1986 (8) TMI 63 - HC - Central Excise

Summary

Issues Involved:
1. Levy and collection of excise duty on cigarettes.
2. Validity of the notification dated 2nd September 1985 and its amendments.
3. Consideration of the retail price versus adjusted sale price for excise duty calculation.
4. The applicability of Rule 8 of the Central Excise Rules, 1944.
5. The legality of the respondents' actions in equating actual retail price to adjusted sale price.

Issue-Wise Detailed Analysis:

1. Levy and Collection of Excise Duty on Cigarettes:
The petitioners, a company engaged in the manufacture and marketing of cigarettes, challenged the procedure followed by the excise authorities in levying excise duty based on the price at which retailers sell the cigarettes. The excise duty, as per the Central Excises and Salt Act, 1944, and the Additional Duties of Excise (Goods of Special Importance) Act, 1957, was initially on an ad valorem basis but later included specific duties. The petitioners argued that the excise duty should be based on the "adjusted sale price" as defined in the notification issued under Rule 8 of the Central Excise Rules, 1944.

2. Validity of the Notification Dated 2nd September 1985 and its Amendments:
The notification dated 2nd September 1985, as amended, provided for different slabs for excise duty based on the adjusted sale price per thousand cigarettes. The petitioners contended that the notification was irrational, impracticable, and created absurd situations where the excise duty could exceed the price of the product itself. Despite these arguments, the Court held that the notification, being legislative in character, could not be struck down on the grounds of being unworkable or absurd.

3. Consideration of the Retail Price versus Adjusted Sale Price for Excise Duty Calculation:
The petitioners argued that the excise authorities were unjustly considering the actual retail price instead of the adjusted sale price for calculating excise duty. They maintained that the adjusted sale price, as defined in the notification, should be the basis for excise duty, and any deviation from this was not warranted by law. The Court acknowledged the arguments but noted that the petitioners had been given liberty to challenge any final order passed by the respondents in earlier proceedings. Therefore, the Court did not delve into this issue in the current petition.

4. The Applicability of Rule 8 of the Central Excise Rules, 1944:
Rule 8 of the Central Excise Rules, 1944, empowers the Central Government to exempt any excisable goods from the whole or part of the duty leviable. Sub-rule (3) allows for the levy of duty at a rate expressed in a form or method different from the statutory duty. The petitioners argued that the adjusted sale price was not a permissible measure under Rule 8. However, the Court held that the term 'valuation' in the explanation to sub-rule (3) could include the adjusted sale price, making the method used in the notification permissible.

5. The Legality of the Respondents' Actions in Equating Actual Retail Price to Adjusted Sale Price:
The petitioners contended that the respondents' actions in considering the actual retail price for excise duty valuation were illegal. They argued that the excise duty should be based solely on the adjusted sale price as printed on the cigarette packets, as per the notification. The Court found these arguments weighty but reiterated that the petitioners could challenge the final order in separate proceedings, as previously allowed.

Conclusion:
The petitioners failed to establish that the notification dated 2nd September 1985, as amended, was invalid. The Court discharged the rule with no order as to costs, leaving the petitioners to challenge any final order passed by the respondents in separate proceedings.