1981 (9) TMI 120 - HC - Central Excise

Valuation - Exemption - Non-passing of the benefit to costomer - Determination of assessable value

Summary

Issues:
Interpretation of Central Excises and Salt Act regarding levy of excise duty on steel furniture, computation of value for excise duty, applicability of notifications providing exemptions, inclusion of excise duty in the value of goods, passing of exemption benefits to consumers, and authority to make rules for exemption.

Analysis:
The petitioner, a small-scale industry engaged in manufacturing steel furniture, disputed the demand for excise duty by Central Excise authorities based on the interpretation of notifications exempting duty up to a certain value. The controversy centered on whether the excise duty collected by the petitioner should be included in the value of goods for excise duty assessment. The petitioner argued that duty collected should not be included as per Section 4(4)(d) of the Central Excises and Salt Act, which excludes excise duty from the value of goods for assessment purposes.

The notifications issued under Rule 8 of the Central Excise Rules provided exemptions from duty up to specific values for manufacturers of steel furniture. The petitioner claimed entitlement to exemptions for certain years based on the value of goods cleared. However, the Central Excise authorities contended that the duty collected by the petitioner from customers should be considered in the valuation of goods for exemption limits. The authorities argued that the value of duty-free goods should be increased by the duty amount collected from customers.

The Court referred to relevant legal provisions and precedents to determine the correct interpretation. Citing the Madras Rubber Factory Ltd. case and Modi Rubber Ltd. case, the Court emphasized that excise duty collected should not be considered as part of the value of goods for excise duty calculation. The Court rejected the authorities' argument that duty collected should be included in the value, stating that the benefit of exemption should accrue to the manufacturer.

In contrast, the authorities relied on the Bata Shoe Company case, which interpreted Section 4 of the Act differently. The Calcutta High Court's view was considered, but the Court aligned with the Delhi High Court's interpretation that excise duty should not be included in the value for exemption purposes. Consequently, the Court allowed the writ petition, quashed the demands raised by the authorities, and directed them to refund the amount collected. The Court held that excise duty should not be part of the value calculation for excise duty assessment.

In conclusion, the judgment clarified the computation of value for excise duty assessment, the applicability of exemptions under notifications, and the exclusion of excise duty from the value of goods. The Court's decision emphasized that excise duty collected by the manufacturer should not be included in the value calculation for exemption limits, affirming the petitioner's position and ordering a refund of the collected amount.