1981 (11) TMI 58 - HC - Central Excise

Value of clearances of goods manufactured - Writ Jurisdiction - Existence of alternate remedy

Summary

Issues Involved:
1. Applicability of the 1979 notification to job work.
2. Interpretation of the term "value" under the 1979 notification.
3. Determination of the real value of goods for excise duty purposes.
4. Jurisdiction and procedural propriety of the excise authorities' decision.
5. Availability of alternative remedies and the appropriateness of filing a writ petition.

Issue-wise Detailed Analysis:

1. Applicability of the 1979 Notification to Job Work:
The petitioners, who engage in job work by processing forgings into connecting rods, challenged the interpretation of the 1979 notification by the excise authorities. The petitioners contended that the mode of computation of value, which included the value of raw materials plus job work charges, had no support in law. The court found that the excise authorities' interpretation had civil consequences for the petitioners, compelling them to apply for an excise license and pay excise duty on processed rods. Consequently, the court held that the petitioners were entitled to challenge the interpretation in court.

2. Interpretation of the Term "Value" Under the 1979 Notification:
The primary contention was whether the value of raw materials should be included in the computation of the value of goods processed on job work for determining excise duty liability. The court referred to Section 4 of the Central Excises and Salt Act, 1944, which defines the valuation of excisable goods. The court concluded that the real value of goods could include only the manufacturing cost and the manufacturing profit, as per the Supreme Court's judgment in A.K. Roy v. Voltas Limited. Since the petitioners did not incur any expenditure on raw materials, the value of raw materials could not be included in determining the value of the processed goods.

3. Determination of the Real Value of Goods for Excise Duty Purposes:
The court emphasized that the real value of goods should include only the manufacturing cost and the manufacturing profit, excluding the cost of raw materials. The court rejected the excise authorities' justification for including the value of raw materials in computing the value of processed rods, aligning with the Supreme Court's dicta in the Voltas case.

4. Jurisdiction and Procedural Propriety of the Excise Authorities' Decision:
The respondents argued that the petition was premature as no final decision had been taken by the excise authorities regarding the petitioners' entitlement to exemption under the 1979 notification. However, the court noted that the excise authorities' interpretation had already compelled the petitioners to apply for an excise license and pay duty, thus having civil consequences. Therefore, the petitioners were justified in seeking judicial intervention.

5. Availability of Alternative Remedies and the Appropriateness of Filing a Writ Petition:
The respondents contended that the petitioners should have exhausted the available appeal provisions under the Act before filing a writ petition. The court, however, highlighted the conflicting trade notices issued by different Excise Collectorates and the necessity for a judicial interpretation of the 1979 notification. The court found it appropriate to place a judicial interpretation at the earliest possible juncture, thus justifying the filing of the writ petition.

Conclusion:
The court ruled in favor of the petitioners, directing the excise authorities to include only the job work charges for the purposes of calculating the aggregate clearances under the 1979 notification. The respondents were instructed not to act upon the letter dated 7th September, 1979, and to proceed to determine the petitioners' entitlement to exemption based on the revised computation. The rule was made absolute, and the respondents were ordered to pay the petitioners' costs.