1981 (7) TMI 69 - HC - Central Excise

Excise duty - Powers of parliament - Tariff value - Fixation of - Valuation - Difference in methods - Guidelines for - Constitution - Interpretation

Summary

Issues Involved:
1. Validity and enforceability of the tariff value for plywood tea-chest refixed by Notification No. 8 of 1979.
2. Whether the fixation of a flat rate of Rs. 10.60 per Sq. Metre is arbitrary and invalid.
3. The competence of Parliament to enact a law for levying excise duty.
4. The legislative power to impose excise duties and the method of determining assessable value.
5. Excessive delegation of legislative power to the Government under Section 3(2) of the Central Excises and Salt Act, 1944.
6. Whether the weighted average method adopted to fix the value is arbitrary.

Detailed Analysis:

1. Validity and enforceability of the tariff value for plywood tea-chest refixed by Notification No. 8 of 1979:
The court examined the validity of the tariff value refixed by Notification No. 8 of 1979, dated 3-1-1979, under Section 3(2) of the Central Excises and Salt Act, 1944. The petitioners, manufacturers of plywood, contended that the refixed value of Rs. 10.60 per square metre was arbitrary and not based on manufacturing cost and profit. The court found that the Central Government has the delegated power to fix tariff values for excisable goods, including plywood, and the notification was issued in the exercise of this power.

2. Whether the fixation of a flat rate of Rs. 10.60 per Sq. Metre is arbitrary and invalid:
The petitioners argued that the flat rate of Rs. 10.60 per Sq. Metre was arbitrary and did not reflect the manufacturing cost and profit, which they claimed to be around Rs. 5/-. The court clarified that excise duty could be levied in various ways, including quantity, value, volume, or price, and it is within the legislative competence to decide the method. The court found that the fixation of tariff value at Rs. 10.60 per Sq. Metre was based on data from leading plywood manufacturers and wholesale prices, and the weighted average method used was a valid approach.

3. The competence of Parliament to enact a law for levying excise duty:
The court reiterated the concept of excise duty as a tax on articles produced or manufactured in India for home consumption. It referred to the legislative power under Entry 84 of List I of the Seventh Schedule to the Constitution of India, which allows the Parliament to impose duties of excise on goods manufactured or produced in India. The court affirmed that the legislative competence to levy excise duty on production and manufacture is traceable to Entry 84 and is not limited to manufacturing cost and profit.

4. The legislative power to impose excise duties and the method of determining assessable value:
The court discussed the machinery for determining the assessable value for levying excise duty, as provided by Sections 3(2) and 4 of the Act. Section 3(2) allows the Central Government to fix tariff values for excisable goods, while Section 4 provides for the determination of value with respect to each manufacturer. The court noted that the amended Section 4(3) expressly excludes the application of its provisions to goods for which a tariff value has been fixed under Section 3(2).

5. Excessive delegation of legislative power to the Government under Section 3(2) of the Central Excises and Salt Act, 1944:
The petitioners contended that Section 3(2) conferred arbitrary power on the Government to fix any tariff value, violating Article 14 of the Constitution. The court rejected this argument, stating that Section 3(2) and Section 3(3) provide sufficient guidelines for fixing tariff values and do not confer arbitrary power. The court found that the delegation of power to fix tariff values was necessary for administrative convenience and was not excessive.

6. Whether the weighted average method adopted to fix the value is arbitrary:
The court examined the method adopted by the Government to refix the tariff value. It found that the weighted average method, which took into account prices reported by field formations, price lists of leading manufacturers, and wholesale prices, was a valid and known method for fixing fair prices. The court rejected the petitioners' argument that the method ignored the manufacturing cost and profit, stating that the weighted average method was appropriate for fixing a uniform tariff value.

Conclusion:
The court dismissed the petitions, upholding the validity of the tariff value refixed by Notification No. 8 of 1979. The court found that the fixation of tariff value was within the legislative competence, the method adopted was valid, and there was no excessive delegation of power. The court also noted that the petitioners failed to establish that the determination of tariff value was arbitrary or included non-manufacturing costs.