1980 (10) TMI 79 - HC - Central Excise

Summary

Issues Involved:
1. Determination of 'value' under Section 4(a) of the Central Excises and Salt Act, 1944.
2. Interpretation and scope of Section 4(a) of the Act.
3. Validity and effect of Notifications dated September 1, 1962, and November 26, 1966.
4. Inclusion of post-manufacturing expenses in the assessable value.
5. Jurisdiction of Excise Officers in assessing excise duty.
6. Refund of excess duty paid.
7. Validity of assessments made under the said notifications.
8. Applicability of Supreme Court's decision in Voltas' case.
9. Waiver and acquiescence by the appellant.
10. Alternative remedy and maintainability of the writ petition.

Issue-wise Detailed Analysis:

1. Determination of 'value' under Section 4(a) of the Central Excises and Salt Act, 1944:
The primary issue revolved around the determination of 'value' for excise duty purposes under Section 4(a) of the Act. The appellant argued that the value should only include manufacturing costs and manufacturing profits, excluding post-manufacturing expenses. The Court agreed, stating that excise duty is levied only on the manufacturing cost plus manufacturing profit, excluding post-manufacturing costs and profits.

2. Interpretation and scope of Section 4(a) of the Act:
The Court referred to the Supreme Court's decision in A.K. Roy v. Voltas Ltd., which clarified that the 'wholesale cash price' under Section 4(a) should be determined by deducting selling costs and profits, focusing solely on manufacturing costs and profits. The Court emphasized that excise is a tax on production and manufacturing, not on post-manufacturing operations.

3. Validity and effect of Notifications dated September 1, 1962, and November 26, 1966:
The appellant contended that the notifications were contrary to Section 4(a) and should be struck down. The Court found that the notifications, which provided an alternative method of assessment, were invalid as they contradicted the statutory provisions of Section 4(a). The notifications were deemed to exceed the power conferred by Section 37(2)(xvii) and Rule 8, which only allowed for exemptions from duty, not alternative assessment methods.

4. Inclusion of post-manufacturing expenses in the assessable value:
The appellant argued that the assessable value included post-manufacturing expenses such as interest on long-term credit, transportation charges, freight, insurance, handling charges, godown charges, storage charges, advertisement, and traveling expenses. The Court agreed that these expenses should be excluded from the assessable value, as they are not related to the manufacturing process.

5. Jurisdiction of Excise Officers in assessing excise duty:
The appellant claimed that the Excise Officers had no jurisdiction to assess duty beyond the manufacturing costs and profits. The Court held that the assessments made by including post-manufacturing expenses were beyond the jurisdiction of the Excise Officers and thus invalid.

6. Refund of excess duty paid:
The appellant sought a refund of the excess duty paid based on the incorrect assessments. The Court directed that the assessments should be redone in accordance with the principles laid down by the Supreme Court in Voltas' case, and any excess duty collected should be refunded.

7. Validity of assessments made under the said notifications:
The Court found that the assessments made under the said notifications were invalid as they were not in accordance with Section 4(a). The notifications were deemed to provide an alternative method of assessment, which was contrary to the statutory provisions.

8. Applicability of Supreme Court's decision in Voltas' case:
The Court emphasized that the principles laid down in Voltas' case regarding the exclusion of post-manufacturing costs and profits from the assessable value were binding and should be applied to the appellant's case. The decision clarified the correct method of calculating the 'wholesale cash price' for excise duty purposes.

9. Waiver and acquiescence by the appellant:
The respondents argued that the appellant had waived its rights by not challenging the assessments earlier and by accepting the benefits under the notifications. The Court rejected this argument, stating that there could be no estoppel against the statute, and the appellant's failure to challenge the assessments earlier did not validate the incorrect assessments.

10. Alternative remedy and maintainability of the writ petition:
The respondents contended that the appellant should have pursued alternative remedies, such as appeals or revisions, before filing the writ petition. The Court held that since the assessments were made without jurisdiction and were void, the writ petition was maintainable, and the appellant was entitled to seek relief directly under Article 226 of the Constitution.

Conclusion:
The appeal was allowed, and the impugned assessments were set aside. The Court directed that the excise duty for the period covered by the assessments should be reassessed in accordance with the principles laid down in Voltas' case, excluding post-manufacturing costs and profits. The Court also directed that all pending and future assessments should be made consistent with these principles.