1980 (5) TMI 38 - HC - Central Excise

Price lists - Assessment - Connotation of - Valuation - Related person/favoured buyer - Writ Jurisdiction

Summary

Issues Involved
1. Determination of Excise Duty under Section 4(a) of the Central Excises and Salt Act, 1944.
2. Validity of past assessments from 1961 to the date of the application.
3. Estoppel from challenging past assessments.
4. Jurisdictional error in past assessments.
5. Relationship between the appellant and customer-companies.
6. Refund of excess duty collected.

Detailed Analysis

1. Determination of Excise Duty under Section 4(a) of the Central Excises and Salt Act, 1944
The court held that the excise duty should be assessed based on the "wholesale cash price" comprising manufacturing cost and manufacturing profits only, as laid down in A.K. Roy & Anr. v. Voltas Limited. The appellant's products were assessed based on the price list of customer-companies, which included post-manufacturing costs and profits, making the assessments void. The court emphasized that any assessment made on any sum in excess of manufacturing cost and manufacturing profit would be void.

2. Validity of Past Assessments from 1961 to the Date of the Application
The court quashed the assessments made by the Excise Authorities between 1961 and the date of the application, deeming them null and void as they included post-manufacturing costs and profits. The court directed the respondents to reassess the products based on manufacturing cost and manufacturing profit only and refund the excess amount collected.

3. Estoppel from Challenging Past Assessments
The court rejected the respondents' argument that the appellant was estopped from challenging the assessments because they had submitted price lists based on customer-companies' prices. The court held that there cannot be an estoppel against statute and that no tax can be collected except under the express authority of law.

4. Jurisdictional Error in Past Assessments
The court found that the assessments were vitiated by a jurisdictional error, as the Excise Authorities had no jurisdiction to include post-manufacturing costs and profits in the assessable value. The court held that the error was discovered only after the Supreme Court's decision in A.K. Roy & Anr. v. Voltas Limited, and thus the appellant's application was not barred by laches.

5. Relationship Between the Appellant and Customer-Companies
The court held that the transactions between the appellant and the customer-companies were at arm's length and that the customer-companies were not favoured buyers. The court noted that the appellant was not a shareholder in any of the customer-companies, and the prices charged were reasonable and adequate, covering manufacturing costs and yielding a reasonable profit.

6. Refund of Excess Duty Collected
The court directed the respondents to refund the excess duty collected from the appellant, amounting to Rs. 1,98,40,969.70, along with interest. The court rejected the argument that the refund would lead to unjust enrichment, noting that the appellant had not collected the excess duty from its customers.

Conclusion
The court allowed the appeal, quashed the past assessments, and directed the respondents to reassess the excise duty based on manufacturing cost and manufacturing profit only. The court also ordered the refund of the excess duty collected, dismissing the cross-objections filed by the respondents. Each party was directed to bear its own costs.