1986 (7) TMI 94 - HC - Central Excise

Summary

Issues:
Interpretation of Central Excise Rules regarding the determination of the value of clearances for the benefit of an exemption notification under Notification No. 105/80.

Detailed Analysis:

Issue 1: Interpretation of Notification No. 105/80 and Central Excise Rules
The petitioner, a company engaged in manufacturing engineering goods, claimed exemption under Notification No. 105/80 for the first clearances of goods for home consumption up to a certain value. The dispute arose when the value of clearances exceeded the specified limit. The company contended that excise duty should be calculated based only on labor charges, excluding the cost of raw material. However, the Superintendent of Central Excise rejected this claim, stating that the cost of raw material, along with a margin of profit and labor charges, should be considered. The Division Bench's decision in a previous case supported the petitioner's claim, emphasizing that the assessable value should not include the cost of raw materials.

Issue 2: Judicial Precedents and Applicability
The judgment referred to a previous case where the Division Bench held that the value of manufactured goods, for the purpose of excise duty assessment, should include the value of raw materials. The Division Bench further clarified that processors of goods already subject to duty are required to pay excise duty on the value of the manufactured article, which includes the value of the raw material. This decision was upheld by the Supreme Court in a subsequent case, emphasizing that the manufacturer would receive credit for duty already paid, thus avoiding double taxation.

Issue 3: Resolution and Decision
Considering the conflicting interpretations and to avoid multiplicity of litigation, both parties agreed to abide by the decision of the Supreme Court in a pending appeal. The court set aside the previous orders related to the determination of clearance value under the exemption notification. It directed that for the purpose of the exemption, only the job work charges should be considered. However, after crossing the duty-free clearance limit, the assessable value would be determined under Section 4 of the Central Excise Act, including the value of raw materials for excess clearances. The petitioners were instructed to provide relevant information to the Excise authorities and to recalculate the exemption limit based on the Supreme Court's judgment if necessary.

In conclusion, the court disposed of the petition in accordance with the agreed terms, keeping the existing bank guarantee in place until the Supreme Court's decision. The petitioners were directed to cooperate with the Excise authorities and comply with the recalculated duty obligations based on the final Supreme Court ruling.