2. Inclusion of a 2% Local Levy in the Assessable Value:
The petitioner contended that the 2% local levy recovered from customers in Greater Bombay was a non-manufacturing element and should not be included in the assessable value. The respondents argued that the levy was a profit and should be included. The court referred to the Supreme Court's decision in Voltas Ltd. and the Division Bench's decision in the Indian Tobacco Company case, which clarified that excise duty is levied only on manufacturing cost plus manufacturing profit, excluding post-manufacturing costs and profits. The court concluded that the 2% local levy was a non-manufacturing element and could not be included in the assessable value under Section 4(a).

3. Interpretation of "Wholesale Cash Price" Under Section 4(a):
The court examined the meaning of "wholesale cash price" in light of the Supreme Court's ruling in A.K. Roy and another v. Voltas Ltd. The ruling emphasized that excise duty is levied on manufacturing cost and profit, excluding post-manufacturing costs and selling profits. The court reiterated that the wholesale price should be determined at the factory gate, eliminating additional charges like freight and octroi. The court found that the 2% local levy did not form part of the manufacturing cost or profit and thus should not be included in the wholesale cash price.

4. Limitation Aspect in Issuing Demand Notices:
Although the petitioner raised the issue of limitation regarding the demand notices, the court found in favor of the petitioner on the merits of the case. Consequently, the limitation aspect became academic and was not addressed in detail.

Conclusion:
The court set aside the impugned order dated 28th May 1969, the four demand notices dated 29th May 1969, the appellate order dated 24th July 1974, and the demand notice dated 30th September 1974. The 2% local levy charged by the petitioner in Greater Bombay was deemed a non-manufacturing element and excluded from the assessable value for excise purposes. The rule was made absolute with no order as to costs.