1981 (7) TMI 68 - HC - Central Excise

Valuation - Determination of assessable value - Mistake of law - Writ petition - Amendment of

Summary

Issues Involved:
1. Entitlement to refund of excise duty paid for the period 1st October, 1973 to 11th May, 1974.
2. Limitation period for claiming the refund.
3. Validity of the Notification dated 1st September, 1962 concerning the assessment of excise duty.

Detailed Analysis:

1. Entitlement to Refund of Excise Duty:
The petitioner, a public limited company, sought a refund of excise duty amounting to Rs. 7,09,419.69 paid for the period from 1st October, 1973 to 11th May, 1974. The petitioner had paid excise duty based on price lists that included post-manufacturing costs and profits, which was later deemed incorrect by the Supreme Court in A.K. Roy v. Voltas Ltd. and Atic Industries Ltd. v. H.H. Dave. These judgments clarified that excise duty should be charged only on manufacturing costs and profits, excluding post-manufacturing expenses.

2. Limitation Period for Claiming Refund:
The respondents argued that the claim for refund was time-barred as the amendment to the petition was sought more than three years after the discovery of the mistake. The petitioner contended that the mistake was discovered only after the Bombay Tyre International case in 1979, which clarified that duty collected in variance with the principle was without authority of law and hence refundable. The court agreed with the petitioner, stating that the mistake was discovered after the Bombay Tyre International case, and the petition was amended within three years of this discovery. The court noted that the petitioner could not be expected to act irrationally by not claiming a large amount of refund if it had known earlier.

3. Validity of the Notification Dated 1st September, 1962:
The respondents relied on a Notification from 1st September, 1962, which provided an exemption from excise duty for plastics, arguing that the petitioner was estopped from claiming a refund for part of the earlier period. The court rejected this argument, stating that the Notification could not prevail over Section 4 of the Central Excises and Salt Act, 1944, which determines the assessable value of goods. The Notification only provided for an exemption from duty and did not concern itself with off-loading post-manufacturing costs. The court emphasized that excise duty is a tax on manufacturing, not marketing, and must be levied on the factory gate price.

Conclusion:
The court concluded that the excess duty recovered by the Department from the petitioner for the period 1st October, 1973 to 11th May, 1974, was without authority of law and must be refunded. The petitioner's claim was not time-barred as it was made within three years of discovering the mistake. The Notification dated 1st September, 1962, could not override the statutory provisions concerning the determination of assessable value. The petition was allowed, and the respondents were directed to refund the excess duty within the stipulated time frame. The bank guarantees given by the petitioner were to be discharged.