1979 (5) TMI 24 - HC - Central Excise

Incentive Production Scheme - Exemption notification - Auxiliary duty of excise (now Special Duty) - Interpretation - Valuation - Redetermination of assessable value - Taxation laws - Exemption clause - Canons of interpretation - Writ jurisdiction

Issues Involved:
1. Interpretation of Notification No. 198/76-C.E.
2. Requirement to pass on excise duty relief to consumers.
3. Determination of assessable value when relief is not passed to consumers.
4. Applicability of auxiliary duty exemption under the main notification.

Issue-wise Detailed Analysis:

1. Interpretation of Notification No. 198/76-C.E.:
The writ petition under Article 226 of the Constitution of India questions the scope and interpretation of Notification No. 198/76-C.E., dated June 16, 1976, which grants excise duty relief for goods produced in excess of a base year. The petitioner, an aluminium manufacturing company, challenges the Central Government's directives interpreting this notification. The court held that it is not open to the Central Government, in its administrative capacity, to issue directives to subordinate authorities exercising quasi-judicial functions to interpret the notification in a particular manner. The court referenced a Division Bench decision in Modi Rubber Ltd. v. Board of Central Excise & Customs, holding that such administrative directives are illegal and void.

2. Requirement to pass on excise duty relief to consumers:
The petitioners argued that the main notification does not specify that the benefit of the exemption must be passed on to the consumers. The court agreed, stating that the notification primarily aims to incentivize increased production and does not mandate passing on the benefit to consumers. The court emphasized that if the government intended for the relief to benefit consumers, it should have explicitly stated so in the notification. The court concluded that the impugned press note, which implied such a requirement, was ultra vires and void.

3. Determination of assessable value when relief is not passed to consumers:
The respondents contended that if the benefit of the duty exemption is not passed on to consumers, the assessable value must be re-determined by deducting the duty from the wholesale price. The court rejected this argument, citing the Division Bench decision in Modi Rubber Ltd. The court held that the assessable value should be based on the manufacturing cost and profit, excluding post-manufacturing costs or profits. The court found no statutory basis for re-determining the assessable value based on the non-passing of the benefit to consumers.

4. Applicability of auxiliary duty exemption under the main notification:
The petitioners sought clarification on whether the exemption under the main notification also applied to the auxiliary duty of excise. The court held that the main notification, which provides relief for excise duty, implicitly includes auxiliary duty. The court noted that the auxiliary duty is supplementary to the basic excise duty and should be considered part of the total duty of excise. The court found intrinsic evidence in the notification's language, particularly in para 3, which required manufacturers to indicate both the basic and auxiliary duties they would have paid but for the notification. The court concluded that the exemption under the main notification covered both the basic and auxiliary duties of excise.

Conclusion:
The court quashed the demands and show cause notices based on the impugned press note, declaring it ultra vires and void. The respondents were directed to decide the petitioners' refund applications within three months, considering the court's findings. The court made no order as to costs.

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