1986 (1) TMI 102 - HC - Central Excise

Summary

Issues Involved:
1. Misconception of facts and law regarding wholesale cash price.
2. Treatment of debits as part of the price.
3. Legality of notices issued beyond the prescribed limitation period.
4. Applicability of Rule 10A to the petitioner's case.

Detailed Analysis:

1. Misconception of Facts and Law Regarding Wholesale Cash Price:

The petitioner, a manufacturer of electric bulbs and fluorescent tubes, challenged two show-cause notices issued by the Assistant Collector of Central Excise. The petitioner argued that the notices were based on a misconception of facts and law concerning the wholesale cash price charged to its dealers. The petitioner contended that the discount shown in the price lists was approved by the Department and a memorandum approving the same was issued in the prescribed form. The petitioner argued that there was no misrepresentation or misstatement of facts, as demonstrated by the documents filed, such as the price list and answers furnished to the questionnaire before the list was approved.

2. Treatment of Debits as Part of the Price:

The petitioner argued that the authorities erred in treating the debits as part of the price, whereas they were charged for various services rendered to its customers. The Department, however, contended that the discount was not genuinely passed on to the dealers in full and was subsequently received back by raising debit notes. The Department relied on Rule 5 of the Central Excise (Valuation) Rules, 1975, which states that the value of excisable goods should include any additional consideration flowing directly or indirectly from the buyer to the assessee. The Department argued that the scheme was a camouflage to evade excise duty on the real assessable value of the excisable goods.

3. Legality of Notices Issued Beyond the Prescribed Limitation Period:

The petitioner argued that the notices were illegal as they were issued beyond the six months prescribed under Rule 10 or, at any rate, within one year read with Rule 173J of the Central Excise Rules. The petitioner contended that the limitation of one year runs from the day the memorandum approving the price-list is issued. Therefore, the show-cause notices dated 21-7-1977 and 17-7-1979 were barred by time, and no further proceedings could be continued based on these illegal notices. The petitioner also argued that the second show-cause notice was a continuation of the first and could not give rise to a fresh cause of action.

4. Applicability of Rule 10A to the Petitioner's Case:

The Department argued that the action to re-open the assessment was justified both on facts and in law. The Department contended that the case involved wilful suppression or misstatement, which was implicit and covered by Rule 10A before the new Rule 10 was amended and inserted with effect from 6-8-1977. Rule 10A deals with culpable actions such as misconduct, deliberate misstatement, and suppression. The Department relied on various Supreme Court decisions to support its contention that the flow back of the discount should be added to the assessable value. The Department also argued that the amended Rule 10 should be made applicable to the facts of the case by implication, and the scope of Rule 10A was the same.

Conclusion:

On a careful consideration of the arguments advanced by both sides, the court concluded that the scope of the writ petition was limited to the question of jurisdiction. The Department made out a prima facie case to invoke Rule 10A. Therefore, the court upheld the show-cause notices and dismissed the writ petition, directing the Department to complete the further proceedings without further delay.