1979 (12) TMI 62 - HC - Central Excise

Valuation Equalised freight and insurance charges - Remand not necessary if amount of refund is known

Summary

Issues Involved:
1. Determination of assessable value for excise duty.
2. Inclusion of uniform freight and insurance charges in the assessable value.
3. Classification of expenses as post-manufacturing costs.
4. Application of legal precedents on excise duty assessment.

Detailed Analysis:

1. Determination of Assessable Value for Excise Duty:
The primary issue was whether the uniform freight and insurance charges of 0.25 paise per kg. should be included in the assessable value for excise duty under Section 4 of the Central Excises and Salt Act, 1944. The Company contended that these charges were post-manufacturing expenses and should not be included in the assessable value.

2. Inclusion of Uniform Freight and Insurance Charges in the Assessable Value:
The Company introduced a uniform freight scheme from 3rd April, 1974, charging a uniform rate of 0.25 paise per kg. for transport and insurance, which was shown separately in their invoices and price lists. The Excise Authorities argued that since there were no factory-gate sales, the price including these charges should be considered the assessable value. The Assistant Collector and the Appellate Collector upheld this view, stating that the correct assessable value would be inclusive of the equalized freight charges.

3. Classification of Expenses as Post-Manufacturing Costs:
The Company argued that the uniform freight and insurance charges were post-manufacturing expenses and should be excluded from the assessable value. The Court referred to precedents, including the Supreme Court's decisions in A.K. Roy v. Voltas Ltd. and Atic Industries v. Assistant Collector, which held that the real value for excise duty should include only manufacturing cost and manufacturing profit, excluding post-manufacturing costs and profits.

4. Application of Legal Precedents on Excise Duty Assessment:
The Court analyzed several precedents:
- A.K. Roy v. Voltas Ltd.: It was held that excise duty should be levied on manufacturing cost and profit, excluding post-manufacturing costs.
- Atic Industries v. Assistant Collector: The value for excise must consider only manufacturing cost and profit, excluding selling costs and profits.
- Indian Tobacco Co. Ltd. v. Union of India: It was emphasized that Section 4 should not include post-manufacturing or non-manufacturing elements in the assessable value.
- Calcutta Chemical Co. Ltd. v. Government of India: The Madras High Court held that uniform freight charges should not be included in the cost price.
- Coromandel Fertilizers Ltd. v. Union of India: The Andhra Pradesh High Court ruled that equalized freight shown separately could not be included in the assessable value.

The Court concluded that the uniform freight and insurance charges recovered by the Company were post-manufacturing expenses and should not be included in the assessable value under Section 4 of the Act. The Court found that there were no factory-gate sales, and the Company had consistently shown these charges separately in their invoices and price lists.

Judgment:
The petition was allowed, and the impugned order dated 5th February, 1976, was set aside. The Court ruled that the uniform freight and insurance charges were post-manufacturing expenses and could not be included in the assessable value for excise duty. There was no order as to costs, and the rule was made absolute accordingly.