1980 (6) TMI 33 - HC - Central Excise

Summary

Issues:
1. Whether packing distribution and forwarding costs can be considered for determining the value under Section 4 of the Excises and Salt Act for levying excise duty.
2. Whether the extra charge of 5% for packing and distribution costs should be included in the basic price for excise duty calculation.

Analysis:
1. The petitioners are manufacturers of certain preparations subject to excise duty. They pack the products in consumer packs and store them in bonded warehouses without paying excise duty. The price list submitted by the petitioners includes basic trade price, excise duty per unit, and packing and distribution costs per unit. The dispute arises over the inclusion of a 5% extra charge for packing and distribution costs in excise duty calculation.

2. The Assistant Collector held that the post-manufacturing charges were excluded from the list price, and thus, the prices claimed by the company were not accepted. The Appellate Collector also opined that under the amended provisions of Section 4 of the Act, there was no provision for abatement of distribution or forwarding charges. The Collector rejected the contention that post-manufacturing expenses couldn't be considered for excise duty calculation.

3. The High Court referred to previous decisions where it was held that packing costs and post-manufacturing expenses cannot be included in the cost of the manufactured article for excise duty liability. The Court emphasized that the 5% extra charge was a post-manufacturing cost and should not be part of the basic trade price for excise duty purposes. The Court also noted that the extra charge was discretionary for wholesalers and not mandatory.

4. The Court found that the authorities had erred in justifying the inclusion of the 5% extra charge in the excise duty calculation. It was established that the charge was applicable only when goods were delivered at the duty paid warehouse, not at the bonded warehouse. The burden of proof was on the authorities to justify the duty collection, and since the charge was post-manufacturing and discretionary, it should not have been included in the excise duty calculation.

5. Consequently, the Court ruled in favor of the petitioners, entitling them to a refund of the excise duty collected based on the inclusion of the 5% extra charge in the basic trade price for excise duty calculation. The authorities were directed to process the refund promptly, and the petitioners were awarded costs for the petition.