1985 (10) TMI 97 - HC - Central Excise

Summary

Issues:
Calculation of excise duty on cotton yarn and cotton fabrics; Inclusion of excise duty on yarn in the value of cotton fabrics; Time limit for recovery of duty short-levied.

Analysis:
The judgment revolves around the calculation of excise duty on cotton yarn and cotton fabrics, specifically focusing on whether the excise duty on yarn should be included in the value of cotton fabrics for excise duty calculation purposes. The petitioners, a composite textile mill, argued that both duties should be paid at the time of excise duty payment on fabrics, thus excluding the duty on yarn from the assessable value of cotton fabrics. However, the court found that rules 96V and 96W, which provide a special procedure for duty calculation when yarn is used in fabric manufacture, do not support this contention. These rules do not exempt the excise duty on cotton yarn from being included in the assessable value of cotton fabrics. The normal valuation method under section 4 of the Central Excises and Salt Act, 1944, dictates that any excise duty paid on cotton yarn used in fabric production should be part of the assessable value of the fabrics. Therefore, the petitioners are obligated to include the excise duty on cotton yarn in the value of cotton fabrics for excise duty calculation.

Regarding the time limit for recovery of duty short-levied, the court referred to rule 10 read with rule 173(J) in force at the relevant time, which stipulated a one-year time limit for recovery of short-levied duty. The show cause notices issued to the petitioners covered periods beyond this one-year limit, rendering the claims for those periods time-barred. Consequently, the court directed that excise duty could only be recovered for periods falling within the time limit prescribed by rule 10 read with rule 173(J). The respondents were instructed not to recover any excise duty for periods exceeding the specified time limit. The judgment dismissed the petition except for recovery within the prescribed time limit, and the rule was discharged with costs.