1980 (8) TMI 85 - HC - Central Excise

Valuation - When goods are sold through Central Marketing Division - Most of sales made through one agent - Selling expenses are excludible from the assessable value

Summary

Issues Involved:
1. Jurisdiction of the Assistant Collector in revising the approved price-list.
2. Treatment of sales to Pawan Vidyut Agencies as sales to a wholesaler at the factory gate.
3. Determination of assessable value excluding selling expenses and profits.

Detailed Analysis:

1. Jurisdiction of the Assistant Collector in Revising the Approved Price-List:
The petitioner argued that the Assistant Collector, having approved the price-list for the period 1-2-1974 to 31-1-1975, acted without jurisdiction in revising the same and claiming additional duty on a different basis. The court found it unnecessary to consider this contention in detail because the petitioner's third argument was sufficient to dispose of the case. However, the court acknowledged the prima facie force in the petitioner's submission that once the price list was accepted after an enquiry, it could not be revised without proper procedures under Rule 10 of the Central Excise Rules or Section 35-A of the Act.

2. Treatment of Sales to Pawan Vidyut Agencies as Sales to a Wholesaler at the Factory Gate:
The petitioner contended that sales to Pawan Vidyut Agencies should be treated as sales to a wholesaler at the factory gate at arm's length, in line with the ruling in Voltas. The court did not express an opinion on this issue, as it was unnecessary for the resolution of the case based on the third argument. The court noted that the wholesale cash price for the purposes of Section 4 should reflect the manufacturing cost and profit, excluding selling expenses.

3. Determination of Assessable Value Excluding Selling Expenses and Profits:
This was the primary issue on which the court based its judgment. The court referred to its previous decision in M/s. H.M.M. Ltd. v. Union of India, which dealt with similar circumstances. It was held that the assessable value should reflect only the manufacturing cost and manufacturing profit, excluding selling expenses and profits. The court emphasized that excise duty is intended to be a tax on goods at the stage of manufacture or production, not on selling costs and profits. Therefore, the wholesale cash price should exclude any post-manufacturing expenses.

The court concluded that the petitioner was entitled to deduct selling expenses from the sale price to determine the assessable value. This conclusion was based on the principle that excise duty should only cover manufacturing costs and profits. The court quashed the orders demanding differential duty for the period up to 31-1-1975 and directed the Assistant Collector to reconsider the assessable value for the period from 1-2-1975 to 30-9-1975, taking into account the petitioner's claimed expenses.

Conclusion:
The court allowed the writ petition, quashing the orders dated 9-2-1977, 9-5-1977, and 18-6-1979, and the demand notices. The court directed the Assistant Collector to reconsider the assessable value for the period from 1-2-1975 to 30-9-1975, considering the petitioner's claimed post-manufacturing expenses. The court made no order as to costs.