1980 (9) TMI 99 - HC - Central Excise

Valuation - Determination of assessable value - Goods of like kind and quality - Interpretation - Mistake of law - Appeal not filed against order

Summary

Issues Involved:
1. Determination of the assessable value for excise duty.
2. Whether the price at which goods are sold to distributors or the price at which distributors sell to the trade constitutes the assessable value.
3. Whether the transactions between the petitioners and their distributors were at arm's length.
4. The applicability of the principle that only manufacturing costs and profits should be considered for excise duty assessment.
5. The maintainability of the petition for a writ of Mandamus.

Issue-wise Detailed Analysis:

1. Determination of the assessable value for excise duty:
The primary issue was the basis for determining the assessable value for excise duty under Section 4 of the Central Excises and Salt Act, 1944. The petitioners argued that the price at which they sold their products as original equipment to manufacturers should be the assessable value. The respondents contended that the assessable value should be based on the price at which the distributors sold the goods to the trade.

2. Whether the price at which goods are sold to distributors or the price at which distributors sell to the trade constitutes the assessable value:
The court referred to the Supreme Court's decision in A.K. Roy v. Voltas Ltd., which held that the wholesale cash price charged to wholesale dealers, less trade discounts, represents the assessable value if the transactions are at arm's length and in the usual course of business. However, in this case, the Assistant Collector of Central Excise concluded that the transactions between the petitioners and their distributors were not at arm's length due to common directors between the petitioners and their distributors. Consequently, the price at which the distributors sold the goods to the trade was considered the assessable value.

3. Whether the transactions between the petitioners and their distributors were at arm's length:
The Assistant Collector determined that the transactions between the petitioners and their distributors were not at arm's length because some directors were common to both entities. This finding was crucial in deciding that the price at which the distributors sold the goods to the trade should be the assessable value. The court noted that this finding was a question of fact, and the petitioners should have appealed against it if they were aggrieved.

4. The applicability of the principle that only manufacturing costs and profits should be considered for excise duty assessment:
The petitioners contended that the assessable value for excise duty should only consider manufacturing costs and profits, excluding post-manufacturing profits. The court acknowledged that this principle was established in the Voltas case but concluded that the Assistant Collector's order was not based on a mistake of law. Instead, it was an application of the law to the facts, and any error should have been addressed through an appeal.

5. The maintainability of the petition for a writ of Mandamus:
The court held that the petition for a writ of Mandamus was not maintainable. The petitioners had acquiesced in the Assistant Collector's order by not appealing against it. The court emphasized that the proper remedy for the petitioners was to file an appeal against the order, not to seek a refund through a writ petition.

Conclusion:
The court dismissed the writ petition, affirming that the impugned orders of respondents 2 to 4 were correct. The petitioners were not entitled to a refund of the excise duty paid, and the writ petition was dismissed without costs.