1986 (3) TMI 78 - SC - Central Excise

Whether the goods are sold by a dealer bona fide at the prices quoted by him? Held that - It is the duty of the authorities under the Act to determine the wholesale cash price in accordance with the well-settled principles of course keeping also in view the maximum price fixed by the Government of India under the Essential Commodities Act 1955. But in the orders of the excise authorities which are impugned in this appeal we find that they have not made any attempt to determine the wholesale cash price of the goods in question in accordance with law. It appears that both the authorities felt that they were bound by the maximum prices notified by the Government of India and the excise duty was payable on that basis and not on the basis of the wholesale prices fetched by the goods even if they were lower than the controlled prices. They have not given any valid reason for rejecting the price list submitted by the appellant. We accordingly set aside the order of the High Court and the orders passed by the Central excise authorities and remand the case to the Superintendent of Central Excise (Respondent No. 2 herein) to re-determine the wholesale cash price .

Summary

Issues:
- Interpretation of Section 4 of the Central Excises and Salt Act, 1944 regarding the determination of value for excise duty purposes.
- Conflict between maximum prices fixed under the Essential Commodities Act, 1955 and the wholesale cash price for excise duty assessment.
- Validity of excise duty assessment based on controlled prices rather than actual wholesale prices.
- Judicial review of excise authorities' decisions in setting excise duty.

Analysis:

The judgment pertains to an appeal against the dismissal of a writ petition by the High Court, challenging the excise duty assessment based on controlled prices set by the Government under the Essential Commodities Act, 1955. The appellant, a manufacturer of vegetable oil products, argued that excise duty should not be levied based on maximum prices when goods were sold at lower rates due to commercial reasons. The Deputy Collector upheld the excise duty assessment, relying on controlled prices for determining the wholesale cash price. However, the Supreme Court found that the authorities failed to consider the actual wholesale prices at which the goods were sold, as required by Section 4 of the Act for excise duty calculation. The Court emphasized that the purpose of setting maximum prices under the Essential Commodities Act is different from determining excise duty under Section 4 of the Act, which aims to ascertain the actual wholesale cash price. The Court highlighted that manufacturers may sell goods below maximum prices without contravening the Essential Commodities Act. Thus, the excise authorities erred in solely relying on controlled prices for excise duty assessment.

The Court clarified that the excise authorities must determine the wholesale cash price in accordance with established principles, considering economic factors like supply and demand. While the maximum prices under the Essential Commodities Act can be a factor, they should not be the sole basis for excise duty calculation. The Court noted that in cases where goods are sold above the maximum price, penal consequences under the Essential Commodities Act apply, and excise duty should be based on the actual selling price. Therefore, the authorities were directed to reassess the excise duty based on relevant principles and actual wholesale prices, setting aside the previous orders. The Court mandated the conclusion of reassessment within three months and instructed refund of any excess excise duty paid by the appellant. Ultimately, the appeal was allowed, emphasizing the need for excise authorities to determine wholesale cash prices accurately for excise duty assessment, considering all relevant factors beyond controlled prices under the Essential Commodities Act.