1980 (12) TMI 48 - HC - Central Excise

Summary

Issues Involved:
1. Legality of levying excise duty on post-manufacturing costs and profits.
2. Interpretation of Sections 3(1) and 4 of the Central Excises and Salt Act, 1944.
3. Validity of the assessments made by the Central Excise Authorities from 1951 to 1971.
4. Refund of excess excise duty claimed by the respondent.
5. Jurisdiction of the Central Excise Authorities in assessing excise duty.

Issue-wise Detailed Analysis:

1. Legality of Levying Excise Duty on Post-Manufacturing Costs and Profits:
The respondent contended that excise duty should only be levied on manufacturing costs and manufacturing profits, not on post-manufacturing costs and post-manufacturing profits. The appellants argued that excise duty should be levied on the wholesale cash price of excisable goods as per Section 4(a) of the Act. The court referred to the Supreme Court's decision in Voltas' case, which stated that excise is levied only on the amount representing manufacturing cost plus manufacturing profit and excludes post-manufacturing cost and the profit arising from post-manufacturing operations. However, the court clarified that the wholesale cash price should be understood in the context of the facts and not include post-manufacturing costs and profits.

2. Interpretation of Sections 3(1) and 4 of the Central Excises and Salt Act, 1944:
Section 3(1) is the charging section, and Section 4 is the machinery provision for levying excise duty. The court emphasized that the term "wholesale cash price" used in Section 4 means the price paid by retail traders on wholesale purchase, excluding post-manufacturing costs and profits. The court held that the wholesale cash price should be the first wholesale cash price and not include post-manufacturing costs and profits. The explanation to Section 4 provides that no abatement or deduction shall be allowed except for trade discount and the amount of duty payable at the time of removal of the article.

3. Validity of the Assessments Made by the Central Excise Authorities from 1951 to 1971:
The court noted that the respondent did not provide the assessing authority with the break-up of the basic price, which allegedly included selling costs and selling profits. The court concluded that the wholesale cash price referred to in Section 4 is the first wholesale cash price, and there is no question of any element of post-manufacturing cost and profit in such wholesale cash price. The court held that the assessments made by the Central Excise Authorities were valid as they were based on the basic price submitted by the respondent.

4. Refund of Excess Excise Duty Claimed by the Respondent:
The respondent claimed a refund of Rs. 7,95,90,000/- for the period from 1951 to 1971, alleging that the Central Excise Authorities had illegally charged excise duty on post-manufacturing costs and profits. The court rejected this claim, stating that the wholesale cash price does not include post-manufacturing costs and profits, and the assessments made by the Central Excise Authorities were valid.

5. Jurisdiction of the Central Excise Authorities in Assessing Excise Duty:
The court held that the Central Excise Authorities had jurisdiction to assess excise duty based on the wholesale cash price as per Section 4(a) of the Act. The court found no illegality or lack of jurisdiction in the assessments made by the Central Excise Authorities.

Conclusion:
The court concluded that the wholesale cash price referred to in Section 4 of the Act is the first wholesale cash price and does not include post-manufacturing costs and profits. The assessments made by the Central Excise Authorities from 1951 to 1971 were valid, and the respondent's claim for a refund of excess excise duty was rejected. The court referred the matter to a Full Bench for further consideration due to a conflicting judgment by another Division Bench of the same court.