1979 (10) TMI 83 - HC - Central Excise

Valuation - Exemption - Passing the benefit to the consumer - Trade Notice - Supplementary instructions cannot supply omissions - Exemption - Scope

Issues Involved:

1. Validity and enforceability of instructions issued under Rule 233.
2. Interpretation of the exemption notification under Rule 8.
3. Determination of assessable value under Section 4.
4. Whether the benefit of duty exemption must be passed on to the consumer.

Issue-wise Detailed Analysis:

1. Validity and Enforceability of Instructions Issued Under Rule 233:

The petitioner challenged the enforceability of the instructions issued under Rule 233, arguing that these instructions cannot amend, modify, or qualify the exemption notification issued under Rule 8. The court agreed, stating that Rule 233 merely empowers the Central Board of Revenue and Collectors to provide supplemental instructions but not to alter statutory provisions or notifications. The instructions in question were deemed to qualify, abridge, or curtail the statutory exemption notification, which is impermissible. The court held that the instructions issued under Rule 233 are not statutory and, therefore, cannot override the exemption notification.

2. Interpretation of the Exemption Notification Under Rule 8:

The exemption notification under Rule 8 did not state that the benefit of the exemption was available only to manufacturers who passed on the benefit to the consumer. The court noted that previous notifications had explicitly included such a condition. The absence of this provision in the current notification was significant and could not be supplemented by non-statutory instructions under Rule 233. The court referenced the Delhi High Court's decision in Modi Rubber Limited v. Union of India, which supported this interpretation. The court concluded that the exemption notification must be interpreted based on its clear language, which did not require the benefit to be passed on to the consumer.

3. Determination of Assessable Value Under Section 4:

The court examined the definition of "value" under Section 4(4)(d) of the Central Excises and Salt Act, 1944, which excludes the amount of excise duty, sales tax, and other taxes from the assessable value. The court reiterated that excise duty is a tax on the manufacture and production of goods and should be based on the manufacturing cost and profit alone, excluding post-manufacturing expenses. The court rejected the department's argument that only the actual duty paid should be excluded from the assessable value. The court held that the exemption notification under Rule 8 does not erase the levy of duty but grants exemption, and adding a part of the excise duty to the manufacturing cost and profit while determining the assessable value is impermissible.

4. Whether the Benefit of Duty Exemption Must Be Passed on to the Consumer:

The court addressed the department's contention that the benefit of the duty exemption should be passed on to the consumer. The court noted that the exemption notification did not include such a requirement. The court criticized the department's attempt to impose this condition through instructions under Rule 233, which lacked statutory authority. The court emphasized that if the government intended to make the exemption conditional on passing the benefit to the consumer, it should have included this provision in the exemption notification itself. The court expressed surprise at the department's failure to amend the notification even after the Delhi High Court's decision and suggested that appropriate steps should be taken to address this issue in the future.

Conclusion:

The writ petition was allowed, and it was declared that the benefit of the exemption notification No. 198/76, dated 16-6-1976, cannot be denied to the petitioner solely on the ground that the benefit of exemption was not passed on to the consumer. The court did not impose any costs in the circumstances of the case.

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