1986 (7) TMI 103 - HC - Central Excise

Valuation - Cost of freight octroi additional tax on sales tax excludible from the assessable value - Refund - Duty paid under mistake of law

Summary

Issues Involved:
1. Inclusion of post-manufacturing expenses in the assessable value for excise duty.
2. Refund claims for excess excise duty paid.
3. Limitation period for filing refund claims.
4. Deductibility of specific expenses (freight, octroi, additional tax on sales tax, interest on cash credit and bills of exchange).

Issue-wise Detailed Analysis:

1. Inclusion of Post-Manufacturing Expenses in the Assessable Value for Excise Duty:
The petitioner, a company engaged in manufacturing copper and aluminum winding wire and copper cables, initially paid excise duty on the wholesale price, which included post-manufacturing expenses. This approach was challenged based on a Gujarat High Court judgment that excluded such expenses from the assessable value. However, the Supreme Court's decision in Union of India v. Bombay Tyre International Limited held that several post-manufacturing expenses should be included in the wholesale price for excise duty purposes. Consequently, the petitioner could not press its claim based on the Gujarat High Court judgment but sought deductions for specific expenses allowed by the Supreme Court.

2. Refund Claims for Excess Excise Duty Paid:
The petitioner filed refund claims for the periods January 1977 to June 1978 and July 1978 to June 1979, arguing that the excise duty paid included non-deductible post-manufacturing expenses. The Assistant Collector of Central Excise initially rejected these claims, stating they were not made under protest and were based on a judgment not universally applicable. After a court direction, the Assistant Collector revisited the claims and upheld the petitioner's right to deductions for freight, octroi, and additional tax on sales tax but rejected claims for interest on cash credit and fixed deposits.

3. Limitation Period for Filing Refund Claims:
The Assistant Collector rejected the refund claims on the grounds of being time-barred under Section 11B of the Central Excise Act, which stipulates a six-month limitation period. The court noted that at the time of filing, Rule 11 was applicable, but both provisions had the same limitation period. The court emphasized that the petitioner had approached the court in 1980, and the delay was due to the pending proceedings and interim orders. The court treated the petition as one for enforcing the refund of excess excise duty paid under a mistake of law, which was discovered in November 1979.

4. Deductibility of Specific Expenses:
- Freight and Octroi: The Assistant Collector accepted these as deductible expenses, leading to refunds of Rs. 57,074.48 and Rs. 54,781.79 for the respective periods.
- Additional Tax on Sales Tax: Similarly, the Assistant Collector allowed deductions, resulting in refunds of Rs. 3,218.28 and Rs. 2,381.81 for the respective periods.
- Interest on Cash Credit and Bills of Exchange: The court rejected the claim for deducting interest on cash credit and bills of exchange, distinguishing it from the case of Jenson and Nicholson v. Union of India. The court found no similarity in the facts and concluded that such interest is not deductible from the wholesale price.

Conclusion:
The petition was partly allowed. The petitioner was entitled to refunds for freight, octroi, and additional tax on sales tax but not for interest on bills of exchange. The court found no error in the Assistant Collector's order regarding the non-deductibility of interest on bills of exchange and upheld the view that the claims were not barred by limitation. There was no order as to costs.