1983 (9) TMI 89 - HC - Central Excise

Summary

Issues Involved:
1. Determination of the assessable value for excise duty purposes.
2. Legitimacy of the refund claims for excess excise duty paid.
3. Nature of the agreement between the petitioners and Voltas Limited.
4. Entitlement to interest on the refund amount.

Summary:

1. Determination of the Assessable Value:
The petitioners initially paid excise duty based on the price charged to Voltas Limited, but the Department claimed the assessable value should be the price charged by Voltas to their dealers. The petitioners argued that under Section 4 of the Central Excises and Salt Act, 1944, as it stood prior to October 1975, the assessable value should be the wholesale cash price charged by the manufacturer unless proven otherwise by the Department. The Supreme Court's interpretation in A.K. Roy v. Voltas Limited and Atic Industries Ltd. v. H.H. Dave supported this view, emphasizing that the value must reflect the manufacturing cost and profit, not post-manufacturing operations.

2. Legitimacy of the Refund Claims:
The petitioners filed refund claims for Rs. 3,29,446.90 and Rs. 6,19,223.40, arguing that the assessable value should be the price to Voltas. The Assistant Collector initially rejected these claims, but upon appeal, the revisional authority remanded the matter for reconsideration. The Assistant Collector again rejected the claims, stating the price to Voltas did not represent the wholesale price. The Court found this reasoning flawed, noting the Department failed to prove the price to Voltas was concessional or influenced by extra-commercial considerations.

3. Nature of the Agreement:
The Department contended the agreement between the petitioners and Voltas was not at arm's length, suggesting it was an agency agreement. The Court examined the agreement and concluded it was a genuine distributorship agreement, noting that the conditions requiring Voltas to maintain a Sales Organisation, provide after-sale service, and share advertising expenses were standard commercial terms. The Court rejected the Department's argument, emphasizing that the burden of proof to establish the agreement was not at arm's length lay with the Department.

4. Entitlement to Interest:
The petitioners sought interest on the refund amount, arguing the Department withheld the amount without reason for many years. The Court declined to grant interest at 18% but directed the Department to refund the amount within four weeks, failing which interest at 12% per annum would apply from the date of filing the petition until payment.

Conclusion:
The Court ruled in favor of the petitioners, directing the respondents to refund Rs. 3,29,446.90 and Rs. 6,19,223.40 within four weeks. If the refund was delayed, interest at 12% per annum would apply. The Department was also instructed to finalize the provisional assessment based on the declared assessable value within four months. The respondents were ordered to pay the petitioners' costs.